Concept & Significance

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BUSINESS

ENVIRONMENT

CONCEPT & SIGNIFICANCE

UNIT I


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BUSINESS

1. Business include everything from a small owner-operated company such as a family restaurant, to amultinational conglomerate such as GeneralElectric.

2. To "do business" with another company, abusiness must engage in some kind of transactionor exchange of value with that company.

3. In this sense, the word "business" can be used torefer to a specific industry or activity, such as the"real estate business" or the "advertising business".


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BUSINESS DEFINED

According to L. H. Haney

- Business may be defined as human activitiesdirected toward providing or acquiring wealth

through buying and selling of goods.

James Stephenson says that:

- Every human activity which is engaged in for

the sake of earning profit may be calledbusiness.


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ENVIRONMENT

The circumstances or conditions that surround one;surroundings.

The totality of circumstances surrounding an organism

or group of organisms.

The combination of external physical conditions thataffect and influence the growth, development, andsurvival of business.

The complex of social and cultural conditions affectingthe nature of an individual or community.


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ENVIRONMENT

Environment refers to all External factors which have a bearing

on the functioning of business .

Environment factors or constraints are largely or if not totally,

external and beyond the control of individual industrialenterprises and their managements.

These are essentially the givers within which firms and their

management must operate in a specific country and they vary,

often greatly, from country to country.


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Business Environment

Business is any activity undertaken for the purpose of producing

or selling a particular commodity or service and earns a profit.

The business has several dimensions such as purchasing the

inputs, converting the inputs into the output, selling that output ata profitable price.

Every dimension of a business depends upon several factors.Hence a business is influenced by several factors, all them put

together are described as Business Environment


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Business environment is a sum total of all those factors, whichdirectly affect the working of business. It is a comprehensiveterm and covers factors like consumer behavior, economicpolicies, competition in the market, technology and so on. Manyauthors and experts in different ways have defined the termBusinessEnvironment.

According to Keith Davis, "Environment of the business meansthe aggregate of all conditions, events and influences thatsurround and affect it."

In the words of B.O.Wheeler, "Business environment is the totalof all things external to firms and individuals which affect theirOrganization and operations".


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Concept of Business Environment

A business firm is an open system. It gets

resources from the environment and supplies its

goods and services to the environment.

There are different levels of environmental

forces. Some are close and internal forces

whereas others are external forces.


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External forces may be related to national level,regional level or international level.

These environmental forces provide

opportunities or threats to the business

community.

Every business organization tries to grasp theavailable opportunities and face the threats that

emerge from the business environment.


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Environment is Inseparable Part of Business:

Environment is Dynamic:

Environment is decided by Chance and not bychoice

Environment Regulates the Scope of Business:

Environment has a direct and long lasting impact on

Business .


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Environment is Inseparable Part of

Business

Business environment is the surrounding or atmosphere

under which business is conducted .

Business cannot work in vacuum or isolation and needsfavorable surroundings to survive and grow.

Business depends on environment supply of rawmaterialsand to sell its finished product

Thus, business cannot function without environment, as

both are independent and interdependent on each other.


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Environment is Dynamic

Business environment is dynamic i.e. flexible and ever

changing.

The changes in the environment take place due to manyexternal forces- the social, economic, cultural and other

forces.

A firm would not have the same type of economic or

other conditions prevailing year after year


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Environment is decided by Chance and

not by choice A favorable environment would be conducive for the

survival and growth of a firm

However, in reality, a firm has absolutely no control over

its external environment.

. A firm cannot decide or control or arrange its external

environment as per its own requirements.

To ensure survival and success, a business firm should

adjust itself to the changing environment, or to mould the

environment to suit the interest of business.


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Environment Regulates the Scope of

Business

The scope of business is regulated and restricted by the

external factors surrounding it.

A business firm is expected, to conduct its activitieswithin the social, economic and legal limits set outin theform of rules, regulations and policies.

For instance, advertising of liquor and cigarette isprohibited on government controlled media like Radio

and TV.


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Environment has a direct and long lasting

impact on Business . Both business and environment affect each other in

many ways

But environment has long lasting impact on the future ofthe business enterprise

In the recent past, the Government of India has

announced a number of economic reforms like,liberalization, privatization, open door policy for foreign

investment etc


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Environment is Complex

Theenvironment of modern business is morecomplex,flexible, and highly unpredictable.

The modern business has grown in size & scope and so

is the environment.

The growth of science and technology, expansion ofmarket, large scale production, social awareness,changing social and cultural values, the role of

government etc, have made the business environment ahighly complicated subject to understand and follow.


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Internal and External Environment

Environment is Multi-Faceted

Environment and Planning


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NEED AND IMPORTANCE OF

BUSINESS ENVIRONMENT:

Business organizations cannot change the external environmentbut they just react. They change their internal businesscomponents (internal environment) to grasp the externalopportunities and face the external environmental threats.

It is, therefore, very important to analyze business environmentto survive and to get success for a business in its industry. It is,therefore, a vital role of managers to analyze business

environment so that they could pursue effective businessstrategy.


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SIGNIFICANCE OF BUSINESS

ENVIRONMENT

A study of business environment useful in manyways like: -

Identify Prospects and Problems

Optimum Use of Resources

Flexibility

Environmental analysis is Necessary


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SIGNIFICANCE OF BUSINESS

ENVIRONMENT

Effective planning

Future Needs

Face Competition

Ecological Balance

Formulate Strategy


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Critics of Business

Business dehumanises and exploits workers

Business harms interests of consumers

Business degrades nature and the

environment

Business causes scams and scandals

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