The business is the product of the political-legal, economic, social-cultural, and natural factors amide which it functions, Three features are common to this web of relationship between business and its environment.
There is a symbiotic relationship between business and its environment and among environmental factors.
In other words, business is influenced by its environment, and in turn, to a certain extent, it will influence the external forces environment.
The same is the relationship between other environmental factors too.
These environmental factors are dynamic. They keep on changing as the year’s roll by.
A particular business firm, by itself, may not be in a position to change its environment. But along with other firms, the business will be in a position to mold the environment in its favor, to a large extent.
Characteristics of Business Environment
The characteristics of the business environment can be seen in the following points:
1. Internal and External Environment
All business enterprise is surrounded by internal and external environment.
The internal environment is controllable but the external environment is beyond the control of the enterprise.
Therefore, the business enterprise has to adjust itself according to its external environment.
2. Inter-Dependence
There is a relationship between environmental factors.
Business is influenced by its environment and in turn, to a certain degree, it will influence its external forces.
Similarly, the political-legal, environment influences the economic environment and services.
Thus, the business enterprise depends on the external environment for both to get input as well as for the sale of output.
3. Dynamic Factors
The business environment is the product of various dynamic factors, I.e., economic social, political, geographical religious, and technological.
All these factors are dynamic and beyond the control of a firm; its success will depend to a very large extent on its adaptability to the environment.
4. Resources
The business enterprise gets its resources such as raw materials, capital, etc. Form the external environment.
A firm cannot fulfill its objective without getting these resources.
The business enterprise also depends on the external environment for selling its products or services.
Thus, the business enterprise depends on the external environment for both to get input as well as for the sale of output.
5. Wide Market
The environment is a wide market for the firm.
The goods and services produced by the firm are sold to the consumers in the society which is its external environment.
If the consumer accepts the product its market becomes wide.
6. Communication
Every business enterprise exchanges information with other enterprises regarding the external environment.
It helps the firm in policy-making.
It makes it easy for the firm to know the uncertain and complex information about the external environment.
7. Creation of Utility by Change in Form
The resources provided by the external environment to the firm are returned by the firm to society by making them useful through creating reality.
The production process creates utility in the resources through the change in form, place, ownership, time, etc.
8. To Identify Major Changes
The external environment is dynamic.
It is the responsibility of the firm to identify major changes taking place in the environment and adjust itself accordingly.
9. Responsible for All Factors
The business firm is responsible for all the factors as consumers, workers, suppliers, investors, government, national and international economy, etc.
In other words, the firm should take decisions by safeguarding the interests of the various groups in the environment.
10. Fulfill Needs
The external environment (society) expects the firm to fulfill its needs.
A firm that cannot fulfill the requirements of society cannot survive for long.
11. Changes According to Changes
A business firm is the product of its environment.
The environment is a mix of various factors which influence the firm.
Therefore, for the success of a firm, it is essential that it will change itself according to the changes taking place in the business environment.
12. Uncertainty
A firm faces uncertainty and hurdles in its operations to fulfill the expectations of the external environment.
The success of the firm depends on its ability to take advantage of opportunities and combat the threats in the environment.
13. Effect of Uncontrollable Factors
External factors are uncontrollable and they affect the firm’s operations to a large extent.
The main uncontrollable factors are government policies, legal provisions, research and development, technology, social conditions, political conditions, external relations, and pressures, etc.
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