SESSION-1Concept & Nature of Business Environment

A. Internal Environment

B. External Environment• Micro environment

• Macro environment

Business Environment

• Refers to all those factors that have a direct or indirect bearing on the functioning of business.

Business environment in broad sense includes-

A. Internal Environment

B. External Environment

A. INTERNAL ENVIRONMENT

Consists of factors which are internal to the firm & hence are controllable factors such as-

• Value system• Goals & objectives• Management structure & internal power relationship• Resources & technology

B. EXTERNAL ENVIRONMENT

Consists of those factors which are external to the firm & hence are uncontrollable factors. External environment of business can be classified into

a. Micro environment

b. Macro environment

a. Micro environment- Consists of those players whose decisions & actions have a direct bearing on the company, such as,

• Suppliers of inputs• Workers & their unions• Customers• Marketing intermediaries • Competitors

b. Macro environment refers to those uncontrollable economic & non-economic factors which exercise their influence on business activity in general & thus determine opportunities & threats that the company may have in business. It includes -

• Macro non-economic environment consisting of non-economic factors like

Legal system, political system, social system & the natural environment.

• Macro economic environment consisting of

National Economic Environment

• country’s economic system

• Economic policies of the govt.

•Regulations of the financial authority

• Phase in the business cycle, the country is passing

Global Economic Environment

• WTO’s policies & Agreements

• Other international treaties/protocols

•Regional economic groupings

•Protectionism policy of the developed countries etc.