Business Environment - NET Exam Commerce Paper II

Business Environment :

Meaning

1. Business environment is the sum total of all external and internal factors that influence a business.

2 The definition of business environment means all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand and business regulations.

 3.The business environment is dynamic in nature, that means, it keeps on changing.  The changes in business environment are unpredictable. It is very difficult to predict the exact nature of future happenings and the changes in economic and social environment.Business Environment differs from place to place, region to region and country to country. Political conditions in India differ from another country.

Business environment is of two types-

(i) Micro environment or the internal environment
(ii) Macro environment or the external environment

(i) Micro environment / Internal Environment of Business

Micro environment comprises of the factors in the immediate environment of the company that affect the performance of the company. In includes the suppliers, competitors, Marketing intermediaries, customers, pressure groups and the general public. Supplier form an important factor of the micro environment of business as the importance of reliable sources of supply are obvious. Supplier include the financial labor input. Stock holders, banks and other similar organizations that supply money to the organization are also termed as suppliers. Managers always strive to ensure a study flow of inputs at the lowest price. Customers are also an important factor in the internal environment of business. The customers or the clients absorb the output of an organization and a business exists to meet the demands of the customers. Customers could be individuals, industries, government and other institutions. Labour force is also an important part of the internal environment of business. Other than these the business associates, competitors, regulatory agencies and the marketing intermediaries are also a part of the micro business environment.

Macro environment / External environment of Business :

The forces and institutions out side of the organization that can potentially affect the performance of the organization come under the external environment of Business. The macro environment of business consist of the economic, demographic, natural, cultural and political forces. The external environment of business is often categorized into the economic environment, political and government environment, socio cultural environment and the international environment.