Dimensions of Business Environment

 

Dimensions of the business environment include economic, social, technological, political and legal conditions which are considered relevant for decision-making and improving the performance of an enterprise.

In contrast to the specific environment, these factors explain the general environment which mostly influences many enterprises at the same time. 

Following are the various factors constituting the general environment of business:-

1)- Economic Environment:

• It refers to all the forces and factors which directly influence the economy of your country and these forces and factors are out of the control of business enterprises.
• Increase or decrease of the economic factors result in opportunities or constraints on a business enterprise.
• Interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors that can affect management practices in a business enterprise. 
• For example, in case of construction companies and automobile manufacturers, low longer-term rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money.

2)- Social Environment:

• The social  environment of business includes the social forces like customs and traditions, values, social trends, society’s expectations from business, standard living, taste, preferences and education level of the people living in the society where business exists etc.
• The businessmen cannot overlook the components of the social environment as these components may not have immediate impact on the business but in the long run the social environment has great impact on the business.
• Social trends present various opportunities and threats to business enterprises.
• For example, the celebration of Diwali, Eid, Christmas, and Guru Parv in India provides significant financial opportunities for greeting card companies, sweets or confectionery manufacturers, tailoring outlets and many other related businesses.

3)- Technological Environment:

• Technological environment includes forces relating to scientific improvements and innovations.
• These provide new ways of producing goods and services and new methods and techniques of operating a business. 
• For example, Online sale of grocery items is becoming very common; Due to technological advancement customer can compare the fare prices of various; airlines, hotels, etc. and select the most economical deal;  Online booking of air tickets, movie tickets, not only booking you can see your seat number.

4)- Political Environment:

• Political environment constitutes all the factors related to government affairs such as type of government in power, attitude of government towards different groups of societies, policy changes implemented by different governments, etc.
• The political environment has an immediate and great impact on the business transactions so businessmen must scan this environment very carefully. 
• The businessman has to make changes in his organization according to the changing factor of the political environment.
• The significance of political conditions in business success lies in the predictability of business activities under stable political conditions.
• On the other hand, there may be uncertainty of business activities due to political unrest and threats to law and order.
• Political stability, thus, builds up confidence among business people to invest in the long term projects for the growth of the economy. 
• Political instability can shake that confidence. 
• Similarly, the attitudes of government officials towards business may have either positive or negative impact upon business.
• For example, Swachh Bharat Abhiyan started by BJP government; Political stability encourages business enterprises to invest in long term projects; Constitution of the country; Foreign policy government.

5)- Legal Environment:

• The management of every business enterprise has to obey the law of land.
• Therefore, it is very essential for every business enterprise to have adequate knowledge of rules and regulations framed by the government. 
• Legal environment includes various legislations passed by the Government, administrative orders issued by government  authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government— centre, state or local.
• For example, Legal policies relating to license and foreign trade, Foreign Exchange Management and Regulation Act; Statutory warnings essential to be printed on labels like on tobacco or cigarettes.