What do you mean by Environment of Business?

Answer:

Micro Environment of Business:

A business can be established, but to successfully sustain a business, the business needs resources like finance, for which it has to depend on financial institutions. Acceptance of social norms, for which it has to depend on the society. Proper market conditions, for which it has to depend on the market. The sale of products/services, for which it has to depend on the customers. The labour, for which it has to depend on the society. Then there are natural resources and raw material, for which it has to depend on Nature. Also, the legal support of the government, for which it has to depend on the government. There are many factors and dimensions that affect Business Environment. These factors are many different components of a single concept called Business Environment.

The definition of Business Environment, “The sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but the business still depends upon them as they affect the overall performance and sustainability of the business.”

(1) Internal Environment (Micro Environment)

The micro environment consists of the factors of the firm’s immediate environment, a. Suppliers,

b. Customers

c. Competitors,

d. The public, and

e. Marketing intermediaries.

a. Suppliers:

Suppliers or vendors are those persons or firms who supply inputs like new materials, certain parts, cutting tools etc., to the company. The vendor quality and reliability is a must for the smooth functioning of the business.

They should supply all imputes of right quality and stated quantity in time. In order to be on safe side, adequate stock of input elements should be preserved in the company and services should be taken of more than one vendor to supply the goods.

b. Customers:

Today with the advancement of technology and because of foreign collaborations, it has become easy to manufacture any product, but it is still very difficult to sell i.e., to create, increase and sustain the customers.

Every day we watch a new advertisement e.g., buy one tooth paste tube and take another free along with it or take two shampoo bottles at the price of one etc., to allure the customers. Monitoring the customer sensitivity is, therefore, a prerequisite for the business success. How many different categories of customers shall be there to buy a product, depends upon the product itself.

c. Competitors:

Take an example of a firm ‘A’ making Televisions. Its competitors are not only the firms making and marketing T.V., but are all those firms who compete for the discretionary income of the customers. There are so many firms making T.V., scooters, refrigerators, cooking ranges, stereo sets etc.

The first is the desire competition amongst them.  

The second is the product form competition  

The third is the brand competition I

d. Public:

Public means a group of people. Public opinion can be a threat to a business firm whereas it can be an opportunity for another business firm. Public normally forms an opinion about different brands of the same product after using the same.Opinion travels from friend-to-friend, neighbour-to-neighbour etc

e. Marketing Intermediaries:

Marketing Intermediaries are those firms/individuals who help the company in promoting, selling and distributing its goods to final buyers. The intermediaries are: (i) Middlemen (agents/merchants) (ii) Physical distribution firms who assist the company in stocking and moving goods from their origin to their destination, such as warehouses and transportation firms. (iii) Marketing service agencies such as advertising agencies, market research firms etc., which assist the company in targeting and promoting its products to the right markets.

(2) External Environment (Macro Environment)

I  Economic environment.

It indicates the condition of economy in which business organization operates. It has continuous and great impact on business. It includes national income, production, inflation, savings, investment, price, government activities. Business person must have constant watch on this factor.

 II Political or legal environment

It is defined as rules and regulations determined by the government. Business must fulfil demand of government. There should be non-violation of rules and regulation of government. Business should avoid unfair trade and should provide essential information to the government.

Social environment.

Business must have good environment where a business can be established neatly. Business also helps in employment opportunities generation. There should be socio cultural understanding and application of anti-pollution measures.

Technological environment:

It defines about the methods available for converting resources into product or services. It transforms inputs into output. Inputs means material, capital, man, machine. It affects on business. It helps to change the level of job, skill, and product and so on. There can be innovation, development of scientific techniques which encouraged mass production and distribution.