It enables them in dealing with these changes efficiently by taking appropriate actions at right time. Scope of Business Environment is explained in points given below: Business environment helps business in identification of various opportunities and threats. Technological environment It includes the level of technology available in a country. Increased competition in the market gives the customers wider choice in purchasing better quality of goods and services. The opportunities and threats have been identified as external factors to the organization. Environmental scanning is a constant and careful analysis of the internal and external environment of an organization in order to detect opportunities, threats, trends, important lessons, and weaknesses which can impact the current and future strategies of the organization.. It is quite difficult to understand how a particular factor affects the operations of business. Commerce Mates is a free resource site that presents a collection of accounting, banking, business management, economics, finance, human resource, investment, marketing, and others. In order to solve economic problems of our country, the government took several steps including control by the State of certain industries, central planning and reduced importance of the private sector. Social responsibility is another important characteristic of business environment. It refers to the area where the business exists. The economic reforms that were introduced were aimed at liberalizing the Indian business and industry from all unnecessary controls and restrictions. People are happy with the business and develop confidence towards it. It includes factors like customers, suppliers, competitors, society, technology, economic, political, and cultural environment.eval(ez_write_tag([[300,250],'commercemates_com-large-mobile-banner-1','ezslot_6',172,'0','0'])); Proper understanding of the business environment helps in framing better strategies as per business opportunities and enhances the overall performance. Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. They are more responsive and sensitive to the environmental needs through proper knowledge of business environment. Like strengths, business organizations naturally have weakness as well. *You can also browse our support articles here >. Having a supportive business environment is important for businesses to prosper. Therefore, satisfied employees can be seen as one of the strengths of that particular company when compared with its rivals who do not have such HR policy and satisfied employees. Free resources to assist you with your university studies! Business environment is a dynamic concept and keeps on changing continuously. According to this, business exists for serving various members of society. Reference this. To achieve this, the government redefined the role of the public sector in the New Industrial Policy of 1991. Like countries having better economy are able to enhance their technology by incurring sufficient expenditure on research and development. Business is a system which manufactures the products and services. As per Renee O’Farrel, Business Environment Analysis is a systematic process by which environmental factors in a business are identified, their impact is assessed and a strategy is developed to mitigate and/or to take advantage of them. Changes in any one of the factors will bring changes in several other factors. Therefore, this brief article on the above topic intends to discuss some of strategic analysis tools that can be exercise by the managers in order to analyze their business environment fruitfully. Businesses are able to face challenges and competition in market through systematic planning in an efficient way. Business environment is complex in nature. This concept is used as a tool by companies to track the environment they are operating in or are planning to launch a new product, service or project. Social factors also called as socio-cultural factors and the areas that involve the shared belief and attitudes of the population. Importance of Business Environment. Therefore, most of such decision-makers considered that the SWOT analysis is an extremely useful tool for them to understand and decision-making for all sorts of situations in business and organizations. The SWOT analysis cannot be limited to profit making institutions alone. Government holds the power of governing the country and it decides the policies that should be adopted time to time. The success or failure of an organization is primarily established by the effectiveness of its interaction with its environment. Political environment It comprises political stability and the policies of the government. Demography is the study of people’s vital statistics, such as their age, gender, race and ethnicity, and location. VAT Registration No: 842417633. The rapidly changing technological environment creates tough challenges before smaller firms. Reduction in tax rates and lifting of unnecessary controls over the economy, Simplifying procedures for imports and experts, and. Globalisation is generally understood to mean integration of the economy of the country with the world economy, it is a complex phenomenon. For example, Maruti Udyog became the leader in the small car market because it was the first to recognize the need for small cars in India. Therefore, once managers identified those environmental factors which could influence the success of a business company in future, assumptions can be made with regard to the future development of those factors and subsequently a viable strategy could be formed accordingly. This enables in developing a better image in market. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please: Our academic writing and marking services can help you! Thus, as clearly mentioned above, the decision-makers should be able to understand the changing environment perfectly and should be able to predict how such changing environmental factors could influence over their particular business before they make decisions pertaining to their business. General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may affect an individual firm only indirectly. All work is written to order. We're here to answer any questions you have about our services. The Foreign Affairs Ministry states that 98 expatriate Sri Lankans have... Police Media Spokesperson, DIG Ajith Rohana said that anyone who had left... Tamil Makkal Viduthalai Pulikal (TMVP) General Secretary and former... 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By proper interaction between business and its environment all threats can be easily detected. Study for free with our range of university lectures! These factors include gross national product, corporate profits, inflation rate, employment, balance of payments, interest rates consumer income etc. Our academic experts are ready and waiting to assist with any writing project you may have. These economic factors include interest rates, exchange rates, inflation, economic growth and disposable income of consumers. Removal of restrictions on the movement of goods and services. Freedom in fixing the prices of goods services. By doing a proper business environment analysis, organizations could achieve number of other benefits as well. Freedom in deciding the scale of business activities i.e., no restrictions on expansion or contraction of business activities. For example, Bangalore established itself as the most important IT centre of India mainly because of political support. Proper understanding of the business environment helps business in detecting all these frequently occuring changes easily. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. It also involves specifying the objective of the business venture and helps to identify the internal and external factors that are favorable and unfavorable to achieve the objectives. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. Whereas the external environment includes all those factors which are external to the organization and are not under its control. Therefore, identifying the weaknesses of the organization also has an equal importance for an organization in order to move forward by mitigating such weaknesses to an acceptable level.

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