Business Environment Homework Help

The term business environment means “the aggregate of all forces, factors and institutions which are external to and beyond the control of an individual business enterprise but which exercise a significant influence on the functioning and growth of individual enterprises.” Keth Davis defines business environment as “the aggregate of all conditions events and influences that surround and affect business.”

Business environment is characterized by the following features :

1. Aggregative : Business environment is the totally of all the external forces which influence the working and decision-making of an enterprise.

2. Inter-related : Different elements of business environment are closely inter-related and interdependent. A change in one element affects the other elements. Economic environment influences the non-economic environment which in turn affects the economic conditions. For example, economic liberalization in India since 1991 has opened up new opportunities for private sector and foreign entrepreneurs. Similarly, social pressures against pollution led to the enactment of anti-pollution laws. Therefore, managers should not consider environmental factors in isolation from one another. A holistic approach is necessary for proper understanding of business environment.

3. Relative : Business environment is a relative concept. It differs from country to country and even region to region. Capitalist economies like those of USA and UK have a different kind of environment than communist economies. The nature of economic system in a country affects the environment of business.

4. Inter-temporal : Business environment is also and inter-temporal concept as it changes over time. For example, business environment in India today is much different from that prevailing before 1991. In the short run business environment may remain static. But in the long run, it does change.

5. Uncertain : Business environment is largely uncertain because it is very difficult to forecast the future environment. When the environment is volatile, i.e., changes very fast, uncertainty increase.

6. Contextual : Business environment provides the macro framework within which the business firm (a micro unit) operates. The environmental forces are largely those given within which an individual enterprise and its management must function.

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