Contents:
Components of a Business Environment
The major components of a business environment are:-
Dimensions of the business environment mean all the factors and institutions which have direct or indirect influence over the business transactions.
General environment is the most important dimension of the business environment as businessmen cannot influence or change the components of the general environment, rather he/she has to change his plans and policies according to the changes taking place in the general environment.
1. Economical Environment:-
Economic Environment consists of Gross Domestic Product, Income level at national level and per capita level, Profit earning rate, Productivity and employment rate, Industrial, monetary and fiscal policy of the government, etc.
The economic environment factors have immediate and direct impact on the businessman so businessmen must scan the economic environment and take timely actions to deal with these environments. Economic environment may put constraints and may offer opportunities to the businessman. After the new economic policy of 1991, lots of opportunities are offered to businessmen.
The common factors which have influenced the India economic environment are:
Banking sector reform has led to many attractive schemes of deposits and lending money. The banks are offering loan at very nominal rate of interest and with minimum formalities to be completed,
Recent changes in economic and fiscal policy of the country have encouraged NRIs and foreign investors to invest in Indian companies.
Lots of economic reforms are taking place in leasing and financing institutions. The private sector is allowed. The private sector is allowed to enter financial institutions as a result customers are gaining.
Some aspects of Economic Environment:
Role of the private and public sector.
Rate of growth of GDP, GNP and per capita income.
Rate of saving and investment.
Balance of Trade
Balance of Payment
Transport and communication system.
Money supply in the economy.
International Debt.
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. The businessman cannot overlook the components of the social environment as these components may not have immediate impact on the business but in the long run the social environment has a great impact on the business.
In India also, there are many social reforms taking place and the common factors of Indian social environment are:-
Demand for reservation in jobs for minorities and women.
Demand for equal status of women by paying equal wages for male and female workers.
Demand for automatic machines and luxury items in middle class families.
The social movements to improve the education level of girl children.
Health and fitness trend has become popular.
Some Aspects of Social Environment:
Quality of life
Importance or place of women in workforce
Birth and Death rates
Attitude of customers towards innovation, lifestyle, etc.
Education and literacy rates
Consumption habits
Population
Tradition, customs and habits of people.
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 an immediate and great impact on the business transactions so businessmen must scan this environment very carefully.
The businessman has to make changes in his organisation according to the changing factor of the political environment. For example, in 1977 when the Janta government came in power they made the policy of sending back all the foreign companies. As a result the coca cola company had to close its business and leave the country.
The common factors and forces which have influenced the India political environment are :-
The government in Hyderabad is taking keen interest in boosting the IT industry, as a result the state is more commonly known as Cyberbad instead of hyderabad.
After the economic policy of liberalisation and globalisation, the foreign companies got easy entry into India. As a result the Coca-Cola which was sent back in1977 came back to india. Along with Coca-Cola, Pepsi Cola and many other foreign companies are establishing their business in India.
Some Aspects of Political Environment:
Present political system
Constitution of the country
Profile of political leaders
Government intervention in business
Foreign policy of government
Values and ideology of political parties
4. Legal Environment:-
Legal environment constitutes the laws and various legislations passed in the parliament. The businessman cannot overlook the legislation because he has to perform his business transactions within the framework of the legal environment.
The common legislation passed which has affected the business transactions are Trade Mark Act, Essential Commodity Act, Weights and Measures Act, etc. Most of the time legal environments put constraints on the businessman but sometimes they provide opportunities also. The common instances of Indian legal environment which have influenced business transitions recently are:-
Deregulation of the capital market has made it easy for businessmen to collect capital from the primary market.
Removal of control from the freign exchange and liberalisation in investors and NRIs to invest in the Indian capital market.
Advertisement of alcoholic products is prohibited.
Compulsory to give statutory warning in Tobacco production.
Delicensing policy of industries.
Some Aspects of legal Environment:
Various laws and legislative acts.
Legal policies related to licensing.
Legal policies related to foreign trade.
Statutory warning essential to be printed on label.
Foreign Exchange Regulation and Management Act.
Laws to keep a check on Advertisements.
5. Technological Environment:-
Technological environment refers to changes taking place in the method of production, use of new equipment and machinery to improve the quality of product. The business must closely monitor the technological changes taking place in his industry because he/she will have to implement these changes to remain in the competitive market.
Technological changes always bring quality improvement and more benefits for customers. The recent technological changes of India market are:-
Digital watches have killed the prospects and the business of traditional watches.
Colour T.V technology has closed the business of black and white T.V.
Artificial fabric has taken the market of traditional cotton and Silk fabrics.
Photocopiers and Xerox machines have led to the closure of the carbon paper business.
Shift in Demand from vacuum tubes to transistors.
Shift from steam locomotives its diesel and electrical engine.
From typewriter to word processors.
Some Aspects of Technological Environment:
Various Innovations and Inventions
Scientific Improvements
Developments in IT sector
Import and Export of technology
Technological advances in computers