2. UNIT I
INTRODUCTION
Meaning of Business Environment-
• Nature and Significance-
• Political
• Cultural
• Legal
• Economic and
• Social Environments
Impacts on Business.
3. What is Business
• It is a continuous production and distribution
of goods and services with the aim of earning
profits under uncertain market conditions.
• It is a form of regular activity conducted with
an objective of earning profits for the benefit
of those on whose behalf the activity is
conducted.
5. Meaning of Business Environment
• The term “Business environment” represents
the sum of all the individuals, institutions,
competing organisations, government, courts,
media, investors, and other factors outside
the power of the business organisations but
affects the business performance.
6. Business Environment Definition
• The term “Business environment " is the sum
of all conditions, events, and influences that
surround and affect business activities and
growth.
• Business environment consists of individuals,
institutions and other forces which are outside
the control of a business but that potentially
affect is performance.
7. Types of Business Environment
•Mainly Business Environment divided into two
types.
These are:
1.InternalEnvironment
2.ExternalEnvironment
9. Components of Business Environment
Internal - It combines the factors that exist
within the company. These are –
• Human resources
• Value system
• Vision and mission
• Labour union
• Corporate culture
10. Components of Business Environment
External - An external Environment includes
those outside factors that exercise an
influence on a business’s operations. It is
further classified into two segments.
• Macro - Socio-cultural, political, legal, and
global factors fall into this category.
• Micro - This environment has a direct and
immediate impact on a business. It consists of
customers, investors, suppliers, etc.
12. Macro Environment
Political Environment: It affects different
business units extensively
•Political Belief of Government
•Political Strength of the Country
•Relation with other countries
•Defence and Military Policies
•Centre State Relationship in the Country
•Thinking Opposition Parties towards Business
Unit
13. Macro Environment
• Socio-Cultural Environment
It implies the tradition, culture, customs, and values of a society
in which the business exists.
Tradition: In India, festivals like Diwali, Christmas, and Holi
provide a financial opportunity for several market segments like
sweet manufacturers, gifting products suppliers, etc.
Value: A company that follows long-held values like social
justice, freedom, equal opportunities, gender equality, etc.
excels in that given society.
Recurrent Trends: It refers to development or general changes in
a society like consumption habits, fitness awareness, literacy
rate, etc. which influence a business.
For example, the demand for organic vegetables and gluten-free
food is increasing; therefore, companies that manufacture food
items keep this in mind to attract more crowds.
14. Macro Environment
• Technological Environment
It comprises the knowledge of the latest technological
advancements and scientific innovations to improve the
quality and relevance of goods and services.
Example: A Watch Company that sells smartwatches and
traditional watches will prosper as smartwatches are
trendy recently.
• Economic Environment
It involves market conditions, consumer needs, interest
rate, inflation rate, economic policies, etc.
15. Macro Environment
• Legal Environment
It includes the laws, rules, regulations, and acts
passed by the government. A company has to
operate by abiding by the rules and regulations of
laws like the Consumer Protection Act 1986,
Companies Act 1956, etc. A proper understanding
of these laws assists in the smooth operations of a
company.
Example: A cigarette-selling company compulsorily
has to put the slogan “smoking is injurious to
health” on every packaging.
16. Importance of Business Environment
The business environment and its importance are
necessary for the following reasons:
• Enabling the identification of opportunities and
taking immediate steps to explore the benefits.
• Helping identify threats and early warning signals
• To cope with the immediate changes.
• Support in planning and policy.
• Improving the business performance.
