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Class : 11
Unit : Business

Explain the concept of Business Environment.

Ans : Business organizations establish, operate and grow in society which is surrounded by environmental factors. Environment is dynamic and changes according to time. It consists of all factors which affect the operation of business activities of an organization. According to Keith Davis, “Business environment is the aggregate of all the conditions, events, and influences the surround and affect it.” Managing an organization is not accomplished in a vacuum. Many interacting environmental factors can affect the performance of managers and the organization. Every business organization obtains inputs from environment, transforms them into outputs again supplies to the environment. Broadly, there are two types of environment: A. Internal Environment B. External Environment A. Explain the concept of internal environment of business. Ans:- All conditions and forces within the organization affecting business operation in internal environment. Such environment components are controllable to the management. The components of internal environment consist of following points which are presented below: i) Owners:- Owners are investors who have direct interest in welfare and propriety of business organization. They have legal right on the property and assets of the business. In sole trading concern they are known as sole proprietor, in partnership firm as partners and in joint stock Company as shareholders. ii) Board of director:- the members of board of directors are the representatives of shareholders who directly involve in day to day operation of the company. They also involve in preparing of long term plans and business strategies of the organization. iii) Organization resources:- For effective functioning of the business, every organization needs resources like human, financial, physical, and information. The success and failure of the organization depends upon the effective and efficient utilization of these resources. iv) Organizational structure:- Organization structure is the foundation of organization which consists of job definition, division of work, hierarchy of authority, responsibility and co-ordination among all the department and member. It is a mean of implementing strategies and plans to achieve a desired result. v) Organizational Culture:- Organizational culture is the set of values that helps it’s members to understand what the organization stands for, how it does things and what it consider important. It is the system of shared believes help by organization’s members. B. State and explain the components of externally environment of business. Ans:- The external environment refers to forces and institutions outsides the organization that potentially affects the performance. The external environment is of two types: the specific or task environment and general environment. (a) Specific/ Task Environment:- The task environment consists of specific organizations or groups that influence an organization’s performance. It directly affects to the achievement of Organizational goals. It consists of competitors, customers, supplies, government, pressure groups, media, financial institutions and strategic allies. i) Customers:- Customers are the main source of revenue and they pay money for goods and services. A satisfied customer of today may not be satisfied tomorrow through the same type of goods and services. It is necessary to collect information about preference and demand of customers. ii) Supplier:- Supplier are the parties and institutions that supply materials, machine and other materials to the organization. It is necessary to an organization’s to supply goods and services to it’s customers. However, if suppliers do not supply materials in time and also charge high price, it reduces the organizational effectiveness. iii) Competitors:- Competitors are the rivals that compete with the organization for resources. No business organization can ignore to it’s competitors and their business strategy. Therefore, manager of an organization’s should have ability to forecast customer’s demand and develop new strategy to increase market share. iv) Government:- Government involves in regulating new rules and regulations for welfare of the society. All business organizations need to perform their business activities within the rules and regulations enacted by the government. v) Pressure groups:- Pressure groups are the special interest groups which may also create problems and difficulties in business activities. vi) Financial institution:– Financial institution consist of commercial banks, development banks, finance companies, insurance companies etc. They supply short term and long term credit to the business firms. Every business organization needs to maintain cordial working relationship with financial institution. (b) General Environment:- General Environment consists of those major forces that affects the organization and it’s environment. It is uncountable and requires proper monitoring so that appropriate policy may be design to face emerging change. The various elements of general environment are as follow:- i) Economic environment:- Economic environment indicates the condition of the economic in which business organization operates. The economic fluctuations continuously and greatly influence business activities. A number of economic factors such as national income, wages and productivity, government activities etc. reflect economic environment. ii) Socio-cultural environment:- It consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preference, customs, Norma, values, beliefs of the people living in the society where business exist. iii) Technological environment:- Technology is the method of converting input into output. The input resource consists of men, money, materials, machines and method. Whereas output involves finished product all services. Technology influences business by bringing changes in jobs, skills, product and production process. The innovation of automation, robotics and computerization premendous change in production and distribution system. iv) Political legal environment:- It refers to the government regulations of business that define the rule by which organization most operate. Generally political legal environment is the influence of free institution that is legislative, executive, judiciary. Legislative enacts rules and regulations and laws ensure whether rules and law are effectively implemented in public interest. Business organization most ensures that their activities are according to the lodge of the government.
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