BUSINESS ENVIRONMENT

Business environment refers to forces, factors, individuals and

institutions which are outside the control of business enterprise but
these may effect its performance.
Environment scanning refers to complete awareness and understanding
of business environment.
FEATURES Of BUSINESS ENVIRONMENT
1. All the external forces: Business environment includes all the forces,
institutions and factors which are external to business organisations.
2. Specific and general forces. Business environment includes both
specific and general forces. Specific forces affect business enterprises
directly and immediately.
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3. Inter-relation: All the forces and factors of Business Environment are

inter-related to each other. For example, with inclination of youth
towards western culture, the demand for fast food is increasing.
4. Uncertainty: It is very difficult to predict the changes of Business
Environment. As environment is changing very fast.
5. Dynamic: Business environment is highly flexible and keep changing. It
is not static or rigid that is why it is essential to monitor and scan the
business environment continuously.
6. Complex: It is very difficult to understand the impact of Business
environment on the companies. It is easy to scan the environment but
it is very difficult to know how these changes will influence Business
decisions.

7. Relativity: Business environment differ from country to country, region

to region as political conditions, cultures are different in different
countries.
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 IMPORTANCE OF BUSINESS ENVIRONMENT
1. Enables the Firm to Identify Opportunities and Getting First Mover
Advantage: The businessmen who are able to understand and scan the
opportunities of business environment at early stage they get maximum
benefit or they can capture a big share in the market.
2. Helps the Firm to Identify the Threats and Early Warning Signal: The
businessmen who are able to scan and understand the business
environment on time get a warning signal to deal with the constraints
or the negative policies of business environment.
3. Helpful in Tapping and Assembling Resources: Businessmen have to
supply the goods to market according to the demand in market. To
supply output they need input, raw materials, etc. They acquire raw
materials and other resources keeping in mind the output demanded in
the environment. They select resources according to availability in
environment and demand of output in environment.
4. Help to Adjust and Adapt with the Rapid Changes: Today changes are
taking place very fast and these changes have great impact on Business.
So it is essential to understand these changes as early as possible.
Business environment scanning helps the companies to scan and
understand these changes with environment scanning.
5. Assisting in Planning and Policy Making: The major strategies or plans
and policies in the organisation are formed keeping in mind business
environment because the policies and strategies have to be
implemented in the presence of environmental factors.
6. Improvement in Performance: With continuous scan of Business
environment companies can easily improve their performance.

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 DIMENSIONS OF BUSINESS ENVIRONMENT
Dimensions of business environment mean all the factors, forces and
institutions which have direct or indirect influence over the business
transaction.
MAJOR COMPONENTS OF GENERAL ENVIRONMENT ARE:

1. ECONOMICAL ENVIRONMENT. Economic Environment refers to all the

forces and factors which directly influence the economy of your
country .
Some aspects of Economic Environment are:
1. Increase in GDP result in rise in disposable income of people and
further increased in demand for product.
2. High inflation rate set as constraint as they increase the cost of
production.
3. Decrease in interest rate is beneficial and increase demand for home
loans and borrowing money.
4. Passing of GST Bill will affect almost all the business organisation.
5. Demonetisation of 500 and 1,000 note recently hit the Indian
economic environment.
6. Banking sector reform has led to many attractive schemes of
deposits and lending money. The Banks are offering loans at very
nominal rate of interest and with minimum formalities to be
completed.
7. Recent changes in economic and fiscal policy of country have
encouraged NRIs and foreign investors to invest in Indian companies.
8. Lots of economic reforms are taking place in leasing and financing
institutions. The private sector is allowed to enter in financial
institutions, as a result customers are gaining.

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 9. Role of private and public sector
10. Rate of saving and investment
11. Balance of trade & Balance of Payment
12. Money supply in the economy
13. International debt

2. SOCIAL ENVIRONMENT: Social Environment consists of the customs

and traditions of the society in which business is existing. It includes
the standard of living, taste, preferences and education level of the
people living in the society where business exists.
Some Aspects of Social Environment:
1. Demand for reservation in jobs for minority and women.
2. Demand for equal status of women by paying equal wages for male
and female workers.
3. Demand for automatic machines and luxury items in middle class
families.
4. The social movements to improve the education level of girl child.
5. Health and Fitness trend has become popular.
6. Change in quality of life.
7. Importance or place of women in workforce.
8. Birth and death rates & population
9. Attitude of customers towards innovation, life style, etc.
10. Education and literacy rates.
11. Tradition, customs and habits of people.

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3. POLITICAL ENVIRONMENT : Political environment constitutes all the
factors related to government affairs such as type of government in
power, attitude of government towards different groups of societies,
policy changes implemented by different governments, etc.

The common factors and forces which have influenced the Indian
political environment are:
1. Swachh Bharat Abhiyan started by BJP government.
2. Skill India Movement started by BJP government.
3. Political stability encourage business enterprises to invest in
long term projects.
4. Present political system & profile of political leaders.
5. Constitution of the country.
6. Government intervention in business.
7. Foreign policy of government.
8. Values and ideology of political parties

4. LEGAL ENVIRONMENT : The management of every business

enterprise has to obey the law of land. Therefore, it is essential for
every business enterprise to have adequate knowledge of rules and
regulations framed by government.

Legal environment includes:

1. Various Laws and Legislative act.
2. Administrative order issued by government authorities.
3. Court judgements, as well as the decisions rendered by various
commissions and agencies at every level of the government-Centre,
State or Locals.

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 Some Aspects of Legal Environment:
1. Legal policies related to licensing and foreign trade.
2. Statutory warnings essential to be printed on label. For example,
Packets of cigarettes must have statutory warning.
3. Foreign exchange regulation and management act.
4. Laws to keep a check on advertisements. For example, the
advertisement of alcohol products is prohibited. Advertisement on
baby food must inform that mother's milk is the best, etc.

5. TECHNOLOGICAL ENVIRONMENT: Technological environment

includes forces related to scientific improvements and innovations
which provide new ways of producing goods and services and new
way of operating business.
Few examples of recent technological changes which have effected
Indian business:
1. Companies have started using new ways of advertising such as CD-
RO Ms, computerised information kiosks, internet, etc., due to
technological advancement is computers and electronics.
2. Online sale of grocery items is becoming very common.
3. Online booking of air tickets, movie tickets, not only booking you
can see your seat number.
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4. Due to technological advancement customer can compare the fare

prices of various airlines, hotels, etc. and select the most
economical.
5. Continuing innovation in different scientific and
engineering fields such as lasers, robotics, biotechnology, food
preservatives, medicines, etc. have provided lots of opportunities
and threats for many enterprises.
6. Shift from vacuum tubes to transistors.
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 7. Shift from typewriter to word processors.

8. Shift from carbon paper to photocopier, etc.

9. Various innovations, inventions and scientific
improvement.
10. Developments in IT sector, Technological advantages in
computers.
11. Import and export of technology.
12. Online booking of tickets (rent, air, movies).

DEMONETISATION
November 8, 2016 was the day when '500' and '1000' denomination
notes were withdrawn from circulation. It resulted in withdrawal of 86%
currency in circulation. People were advised to go to the bank to replace
old notes with new up to a limit.

FEATURES OF DEMONETISATION
1. Demonetisation as a tax administration measures: Due to
demonisation people had to declare their cash holding to get it
exchange from bank.
2. Non tolerance of tax evasion: Demonetisation also indicated that
government will no longer accept tax evasion.
3. Creating less cash or Digital Cash lite economy: Another feature of
demonetisation is to create a less cash or cash-lite economy i.e.,
channelising more saving through the form financial system and
improving tax compliance.

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