Introduction
The term "business environment" refers to the sum or collection of all internal and external factors such as employees, customer needs and expectations, management, owners, clients, supply and demand, government activities, economic changes, suppliers, social trends, technological innovation, market trends, and so on. These factors have an impact on the company's function and how it operates, either directly or indirectly. The sum of these factors influences the company's or business organisation's environment and situation.
Uses of business environments
- It aids in identifying opportunities and gaining a competitive advantage. The environment provides numerous opportunities, and it is necessary to identify those opportunities in order to improve a business's performance.
- It aids the firm in identifying threats and early warning signs. The business environment assists in understanding potential threats in the future. Environmental awareness can assist managers in identifying various threats in real-time and serving as an early warning signal. For example, Patanjali products have served as a wake-up call to the rest of the FMCG industry.
- It Aids in Accessing Useful Resources Businesses and industry extract resources (inputs) from the environment, convert them into usable products (outputs) and distribute them to society. The environment provides a variety of inputs (resources) such as finance, machinery, raw materials, power and water, labour, and so on.
Salient features of a business environment
Complex Different elements of the business environment are inextricably linked and interdependent. It is complex in the sense that determining the precise impact of a particular factor on the entity is difficult. Changes in one element have an effect on the others as well. The economic environment influences the non-economic environment, which in turn influences economic conditions. For example, India's economic liberalization since 1991 has created new opportunities for the private sector and foreign entrepreneurs.
Dynamic Dynamic implies that it changes from time to time. The environment is volatile due to the constant change in nature, shape, character, and pervasiveness of the various influencing factors. As an example: The audio cassette was replaced by the CD in the music industry. Smartphones later have an impact on the CD market. Currently, ringtones and caller tunes generate more revenue for the film industry than selling music CDs.
Relativity The business environment is a relative term. It differs from one country to the next, and even from one region to the next. Capitalist economies, such as those of the United States and the United Kingdom, operate in a different environment than communist economies. The nature of a country's economic system influences the business environment. As an example: The Honda Activa 7G is expected to be launched in India by mid-2022, while 10G scooters are being launched in the United States.
Uncertainty The business environment is largely uncertain because forecasting the future environment is extremely difficult. When the environment is volatile, or changes quickly, uncertainty rises. For example, in some business industries, it is nearly impossible to predict future trends.
