BUSINESS

Meaning - Business refers to an economic system in which goods & services are exchanged for one
another or money, on the basis of their perceived worth. Or Business refers to all those economic
activities which are concerned with the production or purchase of goods & services for the
purpose of sale at a profit.

Definition - Acc. to R. Urwivk, “Business is profit can be more the main objective of a business than
betting is the main of making profit & acquiring wealth through the satisfaction of human wants

SCOPE OF BUSINESS

The scope of business can be described as follows

1. Improvement in standard of living: Business helps people in general to improve their

standard of living.

2. Proper utilization of resources: it leads to effective utilization of the scare resources of

society. It provided facility of mass production.

3. Better Quality & large variety of goods & service: it involves production, purchase &
sale of goods & service for price. Customer satisfaction is the backbone of modern business.
Services such as supply of water, electricity etc, may be considered highly significant for the
community.

4. Creates utilities: business makes goods more useful to satisfy human wants. It adds to
products the utilities of person, time, place, form, knowledge etc. Thus, people are able to
satisfy their wants effectively & economically.

5. Employment Opportunities: it provides employment opportunities to large number of

people in society.

6. Workers welfare: business organization these days take care of various welfare activities
for workers. They provide safer & healthier work environment for employees
OBJECTIVES OF BUSINESS
1. Profit Making: Profit is backbone of any business enterprise. It is excess of income over
expenses. Profit is the main motivator, strong sustainers & judicious allocator of resources,
objective indicator of efficient productivity & a solid basis for growth expansion & survival.
It enables a businessman to realize his other objectives. ex: Hospitals schools, Charitable
institution & government agencies are not concerned with profits oriented

2. Growth: It is another primary objective of business. It should grow in all directions over a
period of time. An enterprise which remains stagnant for long is presumed to suffer from
an organic defect. There are various strategies adopted to achieve growth: i. Add more
products or markets ii. Integration forward or backward. iii. Increase market share iv.
Diversify business into new areas. v. Expand markets. Etc.

3. Power: Business has vast resources such as money, materials, men & know-how .These
resources confer enormous economic & political power on owners & managers of business
ventures.

4. Employee satisfaction & development: The Chinese proverb says, “ if you want to plan
for a year, plant corn. If your want to plan for thirty plant a tree. But if you want to plan for
100 years plant a men”. Carrying for employee satisfaction & their development has been
one of the objectives of enlightened business enterprises. 5. Quality of Products & Services:
This is one of the major objectives of business. Those who insisted on & persisted in quality
survived competition & stayed ahead of other on the market persistent quality earns brand
loyalty, a vital ingredient of success.
BUSINESS ENVIRONMENT
Meaning:
Business environment is an environment in which business is carried out. Business environment
encompasses all those factors that affect a company’s operations, including customers,
competitors, suppliers, distributors, industry trends, substitutes, regulations, government
activities, the economy, demographics, social & cultural factors innovation & technological
developments.

FEATURES OF BUSINESS ENVIORNMENT

1. Environment is Complex: A business environment has a plethora of factors events,

conditions, & influences arising from a variety of sources. Therefore, it is very difficult to
understand all the factors affecting a given environment at any time. Although we can
understand it in parts, it is impossible to grasp it in totality.

2. Environment is Dynamic: Business also keeps a changing constantly. This is due to a wide
range of influencing factors. These factors create dynamism in the environment causing it
to continuously change its shape & character.

3. Environment is Multi faceted: Due to complexity & dynamism of a business environment,

it continuously changes its shape & character. However, different observes view the
changes differently. Therefore a particular observer might see a specific change in the
environment as an opportunity while someone else might perceive it a threat.

4. Environment has long term impact on business: Environment has long lasting impact on
functioning of business organizations. Their growth & profitability depends upon the
environment under which they have to operate. Environment influences business
enterprises. Such influences may be positive or negative & may affect the profitability,
efficiency & development of business.

5. Environment influences business organization: Businesses organizational have limited

capacity to influence business environment as it is the result of government policies &
social & technological changes which are basically external variables.

6. Environment and business planning go together: Business environment & business

planning are closely related concepts. In fact, planning is necessary in order to derive
maximum benefit from suitable environment. Similarly, planning is useful for dealing with
the problems created by unsuitable environment.
TYPES OF BUSINESS ENVIRONMENT

A. INTERNAL ENVIRONMENT
Internal environment refers to environment within the organization. It includes internal
factors of the business which can be controlled by business. It includes objective of
business, managerial policies, management & employee of the organization, labor
management relationship, brand image & corporate image working conditions in the
organization, technological & research & development capabilities.
Internal environment includes 5 M’s are
• Men,
• Material,
• Machinery,
• Money &
• Management available with business organization.

These components usually within the control of business.

Some of the Internal Components are as follows

• Value system: The value system of the founders, Board of Directors, managers, workers of
the organization has important bearing on the strategies of the organization.

• Mission & objectives of the business: Firm’s philosophies, priorities, development,

policies are guided by the mission & objectives of the organization, mission & objective are
the first steps in the development of the organization.

• Organization Structure: Organizational hierarchy is the authority which flow of from top
to bottom. Some management structure & styles delay decision making & while other
facilities quick decision making.

• Financial capability: Financial factors like financial policies, financial positions & capital
structure etc. affect corporate strategies & decisions.

• Human Resource Management: The characteristics of the Human resources like skill,
quality, morale, commitment, attitude, knowledge etc. could contribute to the strength &
weakness of an organization. Some organizations final difficult to carry out restructuring or
modernization because of resistance from employees.

• Marketing capability
• Operational capability
• Managerial policies
• Brand Image & corporate Image
• Research & development capability
• General management capability.
B. EXTERNAL ENVIRONMENT

External environments refer to external aspects of the surroundings of business enterprise

which have influence on the functioning of business. These factors are beyond the control
of business. External environment includes factors outside the firm can provide
opportunities or pose threats to the firm. External environment has two types
• Micro environment
• Macro environment

1. Micro Environment
The micro environment of a company consists of elements that directly affect the company.
It includes suppliers, customers, market intermediaries, competitors & customers etc.
Micro environment includes:

a) Customers: Customers are the people money to acquire an organization’s products. A

consumer occupies the central position in the marketing environment. The marketer has to
closely monitor & analyze changes in consumer tastes & preferences & their buying habits.

b) Competitors: are the other business entities that compete for resources. A study of the
competitive scenario is essential for the marketer, particularly threats from competition. In
modern age an absolute monopoly is very rare thing. Most of the firms have to work in
some type of competition such as monopolistic competition or oligopoly.

c) Suppliers: Suppliers provide raw materials, equipment, services & so on. Suppliers with
their own bargaining power affect the cost structure of the industry. They constitute a
major force, which shapes competition in the industry. The quality of the commodity & the
cost of production are considerably influence by the supplies of the inputs.

d) Market Intermediaries: It includes agents & brokers who help the company to find
customers. It is a link between the company & the consumer. T
2 Macro Environment:
Macro environment forces that create opportunities & pose threats to the business units.
The macro environment consists of

a) Economic Environment: It refers to those economic factors which have impact on the
working of business. It consists of economic factors that influence the business in a country.
These factors include gross national product, corporate profit, inflation rate, employment,
balance of payments, interest rates consumer income etc.

1. Economic conditions: Economic conditions include income level, distribution of

income, demand & supply trends etc. if the company is in boom condition, it positively
affects demand & market share. On the other hand if the economy is in depression it
will have negative effects on the business.

2. Economic Polices: Economic policies are framed by the government. These policies
establish relationship between business & government. The effect of these policies may
be suitable or unsuitable.
Some of the policies are:
• Industrial policies
• Fiscal policies
• Monetary policies
• Foreign investment policies
• Export – import (EXIM) policies.

3. Economic system: Different economic systems prevails in different countries. These

systems affect the business. The economic system includes capitalism, socialism &
mixed economies. The world economy is primarily governed by three types of economic
systems i.e.,
• Capitalist economy
• Socialist Economy
• Mixed economy

4. Economic Growth: The stage of economic growth of the economy has direct impact on
the business strategies. Increased economic growth rate result in increase in
consumption expenditure, lower the general pressure within an industry & offers more
opportunities then threats.

5. The rate of interest: The rate of interest affects the demand for the products in the
economy, particularly when general goods are to be purchased through borrowed
finance. Low interest rated provides opportunities to the industries to expand whereas
rising interest pose a threat to these institution.

6. Currency Exchange: current exchange rates have direct impact on the business
environment. When the rupee was devalued in 1991, it was to make Indian products
cheaper in the world market & consequently boost India’s exports.
b. Political Environment: Political environment affects the different business units. A stable
& dynamic political environment is necessary for business growth. Political environment
includes political stability in the country, relation of the government with other countries,
welfare activities of government, Centre-state relationship & views of opposition parties
towards business. If the political system is stable & efficient then the business grows.

c. Socio-cultural Environment: Socio-Cultural environment refers to social & cultural

factors which are beyond the control of business units. Such factors include attitude of
people to work, family system, caste system, education system, habits, language, religion
has considerable components of business environment. Religion has considerable effect on
business. Some religious restrict their followers they do not allow its followers to engage in
industry, wine making etc. similarly, the social environment of business also includes social
factors like customer, traditions, values, beliefs, poverty literacy, life expectancy rate etc.

d. Technology Environment: It is the most important factor which affects the business
enterprise. The faster changes in technology create problems for business enterprises.
products have shorter life span than the past because of rapid technological developments.
technology provides various advantages. Success in many industries depends on
innovation & research. To promote innovation & research some companies establish
research & development departments in their enterprises.

e. Legal Environment: It refers to the set f laws & regulations which influence the business
Organization & their operations. every business organization has to obey & work within the
framework of law. The legal environment is derived partly from the political climate in a
country & has three distinct dimensions to it:

a. The law of the home country

b. The law of the foreign markets
c. international law in general

f. Natural Environment: It refers to geographical & ecological factors which are beyond the
Control of the enterprise. It includes natural resources, weather & climatic conditions,
landforms, rainfall, environmental pollution etc. Climate & weather conditions affect the
location of certain industries like textile industries. Similarly environmental pollution in
the form of air pollution, have caused disturbances in ecological balance.

g. Demographic Environment: Demographic factor include size, growth rate, age

composition, sex composition etc. of population, family size, economic stratification of
population, educational level, caste, religion etc. all these demographic factors are relevant
to business. These factors affect the demand for goods & services. High population growth
rate indicates an enormous increase in labor supply. Population with varied tastes,
preferences, beliefs, temperaments etc. gives rise to differing demand pattern & calls for
different marketing strategies.
Natural Environment
A natural environment is an environment that encompasses all living & non-living things
occurring naturally on earth or some region thereof. Natural environment refers natural resources
like minerals, forecasts, water & land etc which influence on the business activity. These resources
are not made by human beings.

COMPONENTS OF NATURAL ENVIRONMENT

1. Water on Earth: An ocean is a major body of saline water & a component of the hydrosphere
approximately 71% of the earth’s surface (an area of some 362 million square kilometers) is
covered by ocean, a continuous body of water that is customarily divided into several principal
oceans & smaller seas. More than half of this area is over 3,000 meters (9,800 ft) deep. Average
oceanic salinity is around 35 parts per thousand (3.5%).

2. Atmosphere, climate & weather: Atmosphere gases scatter blue light more than other
wavelength creating a blur when seen from space. The atmosphere of the earth serves as a key
factor in sustaining the planetary ecosystem. The thin layer of gases that envelops the earth is held
in place by the planet’s gravity/ dry air consists of 78% nitrogen, 21% oxygen, 1% argon & other
inert gases, among which are the greenhouse gases such as often referred to as trace gases, among
which are the greenhouse gases such as water vapour, carbon dioxide, methane, nitrous oxide &
ozone.

3. Effects of Global Warming: The potential dangers of global warming are being increasingly
studied by a wide global consortium of scientists. These scientists are increasingly concerned
about the potential long-term effects of global warming on out natural environment & on the
planet of particular concern is how climate change & global warming caused by anthropogenic or
human-made releases of greenhouse gases, most notably carbon dioxide can act interactively &
have adverse effects upon the planet.

4. Ecosystems: An ecosystem(also called as environment) is natural unit consisting of all plants,

animals & micro-organism (biotic factors) in an area functioning together with all of the non-living
physical (biotic) factors of the environment . the central to the ecosystem concept does the idea
that living organism s are continually engaged in a highly interrelated set of relationships with
every other element constitute the environment in which they exist
IMPACT OF NATURAL ENVIRONMENT ON BUSINESS DECISION

1. Environmental Regulations: Regulating business activities is one way government agencies

protect the environment. Businesses must meet certain standards that help to reduce any adverse
effects is a company’s activities have on the environment as a result, natural environmental
factors, such as clean water & clean air, dictate how companies conduct their day-to-day
operations.

2. Permit Requirements: Companies involved in activities that impact their surrounding

environment typically have to file for operating permits through a local, state or federal
government agency. Businesses permit requirements enable government agencies to regulate &
keep track of business activities. These permits serve different purposes some of which include
setting minimal standards for any air emissions, dictating certain procedures for handling waste &
hazardous materials.

3. Compliance Requirements: Natural environmental factors affect a business operations as well

as its ability to expand or take on new operations. In effect, companies must comply with
environmental regulations in all stages of business development. Companies considering
purchasing a building should ensure the building conforms to environmental regulations or risk
paying penalties for non-compliance. Building expansions must also meet regulatory
requirements.

4. Environmental Contaminants: Businesses that work with hazardous materials on a regular

basis have certain responsibilities when it comes to ensuring contaminants don’t reach or affect
the natural environment. The comprehensive environmental response, compensation liability act
holds business owners liable for activities that contaminate surrounding air, soil or water
supplies. This law even applies for new business owners who unknowingly purchase a
contaminated site or purchase an operation that fails to meet compliance standards.

5. Impact of Global Warming: The potential dangerous of global warming are being increasingly
studied by a wide global consortium of scientists. These scientists are increasingly concerned
about the potential long-term effects of global warming on out natural environment & on the
planet of particular concern are how climate change & global warming caused by anthropogenic or
human made realize of greenhouse gases most notably carbon dioxide, can act interactively &
have adverse effect upon the planet.