Legal. Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Economical.BUSINESS ENVIROMENT Business Environment may be defined as a set of conditions ± Social. .

machinery and management. . man.e. . Business can make changes in these factors according to the change in the functioning of enterprise.COMPONENTS Internal Environment: It includes 5 Ms i. material. usually within the control of business. money.

Socio-Cultural Factors. DemoGraphical factors etc . These factors are: Government and Legal factors. Geo-Physical Factors. Political Factors.COMPONENTS External Environment: Those factors which are beyond the control of business enterprise are included in external environment.

and interest rates.BUSINESS CYCLE A predictable long-term pattern of alternating periods of economic growth (recovery) and decline (recession). . industrial productivity. also called economic cycle/Business Cycle. characterized by changing employment.

Phase of Business Cycle Prosperity Recession Depression Recovery .

There is a rise in real output and incomes of the people. During Prosperity there is:       Increase in production Increase in Capital Investment Expansion of credit high prices Increase in profits New business ventures Rise in level of Employment . The general mood of the businessmen is that of optimism and commercial. In the boom period the overall business activity is rising at a more rapid rate. peak or boom.PROSPERITY  The top business cycle is called Prosperity.

and often cutting the size of their workforce. During Recession there is:      Employment decline Decline in demand Credit contraction Increasing competition . postponing expansion plans. reducing inventories. consumers frequently postpone major purchases and shift buying patterns toward basic. Businesses mirror these changes in the marketplace by slowing production.RECESSION  During a recession .a cyclical economic contraction. functional products carrying low prices.

More bankruptcies are observed.. All prices. but the number and the size of the bankrupt firms are bottoming out. During Depression there is: Negative growth rate National income declines Expenditure declines Economic activity slows down . interest rates and wages are at their lowest. Firms try to survive as they can sell off the inventory on hand.DEPRESSION Depression is a large recession. The contraction has run its course. The economy has reached its trough.The unemployed are ready to take any job.

It is important to note that recovery doesn't necessarily take place at a steady pace. the recession begin to disappear. bank expand credit . Its pace is still slow. During Recession there is:      Improvement in business Slow rise in price Small rise in profit New investment in capital goods Industry. The economy strengthens from a period of slow growth. and consumers start purchasing more discretionary items such as vacations and new computer equipment.RECOVERY  In the recovery stage.

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