Business environment

From Wikipedia, the free encyclopedia

An environment can be defined as anything which surrounds a system. Therefore, the business environment is anything which surrounds the business organisation. It affects the decisions, strategies, processes and performance of the business. The micro environment consists of different types of stakeholders - customers, employees, suppliers, board of directors and creditors. The macro environment consists of factors which are beyond the control of the business (STEP) - Social, Technological, Economical and Political.

Changes in the micro environment will directly affect and impinge on the firm's activities. Changes in the macro environment will indirectly affect the business but will nonetheless affect it. For example, a change in legislation such as the smoking ban indirectly affects pubs and restaurants.

1 Social environment
2 Technological environment
3 Economic environment
4 Political environment
5 See also
6 References

[edit] Social environment

[edit] Technological environment

Technological environment hold new technological innovation, new products, the state of technology, the utilization of technology for maximum inputs and outputs, the obsolescence of technology and the dynamic changes that frequently occur in technologies which enable firms to get a competitive advantage.^{[citation needed]}

Availability of electric power, natural gas, drinking water, sewage collection, telecommunications, roads and highways, postal service, garbage collection, and public transport.

[edit] Economic environment

The economic environment consists of the demand dynamics, supply situation, pricing factors, degree of competitiveness, and impact of profitability. It includes the fiscal policy, monetary policy and the taxation policy, the FDI norms, the investment criterion and financing decisions.^{[citation needed]}

Global economy (Macroeconomics)
Local economy (Microeconomics)
Monetary policy

[edit] Political environment

The political environment includes regulatory burden and red tape, taxes, levels of political corruption, public works services, labor market regulation, policy predictability, property rights, contract enforcement, regulations controlling startup and bankruptcy, competition law, and entry to finance and infrastructure markets.^[1]

The legal environment plays a very important role. The laws of the country, the judicial system, and the laws which affect business are important. For example, there might be a sudden prohibition of tobacco.

The political environment is a very important factor that needs to be taken into consideration. The example of Augusto Pinochet serves as a classic example. Political lobbying, the practices of the ruling parties and the stability of the ruling parties plays a very role as in developing countries as the political systm keeps on changing.