Environment means surrounding. Business environment means the factors/activities thosesurround the business. In other words, business environment means the factors that affect orinfluence the business.Business Environment refers to those aspects of the surroundings of business enterprise,which have influence on the functioning of business. An organization can survive and grow onlywhen it continuously and quickly adapts to changing environment. We are living in the dynamicworld, which is undergoing a rapid change, because of coming up of new ideas, economicchanges, political changes and new technology.
Davis has observed that businessenvironment is the aggregate of all conditions, events and influences that surround and affect thebusiness.A business firm gets human resources, capital, technology, information, energy, and rawmaterials from society. It follows government rules and regulations, social norms and culturalvalues, regional treaty and global alignment, economic rules and tax policies of the government.Thus, every business organization has a direct relation with its environment. The success orfailure of a business depends upon the effectiveness of interaction of a business with itsenvironment.
Business Environment Meaning:
Business environment refers to all those internal and external factors, which impact thefunctioning/performance of a firm and/or its decision making particularly strategies. There areinternal as well as external factors, which affect the success of a business firm.According to Gerald Bell: “An organization’s external environment consists of those thingsoutside an organization such as customers, competitors, government units, suppliers, financialfirms and labour pools that are relevant to an organization’s operations” Thus, it can be saidenvironment as “the set of external factors such as the economic factors, socio-cultural factors,and government factors demographic factors geophysical factors, which are uncontrollable innature and affects the business decisions of a firm or company.Importance of the study of Business environment.1. Helps the business in developing its strategies and policies2. Can understand and analyses its competitors strategies; and can also formulate its counterstrategies.3. Helps to foresee the impact of socio economic changes in the national and internationallevel.4. Managers can adjust themselves to the prevailing conditions and can influence theenvironment as far as possible.Components of Business Environment.A manager must follow a change in his or her structure, strategy and policies in responseto the changing environmental forces. Thus, a business firm exists in two level of businessenvironment a) Internal and b) External. Internal business environment comprises internalstructure, system, culture, staff, and resources of the organization. This is sometimes identifiedinto the internal functional areas such as marketing-distribution, finance accounting, humanresources, production-operation, and research-development.