Dimension of Business Environment

Dimension of business environment

On the basis of the extent of intimacy with the

firm,environmental factors can be classified in two
types of environments.internal environment and
external environment.Internal factors like personal
physical facilities, organisation and functional etc.
Generally considered controllable factors are out of
business control.
Internal (controllable) factors:

Policies set by shareholders, managers, labour

unions and employees are known
Internal environmental factors that can be controlled.
In this context of internal factors
The environment is discussed as follows:
1.value system: The value system is important to
founders and top management.Depends on business
preference. Value systems are critical to business
success.
2. Vision, Mission and Objectives: Company's
business domain, priority direction
Development, business philosophy and business
policy etc. are guided by vision, mission and
Business objectives.
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3. Management Structure and Nature: Composition
of the Board of Directors, its extent
Professionalism of management etc. are important
factors influencing business decisions.
4. Internal power relations: Support from different
levels of top management
Employees, shareholders and BOD have important
influence on decisions and them
Implementation. The relationship between BOD
members and the CEO is also important
because
5. Human Resources: The characteristics of human
resources such as skills, quality, ethical,
Commitment and attitude etc. can contribute to an
organization's strengths and weaknesses.
Other reasons:
Physical assets and facilities.
marketing resources.
Financial factor.
External uncontrollable factor:
1.natural environment:
Factors that affect business are geographic
environment and environmental factors such as
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natural resources, weather and climatic conditions,
topographical factors and location aspects.
In a global context, the natural environment includes
climate, minerals, soil,
Landforms, rivers and oceans and natural resources
etc.
Substantial impact on a business function.
Manufacturing is an aspect of business that depends
on the physical environment for inputs
Such as raw material, skilled labor, water and fuel
etc. There is trade between the two countries
Dependent on geographic factors. For natural
reasons, more suitable for certain regions
Production of certain products while other areas
require such products. Some businesses like mining
Coal and ore, oil drilling and most importantly
agricultural production depend on nature.
Nowadays environmental pollution and disturbance of
ecological balance is a cause of great concern.
Government policy aims to maintain ecological purity,
ecological balance and
Saving of non-renewable assets etc. has created
additional responsibilities
and problems for business.
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2.Social Environment :
An important dimension of the business environment

is the social environment. Social systems are an
integral part of business and changes in society's
beliefs, attitudes and values have far-reaching effects
on business and its operations are subject to social
justice.
A business enterprise will earn a profit only by

meeting the needs of society and achieving socially
acceptable goals.
Major elements of the social environment that affect
the business environment.
● Knowledge and belief
● Social rule and norms
● Tradition and culture
● Religion
● language
● Social Trends
● Consumer Preferences, Habits, and Tastes.
3. Political Environment:
It means the actions taken by the government, which
potentially affect the routine operations of any
business or company, either domestically or globally.
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The success of business and industry depends on
the attitude of the government towards business and
industry, stability of government, peace in the country.
Example:
● The constitution of the country.
● prevailing political system.
● . politicalisation of business and economic
issues.
● Ideologies of major political parties.
● .political leaders and their thinking.
● Government intervention in business.
● . Relationships of our country with foreign
countries.
4. Economic Environment:
It refers to all these forces that have an economic
impact on business operations. We know that
business is an economic entity. Therefore, its
survival and growth is dependent on economic
factors. The economic environment includes various
factors, such as inflation, interest rates, price levels,
money supply in the market, etc. These factors act
as an opportunity or threat to a business. Therefore,
management is always active in seizing opportunities
and trying to convert threats into opportunities.
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For example: an increase in interest rates increases
the cost of production due to an increase in the cost
of raw materials and wages.
5.Legal Environment:
It refers to the broad features of the legislature in
which a business enterprise operates, including
various laws, which are enacted and passed by the
government in parliament or state legislatures. It also
involves administrative orders issued by government
authorities and courts and recommendations made
by various committees. Adherence to the laws of the
land is essential for the management of all business
establishments to operate in a fair and orderly
manner. If you do not follow the law, you will be
punished according to the statutory provisions. So
business managers must have adequate knowledge
about various regulations. Indeed, such awareness
and knowledge are prerequisites for good business
coordination and performance.
For example: Companies Act, Consumer Protection

Act, Trademark Act, Trade Union Act, etc. These
laws are passed by Parliament, which all companies
have to follow.
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6.Technological Environment
It refers to the broad features of science and
technology by the technological environment of
business. It includes forces related to innovation and
scientific development, which provide a new basis for
producing goods and services and also effective
methods and techniques for conducting a business
enterprise. Now it is very common that retailers have
direct links with suppliers who update their stock
when needed. Using the internet, people can search
for flight timings, destinations and fairs and book
tickets online. Technological advancements have
made it possible to book railway tickets from home or
office at a convenient time instead of queuing up at
railway booking counters and today almost all
commercial banks have started internet banking
services where account holders can view their
accounts at any time. Technological progress over
time creates new methods of production and
production techniques. Therefore, a business
enterprise has to adapt to new technologies for its
survival.
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Dimension of business environment

On the basis of the extent of intimacy with the

Internal (controllable) factors:

Policies set by shareholders, managers, labour

External uncontrollable factor:

An important dimension of the business environment

A business enterprise will earn a profit only by

For example: Companies Act, Consumer Protection

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