Business environment

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Micro environment

It is related to small areas or immediate periphery of an organisation. Micro-environment influences an organisation regularly and directly.

Elements of Micro Environment

Consumers:

As all businesses need customers, they should be Centred around customers. The firm's marketing plan should aim to attract and retain customers through products that meets their "wants and needs".

Competitors:

The market can move very quickly for example through a change in trading conditions, consumer behaviour or technological developments. As a business it is important to examine competitors' responses to these changes so that you can maximise the impact of your response.

Employees:

Employees must be appointed with relevant skills and experience. This process starts in the recruitment phase and continues throughout the employment of an employee through ongoing training and promotions opportunities.

Suppliers:

Suppliers provide businesses with the materials they need to carry out their business activities. A supplier's behaviour will directly impact the business it supplies.

Macro environment

It is that part of external environment which is largely external to the enterprise and thus beyond the direct influence and control of the organization, but which experts powerful influence over its functioning.

Elements of Micro Environment

Demographic Environment:

The term demographic denotes the characteristics of population in a area, district, country or in the world. It includes factors such as race, age, income, educational attainment, asset ownership, home ownership, employment status and location.

Economic Environment:

Economic environment of business has reference to the broad characteristics of the economic system in which the... (More)

Environmental Scanning. In any business organization, there is an internal and external environment. Environmental scanning meaning is the gathering of information from an organizations internal and external environments, and careful monitoring of these environments to identify future threats and opportunities.

Importance of business environment

First mover advantage: The study of Business environment enables us to know about the opportunities available. A company which is more conscious about the change taking place in the business environment is the first mover.

Warning signal: Along with the availability of opportunities provided by the study of business environment, we also come to know about the threats accompanying them.

Tapping useful resources: An organisation needs a number of resources to carry on its Business like raw material, machine, labour and money. With the help of this resources goods and services are produced. A business gets resources from the environment and provides goods and services to the same environment. A study of Business environment tells a business the requirements of the environment and what can it make available to get its need fulfilled.

Improvement in performance: In every business organisation the study of business environment has an important role as far as it's performance is concerned. Those organisation which keeps a constant eye on it and analyse it correctly definitely win the race and remain alive for a long time.

So the above points shows the importance of business environment there are lots of other benefits also which are not mentioned above which an organisation gets... (More)

Business environment refers to forces and institutions outside the firm with which its members must deal to achieve the organisational purposes. 

Features of Business environment

Dynamic: Business environment is dynamic in nature which keeps on changing with the change in technology, consumer’s fashion and tastes etc.

Uncertainty: Business environment is uncertain as it is difficult to predict the future environmental changes and their impact with full accuracy.

Specific and general forces: Business environment includes both specific and general forces. Specific forces include investors, competitors, customers etc. who influence business firm directly while general forces include social, political, economic, legal and technological conditions which affect a business firm indirectly.

Complexity: Business environment is complex which is easy to understand in parts separately but it is difficult to understand in totality.

Relativity: Business environment is a relative concept whose impact differs from country to country, region to region and firm to firm. For example, a shift of preference from soft drinks to juices will be welcomed as an opportunity by juice making companies while a threat to soft drink manufacturers.

Business environment refers to forces and institutions outside the firm with which its members must deal to achieve the organisational purposes. 

Types of business environment

1. Economic environment:  It has immediate and direct economic impact on a business. Rate of interest, inflation rate, change in the income of people, monetary policy, price level etc. are some economic factors which could affect business firms. Economic environment may offer opportunities to a firm or it may put constraints.

2.Social264 environment:  It includes various social forces such as customs, beliefs, literacy rate, educational levels, lifestyle, values etc. Changes in social environment affect an organization in the long run. 

3. Technological environment: It provides new and advance ways/techniques of production. A businessman must closely monitor the technological changes taking place in the industry as it helps in facing competition and improving quality of the product. 

4. Political environment: Changes in political situation also affect business organizations. Political stability builds confidence among business community while political instability and bad law & order situation may bring uncertainty in business activities.

5. Legal environment: It constitutes the laws and legislations passed by the Government, administrative orders, court judgements, decisions of various commissions and agencies. Businessmen have to act according to various legislations and their knowledge is very necessary.