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Business environment

The term Business Environment is composed of two words Business and Environment. In simple terms, the state in which a person remains busy is known as Business. The word Business in its economic sense means human activities like production, extraction or purchase or sales of oods that are performed for earnin profits.

!n the other hand, the word Environment refers to the aspects of surroundin s. Therefore, Business Environment may be defined as a set of conditions " #ocial, $e al, Economical, %olitical or Institutional that are uncontrollable in nature and affects the functionin of or ani&ation. Business Environment has two components' (. Internal Environment ). External Environment Internal Environment: It includes * +s i.e. man, material, money, machinery and mana ement, usually within the control of business. Business can make chan es in these factors accordin to the chan e in the functionin of enterprise. External Environment: Those factors which are beyond the control of business enterprise are included in external environment. These factors are' ,overnment and $e al factors, ,eo%hysical .actors, %olitical .actors, #ocio-/ultural .actors, 0emo-,raphical factors etc. It is of two Types' (. +icro1!peratin Environment ). +acro1,eneral Environment Micro/Operating Environment: The environment which is close to business and affects its capacity to work is known as +icro or !peratin Environment. It consists of #uppliers, /ustomers, +arket Intermediaries, /ompetitors and %ublic. (1) Suppliers: They are the persons who supply raw material and re2uired components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier. (2) Customers: - /ustomers are re arded as the kin of the market. #uccess of every business depends upon the level of their customers satisfaction. Types of /ustomers' 3i4 5holesalers

3ii4 6etailers 3iii4 Industries 3iv4 ,overnment and !ther Institutions 3v4 .orei ners ( ) Mar!et Interme"iaries: - They work as a link between business and final consumers. Types'3i4 +iddleman 3ii4 +arketin 7 encies 3iii4 .inancial Intermediaries 3iv4 %hysical Intermediaries (#) Competitors: - Every move of the competitors affects the business. Business has to ad8ust itself accordin to the strate ies of the /ompetitors. ($) %u&lic: - 7ny roup who has actual interest in business enterprise is termed as public e. . media and local public. They may be the users or non-users of the product. Macro/'eneral Environment: It includes factors that create opportunities and threats to business units. .ollowin are the elements of +acro Environment' (1) Economic Environment: - It is very complex and dynamic in nature that keeps on chan in with the chan e in policies or political situations. It has three elements' 3i4 Economic /onditions of %ublic 3ii4 Economic %olicies of the country 3iii4Economic #ystem 3iv4 !ther Economic .actors' " Infrastructural .acilities, Bankin , Insurance companies, money markets, capital markets etc. (2) (on-Economic Environment: - .ollowin are included in non-economic environment'(i) %olitical Environment: - It affects different business units extensively. /omponents' 3a4 %olitical Belief of ,overnment 3b4 %olitical #tren th of the /ountry 3c4 6elation with other countries 3d4 0efense and +ilitary %olicies 3e4 /entre #tate 6elationship in the /ountry 3f4 Thinkin !pposition %arties towards Business 9nit (ii) Socio-Cultural Environment: - Influence exercised by social and cultural factors, not within the control of business, is known as #ocio-/ultural Environment. These factors include' attitude of people to work, family system, caste system, reli ion, education, marria e etc. (iii) )ec*nological Environment: - 7 systematic application of scientific knowled e to practical task is known as technolo y. Everyday there has been vast chan es in products, services, lifestyles and livin conditions, these chan es must be analysed by every business unit and should adapt these chan es.

(iv) (atural Environment: - It includes natural resources, weather, climatic conditions, port facilities, topo raphical factors such as soil, sea, rivers, rainfall etc. Every business unit must look for these factors before choosin the location for their business. (v) +emograp*ic Environment :- It is a study of perspective of population i.e. its si&e, standard of livin , rowth rate, a e-sex composition, family si&e, income level 3upper level, middle level and lower level4, education level etc. Every business unit must see these features of population and recon nise their various need and produce accordin ly. (vi) International Environment: - It is particularly important for industries directly dependin on import or exports. The factors that affect the business are' ,lobalisation, $iberalisation, forei n business policies, cultural exchan e. C*aracteristics:(. Business environment is compound in nature. ). Business environment is constantly chan in process. :. Business environment is different for different business units. ;. It has both lon term and short term impact. *. 9nlimited influence of external environment factors. <. It is very uncertain. =. Inter-related components. >. It includes both internal and external environment