What is Business Environment? 

Business environment refers to forces, factors, individuals and institutions which are outside the control of business enterprises but these may effect its performance. 
In simple words, the business environment is the surroundings in which business exists. 
Thus, the economic, social, political, technological, legal and other forces which operate outside business enterprise are part of business environment. Although these environment forces exists outside the enterprise but they influence the business enterprises. Business environment provide constraints as well as opportunities for the businessman. Constraints or threats refers to conditions which restricts business activities, opportunities refers to conditions which allows growth and expansion of business activities. 



Features/Characteristics/Nature of Business Environment 

1. All the external forces:- Business environment includes all the forces , institutions and factors which are external to business organisations. 

2. Specific and general forces:- Business environment includes both specific and general forces. Specific forces affect business enterprises directly and immediately in their day to day working . These include supplier, investors, customers, general forces are social, political, legal, technological conditions have impact on all the enterprises and effect individuals firms only indirectly. 

3. Inter -relation :- All the forces and factors of business environment are inter - related to each other. 

4. Uncertainty:- It is very difficult to predict the changes of business environment. As environment is changing very fast. 

5. Dynamic:- Business environment is highly flexible and keep changing. It is not static or rigid that is why it is essential to monitor and scan the business environment continuously. 

6. Complex:- It is very difficult to understand the impact of business environment on the companies. Although it is easy to scan the business environment but it is very difficult to know how these changes will influence business decisions. Sometimes change may be minor but it might have large impact. 

7. Relativity:- Business environment differ from country to country, region to region as political conditions, cultures are different in different countries. 


Dimensions of Business Environment 

Dimensions of Business Environment mean all the factors, forces and institutions which have direct or indirect influence over the business transactions. General environment is the most important dimension of business environment as businessman cannot influence or change the components of general environment rather he has to change his plans and policies according to the changes taking place in general environment. 
Major components of General Environment are :- 

1. Economical Environment :- Economic environment refers to all the forces and factors which directly influence the economy of our country. Economic environment consists of GDP, Income level at national level and per capita level, Employment rate, monetary and fiscal policy of the government etc. 

2. Social Environment :- social environment consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preferences and education level of the people living in the society where business exists. Some examples of social environment are celebration of various festivals, change in literacy rate, increase in number of working women, change in fashion, standard of living etc. 

3. Political Environment:- Political environment constitutes all the factors related to government affairs such as type of government in power, attitude of government towards different groups of societies, policy changes implemented by different governments, etc. The political environment has immediate and great impact on business transactions so businessman must scan this environment very carefully. 

4. Legal Environment:- The management of every business enterprise has to obey the law of land. Therefore, it is essential for every business enterprise to have adequate knowledge of rules and regulations framed by government. Legal environment includes various laws and legislative acts, administrative order by government authorities, court judgements, decisions rendered by every level of the government. 

5. Technological Environment:- Technological environment includes forces related to scientific improvements and innovations which provide new ways of producing goods and services and new way of operating business. Examples of technological environment are change in method of production, new machinery, new equipment, new method of working for improvement, new techniques and methods of operating business. 


Conclusion 

In conclusion, Business Environment is sum of all internal and external factors such as employees, customers, owners, supply and demand, management, clients, suppliers, etc. that have a significant impact on the operation of company. In simple words,business environment is the surrounding in which business exists. The business environment provides constraints as well as opportunities for the businessman. Business environment is not static, it Continuously changing. So it is very important for businessman to be aware and identify various threats and opportunities on time. It will help businessman to get early warning signals. 

Frequently Asked Questions

Question 1. What are the components of business environment? 

There are 5 components of business environment :-
  1. Economical environment
  2. Political environment
  3. Social environment
  4. Technological environment
  5. Legal environment
Question 2. What is business environment? 

Business environment refers to forces, factos, individuals and institutions which are outside the control of business organisation but these may effect the performance of organisation. 

Question 3. What are the features of business environment? 

The main features of business environment are ; it is all the external forces, it is very difficult to predict the change business environment, it is highly flexible and keep changing, all the forces and factors of business environment are inter- related to each other. 

Question 4. What is the importance of business environment? 

Business environment helps enterprises to identify business opportunities and threats and helps them to improve the performance of organisation according to current situation.