2. The business environment comprises
external and internal factors that impact
the operations and functions of the
company both in a positive and negative
way. The impact on the environment is so
great that it makes the business restore
and modify the whole business.
1–2
3. TYPES OF
BUSINESS
ENVIRONM
ENT
Primarily the types of business
environment are classified under
two categories;
1.Internal Business Environment
2.External Business environment
1–3
4. Refers to those factors within an organization e.g.,
Policies and programs, organizational structure,
employees, financial and physical resources. These
factors can be changed or altered and hence are known
as controllable factors.
The main internal factors which influences Business
Decisions are as follows:
1. Culture
2. Mission And Objectives
3. Top Management Structure
4. Resources (Human, Physical, Financial,
Technological)
5. Power Structure
1–4
5. EXTERNAL ENVIRONMENT
External Environment refers to the
factors existing outside a business firm.
These External factors are considered to
be uncontrollable because the enterprise
has No or Partial control over these
factors.
External Environment can be divided into
two types Namely:
1. Micro-Environment
2. Macro-Environment
1–5
6. Micro-environment refers to the environment
which is in direct contact with company and
affects the routine activities of business straight
away.
Components of micro-environment
Customers
Suppliers
Competitors
Marketing Intermediaries
Public
1–6
7. The macro-environment factors
are the environmental forces
which are faced by the
organization and determine the
opportunities to exploit in
order to promote its business
and also present a threat so
that it can put restrictions on
the expansion of Business and
its related activities.
1–7
8. TYPES OF MACRO-
ENVIRONMENT
Economic
health of the economy
Legal-political
philosophy/objectives of political party running the government
Socio-cultural
norms, customs, social values
Technological
development and availability of technology
Demographic
characteristics of the population
Natural environment
nature and conditions of environment
1–8
9. ECONOMIC
ENVIRONMENT
The Economic Environment consists of the
economic forces that affects the business
activities. These forces influences the buying
behavior and spending patterns of consumers
and institutions.
Components of Economic Environment
Economic System: includes Capitalist, socialist
and Mixed Economic System.
Economic Policies: includes Monetary Policy,
Fiscal Policy, Supply side Policy etc.
Economic Indices: includes Gross Domestic
Product, Consumer Price index, Per Capita
Income etc.
Financial Market: includes Share Market,
Money Market, Derivative Market, Capital
Market.
1–9
10. POLITICAL AND LEGAL
ENVIRONMENT
Political Environment consists of the
elements relating to government
affairs. The political environment
provides the framework within which
business has to function.
Major elements of the legal and
political environment:
Political stability
Political organization
Image of the leader and the country
Constitution
Foreign policy
1–10
11. SOCIO-CULTURAL
ENVIRONMENT
Business is a part of the society.
Social environment refers to the sum
total of factors of the society in which
the business is located. Social and
cultural environment of society affects
the business.
It is dynamic and includes the
behavior of individuals, the role and
importance of family, customs,
traditions, beliefs and values, religion
and languages, the ethical values.
The literacy level, and the social
attitudes of the people of the society.
1–11
12. TECHNOLOGICAL ENVIR
ONMENT
The technological environment consists of
factors related to technology used in the
production of goods and services that have
an impact on the business of an
organization.
Components of Technological Environment
New approaches to the production of
goods and services
Use of New processes and equipment
Transfer of Foreign Technology
Impact of Technology on cost and quality
technology adopted by competitors
1–12
13. DEMOGRAPHIC
ENVIRONMENT
Demographic characteristics of the
population reflect the details on
parameters such as age profiles, gender
profile, income levels of target group,
size of families, occupation, growth
rate, educational levels, life expectancy,
language, caste, religion etc. are all the
factors which are relevant to business
and affect the demand for goods and
services.
14. NATURAL
ENVIRONMENT
The natural environment is the ultimate
external environment which affects the
business. Availability of natural resources
and the setting up of business depends
largely on the natural environment. It is
desirable that the natural environment is
to be kept relatively unharmed.
Natural resources include geographical
and economic resources like oil reserves,
mineral reserves, water and forest
resources, weather and climate,
conditions, availability and facilities of
Port, connectivity to other countries
and development of the surrounding
areas. For example, availability of
minerals influences certain industries in
that area.
1–14
