DR.

SHAKUNTALA MISRA NATIONAL

REHABILITATION UNIVERSITY, LUCKNOW

FACULTY OF LAW

PROJECT- ON

Meaning and concept of business environment

SUBMITTED TO
Dr. VIJETA DUA TONDAN

FACULTY OF LAW
D.S.M.N.R.U

SUBMITTED BY
PREETI SINGH
B.COM L.L.B (HONS)
IX SEMESTER

1|Page
 INDEX

1) INTRODUCTION
2) MEANING OF BUSINESS ENVIRONMENT

3) NATURE OF BUSINESS

4) CHARACTERISTICS OF BUSINESS ENVIRONMENT

5) IMPORTANCE OF BUSINESS ENVIRONMENT

6) OBJECTIVES OF BUSINESS ENVIRONMENT

7) TYPES OF ENVIRONMENT

8) ENVIRONMENT AND BUSINESS RELATION

9) ENVIRONMENTAL STUDY

10) GOVERNMENT POLICY CHANGES AND ON BUSINESS AND

INDUSTRY

11) CONCLUSION

2|Page
 INTRODUCTION

The formula for business success requires two elements – the individual and the environment.
Remove either value and success becomes impossible. Business environment consist of all those
factors that have a bearing on the business. The term’ business environment implies those
external forces, factors and institutions that are beyond the control of individual business
organizations and their management and affect the business enterprises. It implies all external
forces within which a business enterprise operates. Business environment influence the
functioning of the business system. Thus, business environment may be defined as all those
conditions and forces which are external to the business and are beyond the individual business
unit, but it operates within it. These force are customer, creditors, competitions, government
socio-cultural organizations, political parties national and international organizations etc. some
of those forces affect the business directly which some others have indirect effect on the
business.

MEANING OF BUSINESS ENVIRONMENT –

Environment of a business means the external forces influencing the business decisions. They
can be forces of economic, social, political and technological factors. These factors are outside
the control of the business. The business can do little to change them.

NATURE OF BUSSINESS

3|Page
Business may be understood as the organized efforts of enterprise to supply consumers with
goods and services for a profit. Businesses vary in size, as measured by the number of employees
or by sales volume. But, all businesses share the same purpose: to earn profits. 1

The purpose of business goes beyond earning profit. There are:

 It is an important institution in society.
 Be it for the supply of goods and services
 Creation of job opportunities
 Offer of better quality of life
 Contributing to the economic growth of the country.
Hence, it is understood that the role of business is crucial. Society cannot do without
business. It needs no emphasis that business needs society as much.

Thus, the main characteristics of business are:

 It is an occupation where a person is engaged in manufacturing or buying and selling of
goods and services. The goods may be consumer goods or capital goods. Similarly the
services may be in the form of transportation, banking, insurance2 etc.
 The activities must be carried on regularly. A single transaction is usually not treated as a
business.The sole objective of business is to earn profit. It is essential for the survival of
business. Of course, it is through provision of some goods or some services.
 Every business requires some investment in cash or kind or both. It is usually provided
by the owner or is borrowed by him at his own risK

1
https://www.mbaknol.com/international-business/concept-of-business-environment

2
download.nos.org/srsec319new/319EL1.pdf

4|Page
  Today’s business is characterized by diversification, which may be:
 Concentric Diversification - It refers to the process of adding new, but relates products
or services. 3
 Horizontal Diversification - Adding new, unrelated products or services for present
customers is called horizontal Diversification.
 Conglomerate Diversification - It refers to adding new and unrelated products or
services.
 Going international is yet another trend followed by modern business houses. Business
houses are exposed to global competition, which argues well for consumers. Also
occupying a major role is science in the global economic scenario4

Importance Of Business Environment

 It is concerned with activities of people working towards a common economic goal.
Modern society cannot exist without business. The importance of business can be
described as follows:5
 Firm to identify opportunities and getting the first mover advantage: Early identification
of opportunities helps an enterprise to be the first to exploit them instead of losing them

3
https://www.mbaknol.com/international-business/concept-of-business-environment/

4
https://www.slideshare.net/.../business-environment-featuresmeaningimportanceobjecti...

5
https://www.slideshare.net/MRshakin/basic-concept-of-business-43000955

5|Page
 to competitors. For example, Maruti Udyog became the leader in the small car market
6
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 foreign
multinational is entering the Indian market it should give 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. For this Indian firms
should always be alert.
 It promotes social interest by providing tourist services, sponsoring cultural programmes,
trade shows etc. in the country, which enable people of different parts of the country to
exchange their culture, traditions and practices. Thus, it promotes national integration.
 It also facilitates exchange of culture among the people of different nations and thus,
maintains international harmony and peace.7

 Coping with rapid changes: All sizes and all types of enterprises are facing increasingly
dynamic environment. In order to effectively cope with these significant changes,
managers must understand and examine the environment and develop suitable courses of
action. There are constant changes in technology; machinery fashion etc. managers
should be on toes.
 Improving performance: The enterprises that continuously monitor their environment and
adopt suitable business practices are the ones which not only improve their present
performance but also continue to succeed in the market for a longer period.

6
rccmindore.com/wp-content/uploads/2015/06/Business-Environment-1-DYC.pdf

7
www.businessdictionary.com/definition/business-concept.html

6|Page
Objectives of business
 Economic objectives
 Social objectives
 Human objectives
Economic objectives of a business refer to the objective of earning profit and those which have
a direct impact on the profit-earning objective of business. Some of the main economic
objectives of business are:
 earning of adequate profits;8
 exploring new markets and creation of more customers of available resources in the best
possible manner.9

Social objectives of business are those, which are desired to be achieved for the benefit of the
society. Some of the major social objectives are:
 production and supply of quality goods and services to the society;
 making goods available at reasonable prices;
 avoidance of unfair practices like hoarding, black-marketing, over-charging, etc.;
 contributing towards the general welfare and upliftment of the society;
 ensuring fair return to the investors;
 taking steps in the direction of consumer education; and
 conserving natural resources and wild life and protecting the environment.

8
www.pondiuni.edu.in/storage/dde/downloads/h1040.pdf
9
download.nos.org/srsec319new/319EL3.pdf

7|Page
Human objectives of business primarily refer to the objectives aimed at safeguarding the
interest of its employees and their welfare. Some of the major human objectives are:
 providing fair remuneration and incentives to the employees;
 arrangement of better working conditions and proper work environment for the
employees;
 providing job satisfaction by making the jobs interesting and challenging, putting the
right persons in right job;
 providing the employees with more and more promotional opportunities;
 organising training and development programmes for the growth of the employees; and10

TYPES OF ENVIRONMENT

Environment includes such factors as socio-economic, technological, supplier, competitor and

the government. There are two more factors, which exercise considerable influence on business.
They are physical or natural environment and global environment.

Technological Environment
 Technology is understood as the systematic application of scientific or other organized
knowledge to practical tasks. Technology changes fast and to keep pace with it,
businessmen should be ever alert to adopt changed technology in their businesses.

Economic Environment

10
mu.edu.sa/sites/default/files/content.../1422808745.3397What%20is%20business.pdf

8|Page
  There is close relationship between business and its economic environment. Business
obtains all its needed inputs from the economic environment and it absorbs the output of
business units.

Political Environment 11
 It refers to the influence exerted by the three political institutions viz., legislature
executive and the judiciary in shaping, directing, developing and controlling business
activities. A stable and dynamic political environment is indispensable for business
growth.

Natural Environment
 Business, an economic pursuit of man, continues to be dictated by nature. To what extend
business depends on nature and what is the relationship between the two constitutes an
interesting study.

Social and culture Environment

 It refers to people’s attitude to work and wealth; role of family, marriage, religion and
education; ethical issues and social responsiveness of business. 12

11
https://www.researchgate.net/publication/235938453_Business_Communication
1.
12
www.yourarticlelibrary.com/business/business-environment...significances...business-e...

9|Page
 ENVIRONMENT BUSINESS RELATIONS

 Business is the product of the technological, political-legal, economic, social – cultural,

global and natural factors amidst which it functions. Three features are common to this
web of relationship between business and its environment.
 There is symbolic relationship between business and its environment and among the
environmental factors. In other words, business is influenced by its environment and in
turn, to certain degree, it will influence the external forces. Similarly, political-legal
environment influences economic environment and vice versa. The same relationship
between other environment factors too.

 These environmental forces are dynamic. They keep on changing as years roll by, so does
business.

 The third feature is that a particular business firm, by itself, may not be in a position to
change its environment. But along with other firms, business will be in a position to
mould the environment in its favor.

IMPORTANCE OF ENVIRONMENTAL STUDY

 The benefits of environmental study are as follows;
 Development of broad strategies and long-term policies of the firm.
 Development of action plans to deal with technological advancements.
 To foresee the impact of socio-economic changes at the national and international levels
on the firm’s stability.
 Analysis of competitor’s strategies and formulation of effective countermeasures.
10 | P a g e
  To keep oneself dynamic.

GOVERNMENT POLICY CHANGES ON BUSINESS AND INDUSTRY

 Increasing 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 telecommunication, 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 services.
 Rapidly changing technological environment – Increased competition forces the firms
to develop new ways to survive and grow in the market. New technologies make it
possible to improve machines, process, products and services. The rapidly changing
technological environment creates tough challenges before smaller firms
 Necessity 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 enterprise have to continuously modify their operations.
 Threat from MNC – Massive entry of multi nationals in Indian marker constitutes new
challenges. The Indian subsidiaries of multi-nationals gained strategic advantage. Many
of these companies could get limited support in technology from their foreign partners

11 | P a g e
 due to restrictions in ownerships. Once these restrictions have been limited to reasonable
levels, there is increased technology transfer from the foreign partners.

CONCLUSION
Modern business environment is more competitive than ever before. Companies strive to be the
global leader in their industry. Successful companies have the capacity to adapt orchange
workflows, products, and services. Producing innovative goods and service packages helps
companies stay ahead of the competition. Creative ideas and methods provoke innovation.
Design drives competition and is the bond between creativity and innovation. Individuals can
start and grow new companies with an innovative idea or creative product. Stable and
prosperouscompanies can thrive and flourish by creatively expanding an existing product line or
service bundle. Organizations that continuously seek new and more efficient ways to design
workflows

12 | P a g e