BUSINESS ENVIRONMENT

                 

 BUSINESS ENVIRONMENT

 Meaning of Environment 

After understanding the features of business and the key principles of capitalism, we are now in a position to analyze the environmental factors that affects a business. When a business decides to lunch a new product or a person decides to start a new business, his/her idea is affected by the presence of various factors in the market. These factors or forces are required to be studied and planned by the person before practically starting a business. These factors are categorized in two ways:  internal factors and external factor. The internal factors include all those issue which have an effect on the business operations from within the organization. These issues include employees, culture, capital, management, sales team etc.

                                                                               Secondly there are external environmental factors which also have an impact on the performance of the business. These are further classified in two categories: micro factors and macro factors. The micro external factors include the number of firms in competition with the business, suppliers, customers, agents, dealers etc.The success of a business depends on a good relationship with these factors.

   The macro external environmental factors include the political system of country, the economic development  of a country and the social issues that can affect the business operations. All business operate within the boundaries of particular countries. 

         The governments in different countries have made laws for the monitoring of business activities. Further, a business increase its profit, if it is working in an economically develop country. 

  

   Interaction of Business and Environment

The above mentioned internal and external environmental factors affect the performance of a business. An analysis of the effects of the environmental factors is necessary because it helps to correctly understanding the market conditions which in turn guides toward producing a good quality product.

    There are many ways in which the factors operating in the internal environment affect the business activities. For example, any change in the management of a business may have dramatic effects on its performance. Similarly, if a business has constructed a new building with state-of-the art facilities, it may also improve the level of hardworking of employees.

    The micro-external environmental factors also affect the performance of the business. For example. the selection of a supplier who provides low quality raw material for making a product may negatively affect the sales of a business. Likewise, any positive or advertising practice may also increase the sales of a business.

   In addition to all these factors, the macro-external environmental forces also play their role in shaping the results of a business.For example, any change in the government in a country may lead towards higher tax rate for the business resulting in lower profit margins for the business.Similarly, any change in the social habits also leads towards making adjustments in the design and packing of the product to satisfy the consumers.