“Business environment may be defined as the set of external factors such as the economic factors, socio-cultural factors, government and legal factors, demographic factors, geophysical factors, which are uncontrollable in nature and affects the business decisions of a firm or company.”
A business is a part and parcel of the environment surrounding it. Its activities are influenced by the needs and requirements of the environment. A business exists for satisfying social and economic needs. Its working is influenced by the economic, social, and political environment.
For producing goods and services to satisfy consumer needs, business needs necessary inputs such as materials, energy, money, human force, etc. All these inputs are obtained from the society. These inputs are transformed into products and services by passing through various production/ manufacturing processes and are offered to society for its use.
The society does not get these products and services free of cost but pays a price for it known as price i.e. the price received from the society is used to acquire various inputs for continuing production processes, Business and society are both keeping each other. A business will exist so far as its output is demanded by the society.
In case the products of an enterprise are not in demand then either it will have to change its line of production or close down its working.
MEANING OF BUSINESS ENVIRONMENT
A business organisation does not exist in a vacuum. It exists in a world of concrete places and things, natural resources, important abstractions and living persons. The sum of all these factors and forces is called the Business Environment.
“Environment refers to those aspects of the surroundings of business enterprise and circumstances of business unit which affect or influence its activities and operations and decides its effectiveness.”
“Environment refers to all external forces which have a bearing on the functioning of business.”
The environment of the business is always changing and it is uncertain. The business environment can be divided into two ways.
A. The Micro Environment of Business and
B. The Macro Environment of Business
THE MICRO ENVIRONMENT OF BUSINESS
The micro environment consists of the forces in the company’s immediate environment that affects the performance of the company. These factors are more closely linked with the business than the macro factors. The micro factors may affect different firms in a particular industry in different ways. Some of the micro factors may be particular to one firm only. When competing firms in an industry have same micro factors, the relative success of the firms will depend upon, how effectively they deal with these elements. We shall now discuss these factors in detail.
Suppliers
Suppliers are an important force in the micro environment of a eCommerce business. “Suppliers are the persons who supply the inputs like raw materials and components to the business.” Suppliers are important:
(1) For the smooth functioning of the business it is very important to have a reliable source of supply.
((1) Uncertainty regarding the supply or other supply problems will compel the companies to maintain high inventories which will cause increase in costs.
Why Multiple Sources of Supply?
(1) It is very risky to depend on a single supplier because a strike, lock out or any other production problem with that supplier may seriously affect the company.
(if) A change in the attitude or behavior of the supplier may also affect the company.
Multiple sources of supply often help to reduce such risks. Because of the importance of this factor, many companies give high importance to vendor development.
Customers
On the micro environment of business, customers have direct impact. A company may have different categories of customers viz.
(i) Industrial Customers (iv) Wholesalers Customers
(ii) Foreign Customers etc. (v) Retailers Customers
(iii) Government Bodies Customers
To succeed in capturing customers, a business must try its best to know what people want and will buy. The consumer acceptance impose a constant challenge because non-economic factors in the environment such as attitudes, desires and expectations of people also influence consumer behavior. The choice of customer segments should be made by considering the following factors:
(1) Relative profitability
(iii) Stability of demand
(v) Extent of competition
(ii) Dependability
(iv) Growth prospects
Market Intermediaries
Marketing intermediaries are the vital link between the company and final consumer. A dislocation or disturbance of this link or a wrong choice of the link may cost the company very heavily. The marketing intermediaries include the following:
(i) Middlemen. Agents and merchants who help the company to find the customers and finalize the sales with them.
(ii) Physical distribution firms: Such as warehouses and transport firms which assist the company in stocking the goods and moving the goods from the places of their origin to their destination.
(iii) Marketing service agencies These include advertising agencies, market research firms, media firms and consulting firms and these agencies help in promotion of sales.
(iv) Financial Intermediaries: These persons institutions finance the marketing activities and insure business risks.
Competitors
Competitors play a vital role in running the business enterprise. Business has to adjust its various business activities according to the behavior of the competitors. There are various types of competitions:
(1) Desire Competition: Such competition is generally found in the countries characterized of the customers. Under this type of by limited disposable income and many unsatisfied desires competition the primary task is to influence the basic desire of the customer. A firm’s competitors include not only the other firms which produce the same or similar products but all those who compete for the discretionary income of the consumer. Every consumer has a limited income and he can’t fulfill all his desires with his income. Either he can buy a T.V. or a refrigerator or a washing machine or he can invest his money in the various investment schemes. The competition among these desires is termed as desire competition.
(i) Generic Competition: The competition among alternatives which satisfy a particular category of desire is called generic competition. For example, if particular person wants to invest his he has got various alternatives. He can invest his money with the Unit Trust of India, with the post office, with the banks or he can purchase the shares or debentures of a company. In this case, the competition among various investment schemes is called Generic Competition.
(iii) Product Form Competition. In this type of competition, the consumer has to choose between different forms of the product. For example, if the consumer decides to go in for a washing machine, the next question is, which form of the washing automatic or fully automatic, front loading or top loading etc.
(iv) Brand CompetitionL: Finally the consumer encounters the brand competition i.e. the competition between different brands of the same product. For example, if the consumer decides to buy a fully automatic washing machine, the next question will be which brand: IFB or Videocon or Godrej or Whirlpool etc.
Thus, there are a number of enterprises dealing in the same type of product or service. Every one of them tries to capture as much market as possible. In a free economy there is intense competition among various producers. It will be necessary to know the strengtlis and weaknesses of competitors. For example, marketing strategy adopted by a competitor should help a business unit to plan its own selling. The prices fixed competitor, terms and conditions offered for sale, the quality of products, services provided to the customers, etc. should be properly observed for planning one’s own policies.
Public
“A public is any group that has an actual or potential interest in or impact on an organisation’s ability to achieve its interests.” Examples of public are:
(1) Media Publics
(1) Citizens action publics
(fi) Local publics
Media publics can seriously affect any business. These can be used to publish useful information but sometimes, media public can tarnish the image of the company also. Local publics can also affect the business of the enterprises. Environmental pollution is an issue often taken up by a number of local publics. But fruitful cooperation between a business and the local publics may be established for the mutual benefit of the company and the local community