PROJECT WORK ON BUSINESS ENVIRONMENT

1. PROJECT WORK ON BUSINESS ENVIRONMENT

2. CONTENTS 1.1 Introduction 1.2 Factors of Business Environment 1.3 Environment of Business 1.3.1 Internal and External Environment of Business 1.3.2 Economic and Non-economic Environment of Business and its Importance

3. 1.1 Introduction In common sense, the term business refers to buying and selling of goods. But in modern times, business covers a wide and complex field of industry and commerce involving complex activities related to both production and distribution. All these activities satisfy the diverse needs of the society and also help generate profit of business firms or units. Thus by the term business we mean organized efforts of different enterprise for supplying various goods and services to the ultimate consumers for a profit. Business, in nutshell, includes diverse activities related to production, marketing, transport, trade, finance, banking, insurance, advertising and some other activities connected with industry and commerce. One thing is common, i.e., all these activities are conducted as well as motivated by profits. Moreover, all these activities must be conducted within the existing legal framework. Violations of which must be excluded from business activity.

4. 1.2 Factors of Business Environment Total environment of business is consisting of six factors which are as follows: Economic Environment: Economic development includes all those forces which have an economic impact on business. Accordingly, total economic environment is consisting of agriculture, industrial production, infrastructure, planning, basic economic philosophy, stages of economic development, trade cycles, national income, per capita income, savings, money supply, price level and population. Business and economic environment is closely related. Business usually collects all its required inputs from the economic environment available and also absorbs the output of business units. Politico-legal Environment: It includes the activities of three political institutions such as legislature, executive and judiciary which usually play useful role in shaping, directing, developing and controlling business activities. The legislature takes decisions on a particular course of action, the executive implements those decisions through government agencies and the judiciary serves as a watch-dog for ensuring public interest in all the activities of legislature and executive. In order to attain a meaningful business growth a stable and dynamic politico-legal environment is very important.

5. Technological Environment: It is exercising considerable influence on business. Technology implies systematic application of scientific or other organized knowledge to practical tasks or activities. Business makes it possible for the technology to reach the people in proper format. As the technology is changing fast thus businessmen should keep a close look on those technological changes for its adaption in their business activities. Global or International Environment: Global environment is playing an important role in shaping the business activity. With the liberalization and globalization of the economy, business environment of an economy has become totally different when it has to bear all shocks and benefits arising out of global environment. Natural Environment: It also influences business in a diverse way. Business of modern times is also dictated by nature. Natural calamities like floods, droughts, earthquake etc affect the business activities in a worst manner. Socio-cultural Environment: It is also influencing the business environment indirectly. These includes people’s attitude to work and wealth, ethical issues, role of family, marriage, religion and education and also social responsiveness of business. Social and cultural environment also influences the demand for variety of goods and the type of employees the industry require. Moreover, the obligation of business to society also depends on the cultural milieu in which the firm is operating.

6. 1.3 Environment of Business The term business environment indicates all external forces or factors which have a direct ir indirect bearing on the activities related to functioning of business. However, the term business environment is also being used in a broad sense. Thereby, it includes both internal and external environment of business. Again external environment is also divided into micro environment and macro environment. These aspects are analysed in the following manner: 1.3.1 Internal and External Environment of Business Internal Environment: Internal environment of business includes physical assets, technological capabilities, human, financial and marketing resources, management structure, relationship among various constituents, goods, objectives and value system prevailing. External Environment: External environment of business is composed of various organizations, institutions and forces operating outside the company, which exert influence individually and collectively as well on this environment. External environment of business is broadly is broadly classified into micro environment and macro environment.

7. Micro Environment: It includes those players whose decisions and actions have a direct impact on the company. Production and selling of commodities are the two important aspects of modern business. Accordingly, the micro environment of business can be divided. Input suppliers and workers along with their union are exercising influence on production and they are considered as prominent performers in the micro environment. Moreover, sales operations of the business firm are affected by its customers, markets intermediaries and competitors. Micro environment has a great relevance from the context of company’s business operations. Different players in the micro environment normally do not affect all the companies of a particular industry in a similar way. However, sometimes micro environment of the various firms of an industry remains almost same. Macro Environment: Another constituent of business environment in the macro environment which includes all those economic and non-economic factors which exerts its influence on the business activity in general. Considering the business point of view, the role of macro environment may be both positive and negative.

8. 1.3.2 Economic and Non-economic Environment of Business and its Importance Macro environment of business is broadly classified into economic and non-economic environment of business. Modern business conditions are largely influenced by both economic and non-economic business environment. In order to initiate various economic activities for attaining economic development of a country, both economic and non-economic environment business environment and its various constituent elements are analysed in the following manner: Economic Environment of Business Environment and its Importance Economic environment is playing an important role in mobilizing the business enterprise towards its right direction. Some of the important constituent elements of economic environment of business are as follows: Economic System: By economic system we mean the legal and institutional framework within which various economic activities are undertaken. Various economic activities like production, consumption, exchange distribution and economic growth are all guided by institutional framework which includes laws, customs and social institutions of a particular country. At present there are three types of economic system prevalent in this world. These are- capitalism, socialism and mixed economy.

9. Macro-economic scenario: Macro-economic scenario of a country determines the prospects of business to a large extent. A healthy environment supported by rapid growth, high rates of saving and investment, stable price level, fiscal stability and favourable balance of payments, always opens a bright prospect of business growth in a country. Business Cycle and Stagflation: Economic environment of business is also influenced by ups and downs or cyclical fluctuations in business activity. Prosperity and recessions are the common phases through which the capitalist economy passes through periods. Financial System: The economic environment of business is also influenced by the efficacy of the financial system. Banks and non-banking financial institutions are an important source of fund for the corporate sector. The level of development of the financial system is having a crucial importance in business. Economic Policies: The government of a country has to formulate different economic policies. All these economic policies can be classified as industrial policy, monetary policy, trade policy and fiscal policy. All these economic policies of the government are playing a significant role in determining the economic environment of business of a country.

10. Non-Economic Environment of Business and its Importance Non-economic environment is as important as economic environment for influencing for influencing the business activity of the country. All non-economic issues related to business are included in non-economic environment of a country. The non-economic environment of business can be classified broadly as Politico-legal Environment: In modern times, politico-legal environment is having a paramount importance in business. The politico-legal environment includes three political institutions such as legislature, executive and judiciary which usually play useful role in shaping, directing, developing and controlling business activities. Demographic Environment: It is also an important constituent of business environment. Accordingly,, demographic factors like, rise and growth rate of population, age and sex composition of population, rural urban distribution of population, educational levels, religion, ethnicity, caste, language etc are all relevant to business conditions.

11. Socio-Cultural Environment: These includes people’s attitude to work and wealth, ethical issues, role of family, marriage, religion and education and the social responsibilities of business. All the business firms usually operate in a definite socio-cultural environment and they have to formulate their business policies considering this factor. Technological Environment: It is an important element in business environment. Technology implies systematic application of scientific or other organized knowledge to practical tasks or activities. Natural Environment: Suitable natural environment is also an important component of non-economic environment of business. Thus the business environment in the country also needs a natural support which includes suitable climate, balanced weather, suitable natural environment i.e., free from flood and drought etc. Moreover, the maintenance of eco-friendly atmosphere is also quite important for the promotion of developmental activities in an economy

12. REFERENCE: DHAR P.K. DHAR PARIJAT: BUSINESS ENVIRONMENT KALYANI PUBLISHERS= NEW DELHI- 2012