The meaning and importance of business environment

The intend and importance of commerce milieuMeaning of backing purlieuEnvironment of a patronage nub the external forces influencing the business decisions. They can be forces of economic, loving, political and technological factors. These factors are outside the control of the business. The business can do little to change them.Following featuresTotality of external forces wrinkle purlieu is the wedlock total of all things external to business trues and, as much(prenominal), is aggregative in nature.(Specific and general forces Business surroundings includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus whitethorn affect an individual firm only indirectly.Dynamic nature Business environs is dynamic in that it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entranceway of new competition in the trade.Uncertainty Business environment is largely uncertain as it is really difficult to predict future happenings, especially when environment changes are taking place too oft as in the case of information engineering or fashion industries.Relativity Business environment is a relative concept since it differs from country to country and even region to region. Political conditions in the USA, for instance, differ from those in China or Pakistan. Similarly, demand for sarees may be fairly high in India whereas it may be al almost non-existent in France.Importance of Business Environmentfirm to identify opportunities and fussting the commencement mover advantage Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors. For example, Maruti Udyog became the attra ctor in the small car market because it was the first to recognize the need for small cars in India.firm to identify threats and early warning signals If an Indian firm finds that a irrelevant multinational is entering the Indian market it should gives a warning signal and Indian firms can meet the threat by adopting by improving the quality of the product, reducing cost of the production, engaging in aggressive advertising, and so on.Coping with speedy changes All sizes and all types of enterprises are facing increasingly dynamic environment. In order to effectively bang with these significant changes, managers must understand and examine the environment and develop suitable courses of action.Improving performance the enterprises that constantly monitor their environment and adopt suitable business practices are the ones which not only improve their afford performance but also continue to succeed in the market for a longer period.Dimensions of Business EnvironmentWhat constitu tes the general environment of a business?The following are the key components of general environment of a business.Economic environment economic environment consists of economic factors that influence the business in a country. These factors include gross national product, corporate profits, inflation rate, employment, balance of payments, affair rates consumer income etc. brotherly environment It describes the characteristics of the society in which the organization exists. Literacy rate, customs, values, beliefs, lifestyle, demographic features and mobility of population are part o the social environment. It is grave for managers to notice the direction in which the society is moving and formulate progressive policies according to the changing social scenario.Political environment It comprises political stability and the policies of the establishment. Ideological inclination of political parties, personal interest on politicians, influence of party forums etc. create political environment. For example, Bangalore established itself as the most important IT centre of India mainly because of political support.Legal environment This consists of legislation that is passed by the parliament and state legislatures.Examples of such legislation specifically aimed at business operations include the Trade mark Act 1969, requisite Commodities Act 1955, Standards of Weights and Measures Act 1969 and Consumer Protection Act 196.Technological environment It includes the level of technology available in a country. It also augurs the pace of research and development and progress made in introducing modern technology in production. Technology provides jacket crown intensive but cost effective alternative to traditional outwear intensive methods. In a competitive business environment technology is the key to development.Economic Environment in IndiaIn order to solve economic problems of our country, the government took several steps including control by the State of c ertain industries, central planning and reduced importance of the private sector. The main objectives of Indias development plans were beginner rapid economic growth to raise the standard of living, reduce unemployment and povertyBecome self-reliant and solidification up a strong industrial base with emphasis on heavy and basic industries strike down inequalities of income and wealthAdopt a socialist pattern of development based on equality and delay exploitation of man by man.As a part of economic reforms, the Government of India announced a new industrial policy in July 1991.The broad features of this policy were as followsThe Government reduced the exit of industries under compulsory licensing to six.Dis coronation was carried out in case of many public sector industrial enterprises. indemnity towards foreign capital was liberalized. The share of foreign equity participation was increased and in many activities century per cent Foreign Direct Investment (FDI) was permitted.A utomatic permission was now granted for technology agreements with foreign companies.Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.LiberalizationThe economic reforms that were introduced were aimed at liberalizing the Indian business and industry from all unnecessary controls and restrictions.They indicate the end of the licence-pemit-quota raj.Liberalization of the Indian industry has taken place with respect toAbolishing licensing requirement in most of the industries except a short list,Freedom in deciding the scale of business activities i.e., no restrictions on expansion or contraction of business activities,Removal of restrictions on the movement of goods and services,Freedom in kettle of fish the prices of goods services,Reduction in tax rates and lifting of unnecessary controls over the economy,Simplifying procedures for imports and experts, andMaking it easier to attract foreign capital and technology to india.Pr ivatisationThe new set of economic reforms aimed at giving greater role to the private sector in the nation building process and a reduced role to the public sector.To achieve this, the government redefined the role of the public sector in the New Industrial Policy of 1991The purpose of the sale, according to the government, was mainly to improve financial discipline and facilitate modernization.It was also observe that private capital and managerial capabilities could be effectively utilized to improve the performance of the PSUs.The government has also made attempts to improve the efficiency of PSUs by giving them autonomy in taking managerial decisions.globalizationGlobalizations are the moment of the policies of liberalisation and privatisation.Globalisation is generally understood to mean integration of the economy of the country with the world economy, it is a complex phenomenon.It is an outcome of the set of various policies that are aimed at transforming the world towards g reater interdependence and integration.It involves creation of networks and activities transcending economic, social and geographical boundaries.Globalisation involves an increased level of interaction and interdependence among the various nations of the global economy.Physical geographical jailbreak or political boundaries no longer remain barriers for a business enterprise to serve a customer in a distant geographical market.Impact of Government Policy Changes on Business and IndustryIncreasing competition As a result of changes in the rules of industrial licensing and entry of foreign firms, competition for Indian firms has increased especially in service industries like telecommunications, airlines, banking, insurance, etc. which were earlier in the public sector.More demanding customers Customers today have become more demanding because they are well-informed. Increased competition in the market gives the customers wider choice in purchasing better quality of goods and servic es.Rapidly changing technological environment Increased competition forces the firms to develop new ways to survive and grow in the market. New technologies induct it possible to improve machines, process, products and services. The rapidly changing technological environment creates tough challenges before smaller firms. want for change In a regulated environment of pre-1991 era, the firms could have relatively stable policies and practices. After 1991, the market forces have become turbulent as a result of which the enterprises have to continuously modify their operations. bane from MNC Massive entry of multi nationals in Indian marker constitutes new challenge. The Indian subsidiaries of multi-nationals gained strategic advantage. Many of these companies could get special support in technology from their foreign partners due to restrictions in ownerships. Once these restrictions have been limited to reasonable levels, there is increased technology transfer from the foreign partn ers