Business Environment refers to the external forces, factors, and institutions that are beyond the control of a business but affect its performance.
Features of Business Environment:
Totality of external forces – Includes all external influences.
Dynamic in nature – Keeps changing.
Uncertainty – Hard to predict.
Complex – Many interrelated factors.
Relativity – Varies from country to country or region to region.
Importance of Business Environment:
Helps in identifying opportunities
Assists in threat identification
Enables firm to tap useful resources
Helps in planning and policy formulation
Improves performance
Dimensions of Business Environment:
Economic Environment – Inflation, interest rates, economic policies, etc.
Social Environment – Customs, values, lifestyle, education level.
Technological Environment – Innovation, new methods, automation.
Political Environment – Government policies, stability, ideologies.
Legal Environment – Laws, regulations, and court judgments.
Impact of Government Policy Changes on Business and Industry (especially post-1991 reforms):
Increased competition
More demanding customers
Rapidly changing technological environment
Need for developing human resources
Market orientation
Loss of budgetary support to public sector