subject: Understanding Business Environemnt [print this page] Business Environment is the sum total of all the factors that affect the business but are beyond the control of the business. As one writer has put it Just take the universe, subtract from it the subset that represents the organization, and the remainder is environment.
It is important for a buyer to understand the general environment of the business he wants to buy. This article will help you to know certain such factors affecting a business.
There are various aspects to business environment. It can be categorized into five types namely;
I.Economic environment
External economic factors affecting the general environment of a business, like policies of bank, interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee etc. A rise in the disposable income of people due to increase in the gross domestic product of a country creates increasing demand for products.
II.Social environment
Society plays a key role in the functioning of a business. General customs, traditions, values, social trends, societys expectations from business affect the business operations and management. Some social trend may hamper the productivity of a particular business, simultaneously increasing the sales for another.
III.Political environment
General stability and peace in the country and specific attitudes that elected government representatives hold towards business etc constitute the political environment of business. Political unrest or stability affects the business greatly. It may have both positive as well as negative impact over the business organization.
IV.Legal environment
Law is meant to be followed and that it must be. In order to avoid any government interventions to hamper the normal routine process of a business, an organization must abide by the law that governs the business and its various activities.
V.Technological environment
Scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business directly or indirectly affect a business organization. The most significant change in the technological environment of business has been the use of computers and especially internet/world wide web, which has changed the definition of business activities and management.
Before buying a business, the buyer must ensure that he has a complete knowledge about all such factors that affect the business for sale and how he would be able to cope up in case of emergency.
It is imperative for growth to serve the society and that can be done only when you have the knowledge about the customs and practices in the society affecting your business. Similarly, the law must be followed at every step so as to avoid any legal suites. Thus, business environment, although cannot be controlled, but, ways can be found out to cope up with tricky and difficult situations.
Hiring a business broker is a good step forward to know about the dimensions of business environment and its affect over it. You can also take guidance from the seller or the staff.
Vigilance awareness pays off well in the business world!! It helps to identify the uncertainties, cope up with rapid changes in government policy, improving the performance of the business by understanding the dynamics of the business world.
