DYNAMICS OF BUSINESS ENVIRONMENT

Business environment
Business environment refers to those aspects of the surroundings of business enterprise which have INFLUENCE on the functioning of business. An organization can survive and grow only when it quickly and continuously adapts to changing environment.

Definition of business environment

Business environment is the total of all things external to business firms and industries which affect their organization and operations. According to WHEELER

Dynamics of Business Environment

FACTORS PRODUCING CHANGES IN BUSINESS ENVIRONMENT

Changes

in Government Policies Variations in Growth Performance Corrective Policy Actions Changes in Market Structure and Competition

FACTORS PRODUCING CHANGES IN BUSINESS ENVIRONMENT

(contd..)
Future

Expectations and Business Speculation Changes in Consumer Attitudes, Tastes, and Preferences Imports and Foreign Investment Changes Non-Economic Factors

Changes in Government Policies

Government affects business environment in various roles such as: Regulators Promoters Entrepreneur Planner Consumer

Variations in Growth Performance

Variations in growth rate from year to year bring about corresponding change in the business environment and business firms adjust to the changing scenario..

Corrective Policy Actions

Corrective actions are taken when actual performance deviates from intended or planned performance.

Changes in Market Structure and Competition

The market structure basically depends upon such factors as the no. of buyers and sellers in the market, freedom of entry and exit, independence between firms, mobility of the factors of production and availability of market information to the various participants.

Future Expectations and Business Speculation

Both individuals and business firms on the basis of past trends and current scenario anticipate future changes in a variables such as rate of interest, rate of inflation, exchange rate, taxes, government borrowings, advertisement expenditure etc.

Changes in Consumer Attitudes, Tastes, and Preferences

The main factors that bring about changes are Education, Geographical mobility, Fashion trends and compulsions of Seasonal factors. Consumers perceptions, attitudes and lifestyle are influenced by Advertising and result in changing tastes and preferences.

Imports and Foreign Investment Changes

Exposure of foreign products and foreign business firms can cause a sea change in the nature of business environment. Differences in the prices of imported and domestically produced goods pose challenge to the domestic firms to become lean and efficient so that they can stay in Competition.

Non-Economic Factors

There is a wide variety of non-economic factors which can destabilise the business environment. Such as social and cultural factors, political changes, natural climates.

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