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Introduction:
The business environment is the aggregate of all conditions, events, and
influences that surround and affect a business firm. Business environment
generally refers to the external factors affecting, either positively or
negatively, the operation of a firm. The most important external factors
include economic, legal, political, social and technological factors. The
business environment can include factors such as: clients and suppliers
its competition and owners; improvements in technology; laws and governm
ent activities; and market, social and economic trends
Social
approach
responsibility
Creative approach
As per this approach business gives shape to the environment by facing the
challenges and availing the opportunities in time the business brings about
changes in the society by giving attention to the needs of the people
Internal Environment
Internal environmental factors are events that occur
within an organization. Generally speaking, internal
environmental factors are easier to control than external
environmental factors. Some examples of internal environmental
factors are as follows:
Management changes
Employee morale
Culture changes
Financial changes
External environmental
External environmental factors are events that take place
outside of the organization and are harder to predict and
control. External environmental factors can be more
dangerous for an organization given the fact they are
unpredictable, hard to prepare for, and often bewildering.
Some examples of external environmental factors are noted
below:
Political factors
Government regulations
Main Factors
The main factor that affects most business is the degree of competition
how fiercely other businesses compete with the products that another
business makes. The other factors that can affect the business are:
Social environment:
How consumers, households and communities behave and their
beliefs. For instance, changes in attitude towards health, or a greater
number of pensioners in a population.
Quality of life
Consumption habits
Population
Legal Environment
The way in which legislation in society affects the business E.g.
changes in employment laws on working hours.
Economic environment
How the economy affects a business in terms of taxation, government
spending, general demand, interest rates, exchange rates and European and
global economic factors.
Balance of Trade
International Debt
Political environment
How changes in government policy might affect the business e.g. a
decision to subsidise building new houses in an area could be good for
a local brick works.
Technological environment
How the rapid pace of change in production processes and product
innovation affect a business.
Scientific Improvements.
Developments in IT sector
Ethical ENVIRONMENT
What is regarded as morally right or wrong for a business to do. For instance
should it trade with countries which have a poor record on human rights.
MACRO ENVIRONMENT
It is also called as general environment and remote
environment.
The
microenvironment
is
generally
uncontrollable than micro environment, the success of the
company depends on its adaptability to the
environment the important macro environment
factors as follows:
TECHNOLOGICAL ENVIRONMENT
Technology is one of the important determinants of success of a firm aswell
as economic and social development of nation. It includes both hardware and
software to solve problems and promote progress
Demand conditions
The size of demand influences the choice of the technology . The size of
demand influences the choice of the technological scale. Fast growing trend
of demand would encourage development of technology of large scale.
Suppliers offering
Many times technological changes are encouraged by the suppliers of
acompany, like a capital goods supplier etc
Govt. policy
The govt. contributes to the development to the technology by its own direct
involvement by establishing research organization and funding R & D. The
govt. may encourage private R & D by various incentives.
Micro
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 Customers, Suppliers,
Competitor, Public, and Marketing Intermediaries.
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.
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.
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.
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.
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.
Pakistan is ranked 128th out of the 189 countries surveyed for the latest
World Banks Doing Business annual report, a drop of 18 places from last
year.
According to the Index of Economic Freedom Pakistan's economic freedom
score improved in the last period reflecting improvements in six of the 10
components of economic freedom. Pakistan scores above the world average
in business freedom, fiscal freedom and government size. Pakistan's ranking
improved in the World Bank Group's Regulatory Quality and Control
of Corruption indicator and ICRG's Political. Risk rating. At the same time, the
Country Credit ranking dropped 49 spots. The number of procedures, time
and cost required to start a business have all been reduced resulting in
Pakistan jumping 17 spots in the Starting a Business indicator. Thanks to an
e-services project and the introduction of digital signatures, new companies
can register and file tax returns online. Still, Pakistan slipped 17 spots in the
Paying Taxes indicator.
Business Opportunities