UNDERSTANDING BUSINESS ENVIRONMENT

Understanding Business Environment

Name of Writer

Name of Institution

Table of Contents

Introduction3

Types of Business Environment4

Internal Environment4

External Environment5

Micro/Operating Environment5

Suppliers5

Customers5

Market Intermediaries6

Competitors6

Public6

Macro/General Environment6

Economic Environment6

Political Environment7

Socio-Cultural Environment8

Technological Environment8

Natural Environment8

Demographical Environment9

Global Environment:9

Legal Environment9

Importance of Business Environment10

Conclusion14

References16

Understanding Business Environment

Introduction

Business Environment is the sum total of all the factors that impact the business but are beyond the control of the business. As one author has put it- “Just take the galaxy, deduct from it the part that symbolizes the business, and the rest is environment”.

It is essential for a customer to comprehend the common environment of the business he wants to buy.

So, let us see what kind of structure can assist the control in knowing the business environment - complicated solutions often lie in their convenience of approach. Here are 3 steps that can help:

Understand where your business is: Really comprehend. Taking complete stock of a business's unique circumstances - as respect to item advancement, customer buying styles, PR marketing, what are you selling and what you can sell.

Compare the business with the head in the business: A critical comparison with the head in the industry will bring out the areas where most interest needs to be paid, because most often, the top business has read the business environment right.

Interact with with stakeholders: Continuous conversation with all stakeholders will lead to knowing the business's market and ranking in the aggressive industry.

The ideal direction a business takes will eventually rely on evaluating the business environment properly. Many businesses today do not even have the right evaluation and research tools to see the hidden possibilities behind their functions.

Companies do not want to find themselves going down the track of ”Strategic drift” - imbalance of strategy with around eco-system change, what the writers of the book “Exploring Strategy” dispute. This happens when the ”successful” business becomes adverse to replacing its successful system - mainly due to when the objectives of the business are investor motivated rather than stakeholder motivated. It becomes firm, misreads the environment resulting in rapid loss of performance - as was the case of our car maker (Brinkman, et al., 2010).

Types of Business Environment

Business Environment consists of two words 'Business' and 'Environment'. Simply, the condition in which a person continues to be active is known as Business. The phrase Business in its financial sense indicates human activities like development, removal or purchase or sales of goods that are conducted for generating earnings.

On the contrary, the term 'Environment' represents the factors of environment. Hence, Business Environment can be described as a set of circumstances - Public, Legal, Social, or Political that are unmanageable in characteristics and impact the performing of business. Business Environment has two components (Capon, 2009):

1. Internal Environment

2. External Environment

Internal Environment

It contains 5 Ms i.e. man, money, machine, material and management, usually under the power of business (Capon, 2009).

External Environment

The factors that cannot be controlled or managed by the business is called external environment. These factors are: Economical, Demographics, Political, Socio-Cultural Factors, Technological and legal factors etc. It is of two Types (Capon, 2009):

1. Micro/Operating ...