Components of Business Environment CBSE/ISC Class 12

 Components of Business Environment

There are two main Dimensions / Components/ Elements  of Business Environment:-

1.Micro Environment

2.Macro Environment

Components of Business Environment

1.Micro Environment- Micro Environment refers to all those internal and external factors which directly and continuously influence the working and performance of a  business units or specific firm.

1.Internal Factors- The internal factors refers to all those factors which exist(become) within a business firm. These factors are controllable because the firm has control over these factors.

  1. Corporate culture
  2. Mission and objectives
  3. Top Management structure
  4. Power structure
  5. Corporate image and brand equity
  6. Human and non-human resources

2.External Factors- The external factors refers to those individual and group or agencies  which outside the business organisation and affect directly . A business has no control over external factors.

  1. Customers
  2.  Suppliers
  3. Competitors
  4. Financiers
  5. Shareholders
  6. Marketing middlemen
  7. Society and General public

Aso Read : Business Environment: Meaning, Features and Importance

Components of Business Environment

2. Macro Environment(General Environment)- Macro environment refers to all those external forces which have  homogeneous (Same) effect on the working  of business organisations across business sectors.

  1. Economic environment
  2. Social environment
  3. Political environment
  4. Technological environment
  5. Legal environment

Components of Business Environment

1.Economic Environment- Those economic factors which have their affects on the working of the business is known as Economic Environment. Some economic factors which could affect business firms as follows: –

  1. Economic System of a country
  2. Rates of saving and investment
  3. Rate of economic growth
  4. Fiscal policy
  5. Change in Interest rates ,
  6. Inflation rates
  7. Change in income of the people,
  8. Monetary policy
  9. Rate of income tax
  10. Stage of conomic growth

2.Social Environment(Socio Cultural Environment) –Those social factors which have their affects on the working of the business is known as Social Environment. Some social factors which could affect business firms as follows: –

  1. Customs and traditions
  2. Social Values
  3. Social trends
  4. Society’s expectations from business
  5. Education Level
  6. Literacy rates
  7. Lifestyle
  8. Quality of life
  9. Consumption habits

3.Political Environment-Those political factors which have their affects on the working of the business is known as political environment. Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business.  Some political factors which could affect business firms as follows: –

  1. Political stability
  2. Political interference in business
  3. Government policy towards business
  4. General stability of the Government
  5. Government  foreign policy towards business
  6. International relations of the country
  7. Defence policies of the country

4.Technological environment-Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business. Some technological factors which could affect business firms as follows: –

  1. Technological Development (In country )
  2. Rate of technological change
  3. Extent of use of particular advances
  4. Sources of technology (Internal sources or External sources)
  5. Technological Development (out side country)

5. legal(Regulatory environment-Those legal factors which have their affects on the working of the business is known as legal environment . Legal environment includes various legislations passed by the government, administrative orders issued by government authorities, court judgments as well as the decisions rendered by the various commissions and agencies at every level of the government  central, state or local. Some legal factors which could affect business firms as follows: –

  1. Legislations passed by the government
  2. Administrative orders issued by government authorities
  3. Court judgments
  4. Rights and duties of citizens.
  5. Business and tax laws.
  6. Judicial system of the country

Components of Business Environment

Non-Economic Environment- Non-economic Environment consists of social, political, technical and legal factors that influence the functioning and performance of a business enterprise.

“Business environment refers to the sum total of individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance”.

Also Read : Importance Of Finance For Business

 

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