Meaning and types of

Enviornment

Meaning of Business
Environment
Environment

means the surrounding

within which someone or something
exists..
Business unit is a micro concept, and
environment macro concept.
Business and environment are interrelated.
No business can function against the
environment.

Business

environment refers to the socioeconomic surroundings under which

business activities are to be conducted.
Such environment is the net result or sum
total of various political, economic, social,
technological, natural and other factors.
Environmental factors are largely beyond
the control of the business enterprise.

Features /Characteristics of business

Environment
1) INTERNAL AND EXTERNAL FACTORS:
Internal factors consists of the organizations policies and plans, its
employees, its technical and infrastructural facilities. They are
manageable and controllable.
External factors are consists of economic, legal, social, cultural,
and political factors. They cannot be controlled and therefore a
business has to adjust itself according to the changes of the factors.
2) SWOT:
The internal environment poses strengths and weakness while the
external environment offers opportunities and threats.
A business firm has to consolidate the strengths, overcome its
weaknesses, grab the opportunities and minimize its threats in order
to be successful in the modern world.
3) DYNAMIC:
Business environment is never static. In others words business is
dynamic and ever changing in nature.

4) IT MAY BE FAVOURABLE OR UNFAVOURABLE:

A favorable change in business environment may create
opportunities for the business unit, while unfavorable
change poses threats to the business unit.
5) REGULATES BUSINESS ACTIVITY:
Business environment regulates the functioning of
business activities. Eg. Govt. policies to ban the smoking
of cigarettes in public places and railways stations
affected the sale of such products.
6) UNPREDICTABLE:
Changes in the business environment is very essential to
plan the future course of business activity.
7) ADAPTABILITY:
Adaptation is the key to the survival of business. the
changing business environment demands a high degree
of adjustments and adaptation on the part of business
unit.

Meaning of Micro Environment

(Business)
Micro-environment

implies the factors and

forces in the immediate environment which
affect the companys ability to serve the market.
It exists in order to satisfy the society i.e.,
customers, employees, competitors, government,
general public.

Meaning of Macro
environment(Environment)
Macro

environment refers to those factors that

operate outside the company.
These are external factors and are
uncontrollable by the enterprise.
Macro environment includes various factors like
political, economic, demographic, etc.

Types/components of MacroEnvironment
Political

environment
Economic environment
Social and cultural environment
Technological environment
Regulatory (legal) environment
Demographic environment
Natural /physical/ecological environment
International/global environment

TOTAL MACRO
ENVIRONMENT

Political
Economical
Social and
cultural
Technological
Regulatory
Demographic
International

External factors influencing business

environment (Macro-Environment)
1.Political:
Meaning

Political

factors influence the business

environment in different ways.
For e.g. Legislations are made for restricting
marketing/business activities and to restrict the
growth of private monopolies and malpractices.
Major political changes like the formation of new
government have a strong impact on the business
environment.

Influencing

factors include:
General election
Assurance given by political parties at the
time of election
Death of any important political leader
Political scandals, corruption charges or
War by powerful countries are some
major political factors which affect the
political environment.

Effects

of political changes: Effects

may be direct or indirect for the business.
Sometimes, the effects are suffocating
and even frustrating on the business but
need to be accepted.
Changes in parties may lead to changes
to government priorities.

2.Economic:
Meaning
Economic condition, economic policies and
economic system are the factors that
constitute the economic environment.
In times of good economic conditions, the
environment is favorable.
Favorable economic environment brings rapid
growth and expansion of business activities.

Influencing

factors
Government influences economic environment
through economic planning, monetary and fiscal
policies.
However, in times of depression, companies have
to manage their activities to survive and to
change the activities of business accordingly.
Therefore businessmen have to keep constant
watch on the changes taking place in economic
environment and adjust the decision-making
process accordingly. (minute study)

3.Social and Cultural Factors:

Meaning
Social environment is the result of
social forces and factors. society
includes different social groups i.e.
consumers, investors, local
community and employees.
The need and expectations of these
groups create social environment
for business.

Cultural

environment is treated as a part of social

environment which includes (festivals, music,
dance, celebrations of important days, etc)
Influencing factor
Dynamic in nature
Changes in demand of consumers choice, fashions,
style of celebrating marriages, birthdays, cultural
festivals and so on are the main factors affecting
business activities.
Culture also plays a major role in consumer
demand.

4.Technological:
meaning
Technological changes very fast and therefore
businessmen should be ever alert to adapt
changed technology in their business .
Customers want the latest technology
products.
Companies, must therefore, keep a track of
the latest developments to keep up with the
competition.

Quality

improvement and cost reduction

are possible through the use of modern
technology.
Influencing factors/forces includes the
technique of production, innovations and
inventions that affect quality and quantity
of production.
R & D plays very important role in
influencing business activities. Product
modification, introduction of new
products can be possible only through
R&D.

5.Legal environment:
Meaning
It creates a frame work of rules ,regulations
and legal provisions within which the business
units have to operate.
There are many laws which affect business
directly or indirectly for eg.
The Indian companies Act, 1956.
Consumer protection Act, 1986
Environment protection Act, 1986

Influencing

factors
Government policies relating to licensing,
registration, foreign investment and Act
related to control of pollution, etc.
Too many laws and regulations.

TOTAL MICRO
ENVIRONMENT

CUSTOMERS
COMPETITORS
SUPPLIERS
DISTRIBUTION
CHANNELS
SOCIETY

General public
media
government

(Micro- Environment)
1.Customers:
Meaning :
A business organization exists in order to satisfy its
customers. Customers is the king of the present days
marketers.
2. Competitors:
A business firm has to study its competitors product and
has to constantly design quality of the product so as to
stay in the market place.
3.Suppliers: Suppliers supply goods quality raw
materials, packaging materials, parts and components
on time. A business firm has to maintain cordial
relations with its suppliers.

4. Distribution channel intermediates:

Channel intermediaries not only distributes the
goods but also push sale of goods to the
customers to increase the turnover.
5. Society:
General public consists of shareholders, investor,
employees with whom business firm is required
to maintain good relations.
Media-print, broadcast, outdoor etc.
Government, both central as well as state govt.
plays important role in framing policies of
business firm.

Education environment
and business

Educational environment
Meaning :
Educational environment is the academic surrounding of situation
with in which the educational, training and manpower
development activities are undertaken. It is the educational
system which creates human capital which is useful in economic
growth, skill formation, improving the quality of life ,expectancy
and so on.