3. The term Business Environment is composed of two
words ‘Business’ and ‘Environment’. In simple terms, the
state in which a person remains busy is known as
Business. The word Business in its economic sense means
human activities like production, extraction or purchase
or sales of goods that are performed for earning profits.
On the other hand, the word ‘Environment’ refers to the
aspects of surroundings. Therefore, Business
Environment may be defined as a set of conditions –
Social, Legal, Economical, Political or Institutional that are
uncontrollable in nature and affects the functioning of
organization.
4. Micro Environment:
Micro external forces have an important
effect on business operations of a firm.
However, all micro forces may not have the
same effect on all firms in the industry. For
example, suppliers, an important element of
micro level environment, are often willing to
provide the materials at relatively lower prices
to big business firms.
6. Macro Environment:
Apart from micro-environment, business firms face large
external environmental forces. The external macro
environment determines the opportunities for a firm to
exploit for promoting its business and also presents
threats to it in the sense that it can put restrictions on
the expansion of business activities. The macro-
environment has thus both positive and negative aspects.
An important fact about external macro-environmental
forces is that they are uncontrollable by the management
of a firm. Because of the uncontrollable nature of macro
forces a firm has to adjust or adapt itself to these
external forces.
7. (1) Economic,
(2) Social,
(3) Technological,
(4) Political and legal, and
(5) Demographic
