What is business environment? Explain the important of business environment.

(A) Business Environment: 

A business is defined as buying and selling activity to generate income. Business consists of several interrelated and interacting elements. Business is an economic and social activity of the society. Society is an integral part of the business and its interest cannot be ignored.

Business environment consists of economic, social, legal, technological and political situation. Business obtains money, material, machinery and manpower and other resources from environment. 

According to B. O. Wheeler – Business environment is “the total of all things external to firms and individuals which effect their organisation and operations”. According to Oxford English Dictionary – “Business Environment refers to those aspects of the surroundings of a business enterprise which influence or effect its operations and determine its effectiveness.

Basically business environment consists of all internal and external factors that influence the nature and scope of business activity. 

(B) Importance of Business Environment: 

(i) Flexible and Dynamic : Changing environmental factors should be appraised from time to time. So as to keep the business flexible and dynamic. The new opportunities and threats created by the environment can be appraised by the corporate planners to make the most of it. Turbulent market conditions, less brand loyalty, more demanding customers and intense global competition are some of the images of todays business environment. In order to cope with these significant changes, organization must understand and examine the environment and develop suitable course of activity. 

(ii) Opportunities and Threats : Study of business environment enables a business enterprise to visualise future problems that can arises as also future business prospects in advance. Deriving benefit from honourable business opportunities is possible as also it can face the problems boldly. Awareness of environment help an organisation to take advantage of such opportunities instead of loosing them to competition. It helps organisation to identify various threats on time and serves as an early signal.

(iii) Competition : Understanding the business environment helps to obtain qualitative information which in turn is useful in formulating business plans, policies and strategies for the future course of action. 

(iv) Utilization of Resources Optimally : Optimum use of available resources for the business enterprise is possible by studying the business environment. It enables the enterprise to take full advantage of the policies implemented by the government. 

(v) Strength and Weakness Identification : With the change of technology and global development it helps to analyze individual strength and weakness of the business understanding the challenges, appropriate decisions are taken on timely basis. 

(vi) Knowledge : Study of environment is necessary to discover and exploit new opportunities for business expansion broad strategies and long term planning enable the development of a formidable business wait. 

(vii) Image Building: Environment study makes it possible for the business to expand and to make it acceptable and agreeable to different social groups. By fulfilling its social obligations towards different groups of society, business can create goodwill and reputation for itself. 

(viii) Adaptability to Socio-Economic Changes : A business organization needs to show its keen intentions towards adapting to the socio-economic changes.