what are the factors affecting business environment

For example, in order to reinvent its luxury brand status, the company launched the Prorsum designer collection. Socio-cultural factors include anything within the context of society that has the potential to affect an organization. The forces which constitute the business environment are its suppliers, competitors, media, government, customers, economic conditions, investors and multiple other institutions working externally. This is because this target market accounts for 30% of sales in its London stores (Burberry, 2012). The internal factors that affect a business are such factors as employees, competitors, customers, suppliers and the culture of the organization. In India, cotton textile industries are located in Mumbai and Coimbatore regions due to favorable climate. These are factors which business can control. Though pollution control laws were there in the statute book, they were not enforced with any seriousness. Business Environment is the most important aspect of any business. The trends on most business performances dropped during this period and Burberry experienced a low just like any other business. Even banks are asked to ignore them while extending credit. This is made possible as portrayed by the graph below because of laws and regulations in its foreign destinations of operations, which allow it to charge licensing fee. Entrepreneur and innovation is an important factor among several factors which effects the business environment of any country. Economic environment consists of three important factors namely, economic systems, economic policies and economic conditions. The size of the industrial unit should be in accordance with the provisions and stipulations of the Policy. They should give due weightage to the long-term welfare of the consumers as well as the society. The remaining is in the Polar Regions, ice burgs and glaciers. For example, peoples’ demand determine the kind of products to be offered for sale; this demand is consequently affected by peoples’ attitudes, customs, cultural values, fashion and other related forces. When the size of the market is large, large sale production shall also be there. All these factors directly limit the scope of performance of the business firms. Politics always has a way of affecting the environment of any business and it can sometimes have disastrous effects on a business e.g. The scope of private sector depends mainly on the economic system of a country. Particularly for the last ten years, technology has worked wonders. Business Environment is not concerned with a single factor. Besides, it also acts as a competitor and as a customer. Most important factors of micro environment of business are as follows: 1. competitors, 2. customers, 3. suppliers, 4. public, 5. marketing intermediaries, 6. workers and their union! These include economic, social, legal, technological and political factors. Kotler and Armstrong (2004) explain that different restrictions are imposed on all organizations by the environment. It took more than a century of applied research and engineering in photography to develop the basic discovery into a saleable product. Political and legal intervention in the field of marketing and business activities has now become a common factor. This is particularly important for the reason that developments/changes in the remote environment influence the business organizations. Burberry is extending its web reach so that its customers worldwide can view its brands. Even in South India, people in different states may not have similar tastes, likes etc. A variety of labels are used to distinguish the company garments from imitations. The impact of this environment is much more direct and deliberate than other factors. A decade ago, we were all under an impression that natural resources like air and water are not exhaustible and their supply is unlimited. In this environment, Government interacts with business at three levels — local, state and center and exerts varying amounts of influence over business. Changes in demand are also one great factor that determines success and business performance. Of the various environments stated above, the social and cultural environment has the greatest impact on the policies and performance of all business firms. Some of these are under control of the business while some are not. Sociological factors establish the culture of work, labor mobility, work groups etc, hence, business operation of an enterprise. “Economic development depends upon technical progress and innovations. Thus, environment is multi-dimensional and very complex in nature. The entrepreneurhas foresightedness and self confidence, which he utilizes for production activities. But, in today’s world no country is isolated. Performance trends in Burberry are expected to at least have a flow of returns that conforms to this trend. Also, due to Japanese and American craving for prestigious designer goods, Burberry export business increased dramatically (Burberry 2012). But modern economists are of the view that developed countries are no longer worthwhile propositions for investments because developed economies have almost reached more or less a saturation level in certain spheres of their industrial activities. Therefore, the industrial units cared very little about the pollution prevention norms prescribed, and polluted water and air recklessly. Various internal and external factors affect the economic environment that a business operates in. Legal aspects not explained properly, Your email address will not be published. India has a mixed economy with clear-cut Industrial Policy. Adjusting with the social and cultural development, of course, will enable the firm to reap a rich harvest. increasing environment awareness has made this external environment factor a significant issue to be considered by business firms. Any successful organization pictures out the external factors that affect the business, anticipates the prospective market situations and work to minimize the costs while maximizing the profits. Ecological environment can be defined as the complex aggregate of all external conditions, which affect the life, development and survival of all organisms. Therefore, any technological advancement affects highly the business in a country. The company should identify with the environment in which it operates and formulate its policies in accordance with the forces which operate in its environment (Mühlbacher, Dahringer & Leihs 2006). The deficits elicited foreign borrowing to cushion effects by enhancing exports. Hence those industries, which could cater to the needs of the people, could develop. There are numerous criteria considered as external elements. Prof. Kahn and Wiener have called the new development in technology as “Innovation”, “Revolution” or “Break Through”. The lower the demand as portrayed in line two the lower the level of returns attained. These factors affect the threats & challenges of business. In developing countries, there is a shortage of efficient and co… Physical factors mean and include geographical factors like weather, climatic conditions etc. Factors Affecting Business Environment (5 Dimensions): The business environment accordingly consists of five dimensions or components namely, economic, social, technological, political and legal factors, discussed in the following sub-sections: 1. Examples of Environmental Factors Affecting Business. C. FINANCIAL FACTORS : Financial factors like financial policies, financial position and capital structure also affects a business performance and its strategies. It also includes the exact rulings and courts decision. The doctrine of “Laizze-faire” has become an outdated or discarded principle and the Government all over the world regulate the business activities. Environmental policy impacts businesses because the law … Import and export activities are regulated and restricted by periodical Import and Export Policies announced by the Central Government. Such encouragements are denied to non-priority sectors. They include competitors, customers, distribution channels, suppliers, and the public. Burberry was able to establish its first foreign outlets in Paris, United States and South America, and export its first shipment of raincoat to Japan because of the government’s globalization policy. These factors provide opportunities, threats and challenges to the firm. Exchange rates 3. Geographical conditions exert influence on the decisions as to the type of industries and business to be carried on in a region. It is the main institution that translates discoveries into application for public use. Physical factors mean and include geographical factors like weather, climatic conditions etc. This trend portrayed by the graph shows how the economic situation may affect the economy and general spending and therefore the performance of any business within such an economy. ever-changing society. Technological factors affects business concerning technological investment, technological application and the effect of technology on markets. Political factors are the variables that directly affect business operations. These factors have a notable influence on business prospects. For example, the company is targeting the Chinese shoppers directly by launching a site in China. According to him, industrial growth depends upon technological innovations and the ability to translate technology into profits. Certain industries are exclusively reserved for the public sector, and private enterprises are not allowed to operate in those lines of business. These factors include cost structure, customs and conventions, cultural heritage, peoples’ view towards wealth and income and scientific methods, seniority respect, mobility of labor (Shaikh 2010). The company employs trade-marking and advertising to market its products. The spin off led to a high demand of financial assets and this lowered interest rates whilst raising prices of the respective assets. The country’s social environment affects the functioning of the business since it determines the value system of the society. As the principle guiding force, macro environment agents play a pivotal role in determining the decisions of an organization. The public policy environment is also an uncontrollable factor that affects the marketing environment. Muhlbacher, H, Dahringer, L & Leihs, H. 2006, "International marketing: a global perspective", London: Thomson Learning. New demands are created and old one lost in due course. Basically, the very environment of the economy can have an effect on two essential aspects – your company’s levels of production and the decision-making process of your customers.Some examples of economic factors affecting business: 1. This diversity is apparent even in small areas where the people are speaking the same language. ALL RIGHTS RESERVED. Some of these forces affect the business directly but others affect business indirectly. The impact of the menace came into lime light only in 1984 when the Bhopal episode took 2,000 lives. Joseph Schumpter was the first economist who recognized the place of technology in the sphere of economic development. Cultural environment is an aggregate of all sub-cultures each with distinct concepts, beliefs and faith. P.J. Globalization as government policy too has influence on the business. Environmental Policies. In fact, a number of companies in our country are now spending money for society’s welfare. Business environment determines the success or failure of this policy. These factors need to understand by every business for its success. Relevant Article: Social Factors Affecting Business Economic factors are connected with goods, services, and money. Technical environment. Administered prices are also there. Business environment is therefore, the total of all external forces, which affect the organization and the business operations (Kotler &Armstrong 2004). The Government passed the Environment (Protection) Act in 1986, which gives wide powers to the Government to take punitive action against erring industrialists. Political environment. Interest rates 2. Because even a slight change in political circumstances can make the business environment vulnerable. This deficit peaked alongside the housing bubble whose onset began in 2006. Any successful organization pictures out the external factors that affect the business, anticipates the prospective market situations and work to minimize the costs while maximizing the profits. COPYRIGHT © 2013-2020 PAYPERVIDS. These three elements of the economic environment should be analyzed individually as well as collectively as a whole. When economic activity is strong, unemployment rates are low, and income levels rise. Businesses can’t control external factors but must respond to them. The business environment can include factors such as: clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social and economic trends” So, let’sget started! Within the mixed economic system itself there are wide variations. In all economic situations low rates of interest encourage borrowing and the Federal government in a bid to improve this lowered the Federal fund rate from 6.5% to 1%. The economic policy of the Government has a very decisive impact on the business units. Business is affected by different factors which collectively form the business environment. The Government exercises tight control over the extraction and exploitation of certain natural resources, which are essential for industrial performance. Various legislative measures are also being taken to protect the ecological environment. The degree of control or direction of the Government may differ from country to country but its impact cannot be ruled out elsewhere. In India, almost all the coal mines are nationalized and barring a few production of steel is also under state monopoly. If this is the case of water, it is needless to highlight the importance of other scarce resources. Generally, goods, which are largely preferred by people in one region, may not be liked in another region. Environment Analysis-Political environment. The technological development can contribute to the economic development. The geographical situation, the physical feature, the climate, rainfall, humidity, the vegetation etc. Similarly, the various trade barriers (including tariffs) created by different countries affect the domestic firms and their export efforts. The Government also acts as a supplier as well as a financier through its financial institutions, supplies natural resources needed by the firms etc. In India also, its importance is now well recognized by the Government. Bearing this point in mind most big companies now-a-days show less profit than that they should have normally earned, just to create a public image. Burberry Limited is a manufacturer of apparel, accessories and fragrances for all ages and gender. 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Burberry limited is a manufacturer of apparel, accessories and fragrances for all ages and gender the of! Flow of returns attained that such resources are also increasingly realizing its.. Through this the company will be able to implement business policies in respects! Country but its impact can not be similar to that of in North India see the premises of country. Pearson, 2010, `` business environment business activities has now become a common.. And custom duties, etc also affect a business quality of our natural environment factors business. As a customer norms and values, and environmental factors Affecting Myanmar 1153 Words | 5 Pages political! The favorable geographical and climatic conditions etc free trade Economy or capitalist Economy, Centrally Planned Economy Communist! Monitor air pollution and make suitable recommendations to control it some other factors is only indirect sector. A century of applied research and engineering in photography to develop the basic into... 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