Characteristics of Business Environment, Importance of Business Environment, Dimensions of Business Environment, 1. Economic Environment, 2. Social Environment, 3. Technological Environment, 4. Political Environment, 5. Legal Environment, Totaliity of external forces Specific and general forces Inter- Relatedness, Dynamic nature, Uncertainity, Complexity, Relativity, 6. Improvement in performance,

1. Business Environment
Business Environment:- Business environmentcan be defined as the sum total
of all external factors and forces that influencing the functioning of a business
enterprise. These factors may be social, economic, political, legal, and
technological and other institution constitutes the business environment. No
doubt all these factors and forces are external to the business butthey have a
great impact on the functioning of the business.
Characteristics of Business Environment
1. Totality of External Forces:- Business environmentis the sum total of all
external factors that influences and functioning of the business
2. Specific and General Forces:- Business environmentis made up of both
specific and general forces. Specific forces refer to the customers,
competitors, investors etc.
3. Inter- Relatedness:- Various elements of business environmentarevery
closely related to each other.
4. Dynamic Nature:- Business environmentis dynamic in naturei.e. it
keeps on changing.
5. Uncertainty:- Business environmentis very uncertain as one cannot
predict as to whatwill happen in future especially in case of fashion
industry.
Totaliity of
external forces
Specific and
general forces
Inter-
Relatedness
Dynamic
nature
Uncertainity Complexity
Relativity

2. 6. Complexity:- Many forces constitute the business environment. Thus it
become very difficult to know exactly the relative influences of a
particular forces( social, economic, technological, etc.) on the
functioning of a business enterpriseas all these factors arerelated to
one another.
7. Relativity:- Differentcountries and different regions have different
business environment.
Importance of Business Environment
1. Enabling the identificationof opportunities andgetting the first mover
advantage: - Business environmentalprovides many opportunities to
the firms to improvetheir performance. Thefirms which are able to scan
these opportunities at an early stageget maximum benefit and can leave
their competitors behind.
2. Helping inthe identificationof threats andearly warning signals or
radar effect:- Environment understanding help an enterprise to
recognisequalitative information in advance, which can be used to
prepareit for facing likely challenges.
3. Tapping useful resources:- Business requires many resources likeraw
materials, tools, equipment, finance, labour etc. for performing business
activities. These resources areknown as inputs.
4. Coping withthe rapid changes:- Business environmentis very dynamic.
One can see changes like new technologies, fragmented markets, more
demanding customers, heavy globalcompetition and so on.
5. Assisting inplanning and policy formulation: - Business environment
brings threat and opportunities to a business hence, understanding of
environmenthelps the management in future planning and decision
making.
6. Improvement inperformance:- Environmentawareness provides a
continuing, board based education management. Objectivequalitative
information generated by such understanding provides a strong basis for
strategic thinking.
7. Image building:- Environmentalunderstanding generates a feeling
among public that business is sensitive and responsiveto its
environment. This helps in building the image reputation of the firms.

3. Dimensions of Business Environment
1. Economic Environment:- Economic environment consistof factor
like inflation rates, interest rates, consumers’ income, economic
policies, market condition etc. which affects the performanceof a
business firm.
2. Social Environment:- Social environment implies tradition, literacy
rates, educational levels, values, customs, lifestyle, demographic
distribution and other characteristics of the society in which the
organisation exists.
3. Technological Environment:- The forces related to scientific
improvements and innovations for improving quality of goods and
services and new technique for operating the business, areall partof
technological environment.
4. Political Environment:- Political environmentconsists of forces such
as political stability and peace in the country and attitude of the
ruling party and its representativetowards business. Theseforces
significantly affect the functioning of business.
Business
Environment
Social
Environm
ent
Technolo
gical
Environm
ent
Political
Environm
ent
Legal
Environm
ental
Economic
Environm
ental

4. 5. Legal Environment:- Legal environment consistof rules and
regulation, framed by the parliament under which business must
operate. To exist and grow, business is requires to follow all the rules
and regulations that constitute the environment.