What is Business Environment?

The business environment is very dynamic in nature and the survival and success of a business are dependent on its innate strength, ability to adapt to the environment, and the extent to which the BE is favorable to the development of the organization. In this article, we will learn about what is a business environment, its definition and objectives, types of the biz environment, its nature, and its importance.

► What is a Business Environment?

A business environment is defined as the sum of all internal and external factors that influence an organization’s environment and its operation and activities.

In other words, the business environment is defined as a collection of all internal factors such as organization structure, mission and objective, employees,  company image and brand equity, etc., and external factors such as customers, competitors, suppliers, market trends, financiers, etc.

The biz environment depends on both internal factors (controllable in nature) and external factors (uncontrollable in nature).

◉ Business Environment Meaning

Business environment refers to those aspects of the surroundings business enterprise, which affect or influence its operations and determine its effectiveness.

Definition of Business Environment

The term “Business Environment” implies the aggregate of all the individuals, groups, competitors, financial institutions, national and international organizations, legal institutions, and government that affect the business performance.

This is how you can define Business Env. with suitable definitions by authors.

Definition by Various Authors

“Business environment is the aggregate of all conditions, events, and influence that surrounds and affect it”. – Keith Davis

“The environment of a company is the pattern of all external influences that affect its life and development”. – Andrews

“BE is the climate or set of conditions such as economic, social, political or institutional in which business operates and conducted.” – Arthur M. Weimer

“BE is the total of all things external to business firms and industries which affect their organization and operations. – Bayard O. Wheeler

The BE is a very crucial aspect of any business, it helps the business to identify different business opportunities available, assists in planning and organizing, and ensures the sustainability, profitability, and growth of the business.

► Objectives of Business Environment

  • It helps in identifying business opportunities
  • It helps in rational and fact-based decision making
  • Help in planning and policy-making
  • It helps in enhancing business planning
  • It helps in identifying new emerging threat
  • It helps in resource planning

► Scope of Biz Environment

  • Business Management
  • Competitive analysis
  • Policy formation
  • Tracking of business operations and activities
  • Scanning of opportunity and threat
  • Supplier Management

► Nature/Feature/Characterisitcs of Busines Environment

The nature of the biz environment is as follows.

  • Complex nature
  • Dynamic nature
  • Mutual Interdependence
  • Uncertainty
  • Relativity
  • Far-reaching impact
  • Multifaceted

► Importance of Business Environment

  • It helps in Decision Making
  • It helps the business to Cope with the Change
  • It helps in improving the business Opportunity
  • It helps in Unforeseen Threat and uncertainty and take corrective action
  • It plays a vital role in Merger and Acquisition
  • It helps in assisting in the Planning and Development of strategy

► Dimensions of B.E.

  • Economic Environment
  • Political Environment
  • Legal Environment
  • Technological Environment
  • Social Environment

Must Read : Dimensions of B. Environment (in detail)

► Types of Business Environment

It is divided into two types.

  • Internal Environment
  • External Environment

The external environment is subdivided into two categories.

  1. Micro Environment (Task Environment or Operating Environment)
  2. Macro Environment (General Environment or Remote Environment)

This topic is also asked as discuss the component of BE. So don’t confuse. you can read more details by clicking the button below.

Must Read : Types of B. Environment (in detail)

► Advantages of B. Environment

  • Prevent risk and uncertainty
  • Harness the opportunities
  • Identification of opportunity
  • Adapt to the market trend
  • Policy and Plan Formation
  • Facilitate the decision making
  • Allocation and utilization of resources

► Disadvantages of BE

  • Can be time-consuming and costly.
  • This may be difficult in a rapidly changing market.
  • Dependency on Forecasting.
  • Environmental Threats.
  • Some unplanned opportunities may be missed.

If you want to read what are the topics that are in the Business Env. subject in the MBA syllabus then you can read it here.

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