Business environment refers to all internal and external factors that influence the working and performance of a business. It includes forces such as customers, competitors, suppliers, government policies, economic conditions, social trends and technology.
Internal environment includes factors within the organisation such as:
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Business environment is dynamic because it changes continuously due to technology, competition and policy changes. It is complex as many factors interact with each other. It is uncertain since future changes are difficult to predict accurately, and it is relative because environment differs across regions and time. Hence businesses must continuously monitor and adapt.
Business environment analysis helps firms identify opportunities and threats and supports better planning and decision-making. It enables businesses to cope with change and reduce uncertainty by forecasting trends. Understanding customers, competitors and policies improves competitive strength, innovation and long-term survival and growth.
Business organization, an entity formed for the purpose of carrying on commercial enterprise. Such an organization is predicated on systems of law governing contract and exchange, property rights, and incorporation.
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Business environment refers to all internal and external factors that influence the working and performance of a business. It includes forces such as customers, competitors, suppliers, government policies, economic conditions, social trends and technology.
Internal environment includes factors within the organisation such as:
Micro environment directly affects the firm’s day-to-day operations:
Macro environment affects all businesses in a broad way:
SWOT analysis is a tool used to identify:
Merits: simple, systematic, helps matching internal and external factors, supports strategy choice.
Limitations: may be subjective, may oversimplify, needs correct data and prioritisation.
PESTLE is a tool to analyse the macro environment by studying Political, Economic, Social, Technological, Legal and Environmental factors.
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Business environment refers to all internal and external factors and forces that influence the decisions, operations and performance of a business. It includes customers, competitors, suppliers, government policies, economic conditions, social values and technological changes.
Importance of business environment: Studying the environment helps an organisation identify opportunities (new markets, rising demand, technological improvements) and threats (competition, regulation, recession) in time. It supports effective planning and decision-making because plans are made based on real conditions and future trends. Environmental analysis helps businesses cope with change and reduce uncertainty by forecasting developments. It strengthens competitiveness by understanding customer needs, competitor actions and industry trends, leading to better products and services. It also helps in efficient resource allocation and innovation, ensuring survival, growth and long-term sustainability of business.
Thus, understanding the business environment is essential for adapting strategies and achieving organisational objectives.