Concept of Environment:

The environment literally means the surroundings, external objects, influences, or circumstances under which someone or something exısts. In this sense, business environment refers to those aspects of the surroundings of a business enterprise that affect or influence its operations and determine its effectiveness.

It is unlimited extends beyond the national frontiers. The need, therefore, is to analyze and consider only the relevant factors with appropriate dimensions, obtaining in this scenario. The smooth functioning of the business depends on the availability of inputs like raw materials, machines; technology, manpower, etc., and dispose of output i.e. finished goods to, society.

It is environment-specific. It is neither self-sufficient nor self-contained. The business environment consists of both the internal and external environment of business. The internal environment provides strength whereas the external environment provides opportunities and threats to the business.

Environment refers to all forces which have a bearing on the development, performance, and outcomes of an organization. Such force influences its ability to achieve objectives. An organization must be ready to redefine reposition and rethink the environment. Environmental forces influence strategic management. The environment creates surprises.

Concept of Environment: Writer

According to Keith Davis (1986), “Business environment is the aggregate of all conditions, events, and influences that surround and affect a business.

According to V.P. Michael, “Business environment is the sum total of the environmental factors which provides an atmosphere for business.'”

The environment is very complex, and various factors comprised in it may be highly interrelated and interdependent. It is a great aid in ensuring the survival and growth of business enterprise, Goals, policies, culture, resources, structure, customers, suppliers, market intermediaries, a pressure group which influence the operation of a business enterprise are internal environmental forces.

The influences of these forces can be controlled. The environmental forces which are located outside the business and which effects cannot be controlled are called external environmental forces. They are economic socio-culture, political-legal, technological, natural, geographical, demographic factors, etc.

Environment analysis is the process of monitoring the organizational environment to identify both present and features threats and opportunities that may influence the firm’s ability to reach its goals. The organizational environment is the set of all factors both outside and inside the organization that can affect its progress toward its attainment of those goals.

Finally, the environmental analysıs is awareness of the organizations to success. The future moves with the increasing rate of change in all aspects of the organizational environment. Because future organizations will be more almost dependent on their environment performing environmental analysis will almost certainly be even more important to managers of the future than it is to managers today.

Nature of Environment


It is complex in nature, in the sense, it consists of Such factors, events or conditions arising from different sources that it becomes easy to understand sometimes, while at times or most of the times it seems hard to understand, rather, it is harder when considering it in totality.

2. Multi-Dimensional:

The business environment has many aspects and sides to be observed and perceived. Its perception depends upon its complex functions. The changes in business may have a number of impacts. This saying is worth mentioning. “Change is inevitable”.

Some people change for the better and some for the worst, so you can either embrace them or replace them. ” The same goes for a business. Some people welcome change while some don’t. don’t. Similarly, a change may be considered as a good opportunity or it may be considered as a threat.

3. Dynamism:

As it is clear that the environment is a mixture of many factors and changes in some of the other factors continue to take place. Therefore, it is said that the business environment is dynamic.

4 Uncertainty/turbulent:

Nothing can be said with any amount of certainty about the factors of the business environment because they continue to change quickly. The professional people who determine the business strategy take into consideration the likely changes beforehand.

Components of Environment

Environment means the surrounding, external object, influences, or circumstances under which someone or something exists. An environment consists of forces that influence the organization’s ability to attain goals. It can be classified into two categories i.e.

1. Micro Environment:

The conditions and forces within an organization are called the internal environment. The influence of internal environmental forces can be controlled by the organization. It includes the following forces:

a. Shareholders/Investors:

Shareholders are the owners of business organizations. A corporate BOD is a governing body elected by a corporation’s shareholders and charged with Overseeing the general management of the firm to ensure that S being run in a way that best serves the shareholders’ interests.

b. Customers:

The personş who pay money to acquire an organization’s products or services are called customers. They absorb the organization’s output. They are the source of ideas, opinions,  information, and reactions, etc.

C. Suppliers:

Organizations that provide resources for other organizations are called suppliers. They supply production input regularly and helps in continuing the production of finished products so that the goods can be made available to customers. Long-lasting relationships with suppliers are essential.

d. Competitors:

Competition is a major environment variable. The organization to be successful in the market should be able to deliver greater customer value and satisfaction than its competitors. Competition is everywhere. It directly affects organizations.

2. Macro Environment:

The general environment includes the broad economic, political-legal, socio-culture, demographic, technological, and global conditions that may affect the organization. Çhanges in any of these areas usually do not have as large an impact as changes in the specific environment do, but managers must consider them as they plan, organize, lead, and control.


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