Concept of Business Environment
Business is environment-specific. Business organizations establish, operate, and grow in a society of a combination of environmental components. Environment refers to the totality of factors, forces, institutions, ideas, beliefs, religions, mentality, etc, external to an organization. Business environment refers to all internal and external forces that influence the development, performance, and result of a business organization. Environmental forces determine the effectiveness of an organization. Therefore, the organization must adjust to or deal with these environmental forces in order to survive and succeed. Business depends on the environment for its survival, growth, and change.
Every organization operates within two environments: internal and external. The internal environment is made up of forces over which the organization has some control. Thus, the internal environment consists of controllable factors. The internal environment provides strengths and weaknesses to the business organization. The external environment consists of forces outside the organization’s direct control. They are known as uncontrollable variables and they are beyond the control of the organization. They are uncertain and complex. These forces give opportunities and threats to the business.
“Business environment is the aggregate of all conditions, events, and influences that surround and affect a Business. ” (Keith Davis)“Environment refers to institutions or forces that affect the organization’s performance. “ (Stephen p. Robbins)
Characteristics of the Business environment:
1. Dynamic:
The business environment is dynamic. It is continually changing.
2. Multi-faceted:
Different people perceive environmental changes differently. A particular change in the environment can be an opportunity for one business organization. But it can be a threat for another business organization.
3. Far-reaching impact:
The business environment exerts a far-reaching impact on business organizations. It impacts their capacity to achieve goals.
