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MEANING OF BUSINESS ENVIRONMENT:
Understanding the environment within which the business has to operate is very important for running a business unit successfully at any place. Because, the environmental factors influence almost every aspect of business, be it its nature, its location, the prices of products, the distribution system, or the personnel policies. The success of every business depends on adapting itself to the environment within which it functions. For example, when there is a change in the government policies, then the business has to make the necessary changes to adapt it to the new policies.
When there is a change in technology, then also the business has to make necessary up gradation to cope up with the new advancement for
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Identifying Firm’s Strength and Weakness: Business environment helps to identify the individual strengths and weaknesses in view of the technological and global developments.
NATURE OF A BUSINESS ENVIRONMENT:
The nature of Business Environment is simply and better explained by the following approaches.
Fig 1.2 Different approaches to the Nature of Business Environment
(i) System Approach:
In original, business is a system by which it produces goods and services for the satisfaction of wants, by using several inputs, such as, raw material, capital, labour etc. from the environment.
(ii) Social Responsibility Approach:
In this approach business should fulfil its responsibility towards several categories of the society such as consumers, stockholders, employees, government etc.
(iii) Creative Approach:
As per this approach, business gives shape to the environment by facing the challenges and availing the opportunities in time. The business brings about changes in the society by giving attention to the needs of the people.
On the basis of the above approaches we can conclude the characteristics of the business which are as
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It is the group of many such forces that is why, its nature is of totality. (2) Specific and General Forces:
The forces present outside the business can be divided into two parts – specific and general.
(i) Specific: These forces affect the firms of an industry separately, e.g., customers, suppliers, competitive firms, investors, etc.
(ii) General: These forces affect all the firms of an industry equally, e.g., social, political, legal and technical situations.
(3) Interrelatedness:
The different factors of business environment are co-related. For example, let us suppose that there is a change in the import-export policy with the coming of a new government.
In this case, the coming of new government to power and change in the import-export policy are political and economic changes respectively. Thus, a change in one factor affects the other factor.
(4) Dynamic
Business has been in charge of the upgraded innovation that has generally supplanted the drudgery of most physical work, an outcome in part of the innovativeness of business and its readiness to take and bear the weight of money related hazard. Besides, maybe no establishment in our regular life is more proficient in its operations and more discerning in its association than business. No foundation is more receptive to the requests of its constituents than business.
The major issues facing the company comprises of there being multiple businesses with different demands. There are separate levels of performance and success as well as growth chances for each of the sector and the firm needs to tackle with issues in each of these divisions (Dube, J.P., 2004).
Environmental – External environmental factors are forces or trends that can affect a business whether it is an opportunity, threat, or constraint. They can be divided into three interrelated subcategories of remote, industry, and operating environments. The remote environment includes factors beyond a company’s operating situation such as the economic, social, political, technological, and ecological factors. The industry environment includes factors that have more of a direct influence on a company’s business such as entry barriers, competitor rivalry, the availability of substitutes, and the bargaining power of buyers and suppliers.
which is under the conservative government. Economic factors changes include changes such as a recession creating activity at the lower end of the product price range. Also for instance the rate of interest rates rising depressing businesses. causing redundancies and lower spending levels. Social factors change include changing lifestyles and attitudes.
A firm?s external environment is divided into three major areas : the general, industry and competitor environments. Below is an elaboration in further detail regarding the firm?s opportunities and threats in these three environments.
Selecting a business strategy that details valuable resources and distinctive competencies, strategizing all resources and capabilities and ensuring they are all employed and exploited, and building and regenerating valuable resources and distinctive competencies is key. The analysis of resources, capabilities and core competencies describes the external environment which is subject to change quickly. Based off this information a firm has to be prepared and know its internal resources and capabilities and offer a more secure strategy. Furthermore, resources and capabilities are the primary source of profitability. Resources entail intangible, tangible, and human resources. Capabilities describe environment and strategic environment. Core competencies include knowledge and technical capability. In this section we will attempt to describe in detail the three segments which are resources, capabilities, and core competencies.
Organizational Change "The effectiveness of organizational change is greatest when a firm’s strategy is consistent with environmental conditions and there is internal consistency." (D A Nadler, 2003:204) The only thing that is constant in this world is change and this is widely acknowledged by many in the world, may it be a corporation or a social forum or a governmental body. What comes in this world has to experience change in the light of environmental elements and pressures and influences, internal or external. The study of organizational behavior gives that environmental factors are the political, legal, economic, demographic, technological, social and societal. While these are the external environmental factors that are and cannot be counted among the controllable factors for an organization, they do in fact influence organizational structure, policies and strategies. In turn, the internal environment of the organization, that is very much controlled by the management of the organization and comprises of the top to bottom managerial levels, the staff, the employees, the board of directors, the owners etc. this internal environment, is to a great extent the result of external environmental factors, the change of which results in the direct impact on the internal environment of the organization. As such in lieu of external environmental factors; change agents with in the organization tend to accept the change in their external factors and tries to bring about a compatible change within the internal environment of the organization. The effectiveness of the change that is being brought about with in the organization as a result of the changing external environmental forces is best when, as described by Nadler, the internal facto...
The objective of this research is to help a company or an entrepreneur understand the business environment better as well as customers’ needs and, therefore, make better business decisions.
In analyzing the macro-environment, it is important to identify the factors that might in turn affect a number of vital variables that are likely to influence the organization's supply and demand levels and its costs (Kotter and Schlesinger, 1991; Johnson and Scholes, 1993). The "radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization" (Tsiakkiros, 2002). A number of checklists have been developed as ways of cataloguing the vast number of possible issues that might affect an industry. A PEST analysis is one of them that is merely a framework that categorizes environmental influences as political, economic, social and technological forces. Sometimes two additional factors, environmental and legal, will be added to make a PESTEL analysis, but these themes can easily be subsumed in the others. The analysis examines the impact of each of these factors (and their interplay with each other) on the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans (Byars, 1991; Cooper, 2000).
The wedding business has to take in consideration the ecommerce . too that time people were preserving maxima due to high inflation 2. How should BP have handled an external environmental analysis ties and what environmental changes and trends (opportunity and threats) might they have discovered? The builders, who have needed to work to meet BP 's assignments and who, to meet plan, transmuted working systems Is it administration controllers, who have been well aware of BP 's encroachments, however have endorsed it not to pay its fines and to propagate to work in safe matter.
Organizations usually face change due to many forces surrounding the business. The forces can be from internal or external sources. External forces of change usually occur outside of the organization and it could have a global effect. There four external forces for change: demographic characteristics, technological advancements, market changes, and social and political pressures (Kreitner-Kinicki, 2003). The internal forces for change come from inside the organization. The forces come from human problems and managerial behaviors and decisions.
Worthington, I. and Britton, C., 2006. The business environment. 1st ed. Harlow: Financial Times Prentice Hall.
Analysis of the external environment is very important for the development strategy of the organization and a very complex process requiring a process tracking and assessment factors and also the establishment of links between those factors and the strengths and weaknesses as well as opportunities and threats. External environment has its complexity and uncertainty. It is obvious that without knowing the environment the organization can not exist. The organization studies the environment in order to secure a successful progress towards its goals.
It is important to recognise the main features that affect a business in view of the macro and micro-environmental factors.
Environmental factors cater for the protection of the environment. A business must carefully be able to look at its surroundings to see for benefits and ensure that its daily production does not interfere with society.