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Business Environment and Law-Business And Its Environment

Types Of Business Environment-Business And Its Environment

   Posted On :  04.05.2018 02:42 am

“The total of all things external to firms and industries which affect their organization and operation”—Bayard O. Wheeler

Definition Of Business Environment

“The total of all things external to firms and industries which affect their organization and operation”—Bayard O. Wheeler
According to Arthur M. Weimer, business environment encompasses the ‘climate’ or set of conditions, economic, social, political or institutional in which business operations are conducted.

Types Of Environment

The business environment poses threats to a firm or offers immense opportunities for potential market exploitation. The business is determined by two factors namely:
  1.   Micro environment or internal factor or endogenous factor.
  2.   Macro environment or external factor or exogenous factor.

Micro Environment

Micro environment relates to internal matters of business such as:

  •   Structure of business
  •   Size of the business
  •   Policy relating to business
  •   Product produced

Macro Environment Or Business Environment Or External Environment

  •   Demographic environment
  •   Economic environment
  •   Geographical and ecological environment
  •   Legal environment
  •   Technological environment
  •   Social environment
  •   Cultural environment
  •   Political environment

Demographic Environment

This refers to the size and behaviour of the population in a country. Suppose a country has a huge size of population, then, the country would provide extensive business or marketing opportunities for all types of business organizations. On the other hand, a country with low size of population would force the business organizations to seek external market for their products or services. Similarly, if the population in a country is well - tuned to ‘use and throw concept’ [like most of the western countries] then there would be limited scope for repair shops. The employment scope in that segment would be almost nothing. But alternatively this would give wide marketing opportunities for manufacturing organizations. On the other hand, if the population is averse to ‘use and throw’ concept, then the business opportunities would be limited for manufacturing organizations. But the repair shops, self-employed technical persons and spares manufacturers, would have roaring business. Hence, the size and quality of population emerge as vital factors in a business environment.

Economic Environment

There is close relationship between business and its economic environment. Business obtains all its needed inputs from the economic environment and it absorbs the output of business units.

  1.   Fiscal policy
  2.   Monetary policy.
  3.   Foreign policy.

Geographical And Ecological Environment

Geographical environment refers to climatic conditions and natural resources, which determines the manufacturing scope and the nature of the products that could be marketed. For example, a country like kenya has to manufacture more of products based on forest resources, while the gulf countries can produce only crude, japan can have business on fish, fruits, etc., Countries in the tropical region would produce products from largely available geographical resources in that region, organizations in mediterranean countries have a different business scope, scandinavian countries have scope in dairy products and so on. On the other hand, steps towards balanced eco- system are taking place at an alarming rate in the world today. Deforestation and hunting of rare species of animals for food have been prohibited. Hence, while identifying the business opportunities, business organizations have to be conscious of the limitations posed by the geographical and ecological considerations.

Legal Environment

It is well known that every country has a number of legal regulations to ensure that the interests of business organizations do not run counter to national interests. Right from the stage of incorporation of organizations, their listing in stock exchange, redress of customer complaints, payment of tax to government, manufacturing practices, human resources development to pricing of products and services, a number of legal regulations have to be fulfilled. For example, in usa and several western countries, consumer protection is very active, that even a medical practitioner is subjected to huge liabilities in times of deficiency in services. In india and other countries, very rigorous legal provisions are in place to prevent hunting

of rare species. Hence, any organization, which manufactures products based on such species, have to get legal sanctions. In case of failure to honour cheques issued, organizations are now a days made to pay hefty compensations. Hence, the deterrence in terms of legal provisions has become the order of the day. All organizations have to first of all address these provisions become coming in to steam.

Technological Environment

Technology is understood as the systematic application of scientific or other organized knowledge to practical tasks. Technology changes fast and to keep pace with it, businessmen should be ever alert to adopt changed technology in their businesses.

Political Environment

It refers to the influence exerted by the three political institutions viz., Legislature, executive and the judiciary in shaping, directing, developing and controlling business activities. A stable and dynamic political environment is indispensable for business growth.

Natural Environment

Business, an economic pursuit of man, continues to be dictated by nature. To what extend business depends on nature and what is the relationship between the two constitute an interesting study.

Social And Cultural Environment

It refers to people’s attitude to work and wealth; role of family, marriage, religion and education; ethical issues and social responsiveness of business. According to geert hofstede, culture is “the collective programming of the mind that distinguishes the members of one category of people from those of another”.

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