Characteristics of Business Environment:

Characteristics of Business Environment:

The nature of business and environment is very complex. It will be easy to understand it if we study the following characteristics:

1.      Mutual Interdependence: Business and environment are interdependent and they influence each other. Business may not ignore the environmental factors e.g. government policies, socio-cultural values, industrial policy etc. are very important for success in business.

2.      Dynamic in nature: the entire structure of business is dynamic in nature and changes with time. No business firm is completely static, like a building or a machine with stationary framework and standard parts that may be replaced from the ready stock. Instead competition shift in demand and other such factors call for continuous adaptation: and ambitions and drives executives within the company keep it evolving. And, as changes are made in one part of a company, compensating adjustments are needed in other parts. Thus, company is thought of as a dynamic in nature.  

3.      Each company has its own objectives; Every company develops character and an individual personality of its own. This personality is shaped, not only by physical resources and technology, or financial inputs but by its basic objectives. The objectives may be set by its top management. These objectives are to be achieved. The setting up of objectives is a part of initial planning phase.

4.      Complex in Nature: It is very difficult for a company to pre-determine the external forces influencing the company and the factors exercising pressure. As a result many firms face hardships and problems.

5.      Uncontrolled factors: Some of the factors of external environment are beyond the control of the company e.g. fiscal policy, monetary policy, political structure, and social conditions of a country. There are some other factors that are under the control of the company e.g. labour conditions, consumer demand design habits, etc. These controlled factors refer to the limitations of business.

6.      Skill: Business should possess skills to avoid external harmful effects of environment. Firms should possess the adaptability their manager should have the ability to evaluate the environment effect. Geographical constraints: Each business unit has a geographical area of its functioning. This area may expand if the unit expands its working and may contract or reduce. Few firms may opt local area; some may go for a district, a state or nation-wide operation. Firm may still expand and may opt to become a multinational firm.

7.      Challenges every business unit faces some challenges to fulfil its objectives and carry out productive process. Business has to take the risks of production and if everything wallet may earn profit.

Need or Importance of Studying Business Environment:

The study of the firm’s business environment is very important for more than one reason. It is very important to evaluate and forecast the effects of changing environment for successful entrepreneur or businessperson. The study of the business is essential for the following reasons:

1.      Success in Business: Information about environment is necessary for the successful conduct of business.

2.      Long Term Planning: For preparation of long term strategy the knowledge of business environment is essential. The study of environment opens up fresh avenues for the expansion of business. To prepare business action plan the knowledge of environment is needed. The new schemes and ventures may be put into action if social values, saving and investment habits, customs and traditions.

3.      Dynamic: The knowledge of business environment keeps business person dynamic in their approach which helps the firm to avoid ecological strains and stresses and to maintain harmony with the environment.

4.      Safe from Competition: Business faces competition. Modern business person has to counter the plans of their rival firms in order to survive in the market.

5.      Innovations: Business in the present competitive environment requires new products and designs. For this the study of environmental factors is essentials.

6.      Avenues for profit: It is true that the consciousness towards environment enhances the avenues for profit in business. The knowledge of government policies export, import credit policy help in earning and maximising profit.

7.      Effective management: It is essential to manage business effectively. This requires a comprehensive study of opportunities and threats. A successful businessperson always takes advantage from favourable conditions and always makes an attempt to mould conditions for the benefit of the company. The success in business has no short cuts. The business decisions should be based on environmental realities.

8.      Market Survey helps Business: It is essential for a successful businessperson to gather all possible information, rival firms, their new products, and designs well in advance. This not only helps the company to earn profits but also helps in meeting the future threats. All these activities help in the industrial development of a country.