What are the various components of business environment?

Answer 1

A.Internal environment

Internal environment includes all those factors which influence business and which are present within the business itself. These factors are usually under the control of business. The study of internal factors is really important for the study of internal environment. These factors are:

(i) Objectives of Business, (ii) Policies of Business, (iii) Production Capacity, (iv) Production Methods, (v) Management Information System, (vi) Participation in Management, (vii) Composition of Board of Directors, (viii) Managerial Attitude, (ix) Organisational Structure, (x) Features of Human Resource, etc.

Note:

All the above factors do influence the decisions of business, but since all these factors are usually under the control of business, they cannot be wholly included in the business environment.

B. External Environment

External environment includes all those factors which influence business and exist outside the business. Business has no control over these factors. The information about these factors is important for the study of the external environment.

Some of these factors are those with which a particular company has very close relationship. However, there are some other factors which influence the entire business community.

Micro environment means that environment which includes those factors with which business is closely related. These factors influence every industrial unit differently. These factors are as under:

(i) Customers (ii) Suppliers (iii) Competitors (iv) Public (v) Marketing Intermediaries.

(i) Customers:

Customers of an industrial unit can be of different types. They include household, government, industry, commercial enterprises, etc. The number of different types of customers highly influences a firm.

For example, suppose a firm supplies goods only to the government. It means that firm has only one customer. If because of some reason their relations get soured, the supply of goods will stop and in that case the closure of that firm is certain.

This clearly indicates that the customers do influence business. Therefore, a firm should make efforts to have different kinds of customers,

(ii) Suppliers:

Like the customers, the suppliers also influence business. If a business has only one supplier and he gets annoyed because of some reason, the supply of goods can be stopped and the very existence of the business can be threatened or endangered. Hence, efforts should be made to have various suppliers.

(iii)Competitors:

The competing firms can influence business in a number of ways. They can do so by bringing new and cheap products in the market, by launching some sale promotion scheme or other similar methods.

(iv)Public:

Public has different constituents like the local public, press or media, etc. The attitude or behaviour of these constituents can affect business units. For example, the local population can oppose some established firm whose business is excessively noisy.

Similarly, if the media gives some favourable report about a particular company the price of its share can register an increase on this count.

(v) Marketing Intermediaries:

The marketing intermediaries play a significant role in developing any business unit. They are those persons who reduce the distance between the producers and agents.

For example, a company sells its goods with the help of agents and if because of some reason all the agents get annoyed with the company and refuse to sell its goods, there can be a crisis for the company