Different Environments of Business

Dimensions of business environment mean all the factors, forces and institutions which have direct or indirect influence over business transactions. General Environment is the most important dimension of the business environment as a businessman cannot influence or change the components of the general environment rather he has to change his plans and policies according to the changes taking place in the general environment.

Economical Environment

Economic Environment consists of Gross Domestic Product, Income level at the national level and per capita level, Profit earning rate, Productivity and Employment rate, Industrial, the monetary and fiscal policy of the government etc.

The economic environment factors have an immediate and direct impact on the businessman so businessmen must scan the economic environment and take timely actions to deal with these environments. The economic environment may put constraints and may offer opportunities to the businessman. After the new economic policy of 1991, lots of opportunities are offered to businessmen. Some aspects of the economic environment are:

1. Role of Private and Public sector
2. Rate of growth of GDP, GNP, and Per Capita Income
3. Rate of Saving and Investment
4. Balance of Trade
5. Balance of Payment
6. Transport and Communication System
7. Money Supply in the Economy

Social Environment

Social Environment consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preferences and education level of the people living in the society where the business exists. The businessman cannot overlook the components of the social environment as these components may not have an immediate impact on the business but in the long run, the social environment has a great impact on the business.

For example, when the Pepsi Cola Company used the slogan “Come Alive” in their advertisement then the people of a particular region misinterpreted the word “Come Alive” as they assumed it means Coming out of Graves. So, they condemned the use of the product and there was no demand for Pepsi-Cola in that region. So, the company had to change its advertisement slogan as it cannot survive in the market by ignoring the sentiments of the people. Some Aspects of Social Environment:

1. Quality of life
2. The attitude of customers towards innovation, lifestyle etc.
3. Education and literacy rates
4. Consumption habits
5. Population
6. Traditions, customs and habits of people

Political Environment

The political environment constitutes all the factors related to government affairs such as the type of government in power, the attitude of the government towards different groups of societies, policy changes implemented by different governments etc. The political environment has an immediate and great impact on business transactions so businessmen must scan this environment very carefully.

The businessman has to make changes in his organisation according to the changing factor of the political environment. For example, in 1977 when Janata Government came into power they made the policy of sending back all foreign companies. As a result, the Coca-Cola Company had to close its business and leave the country. Some Aspects of the Political Environment:

1. Present political system
2. Constitution of the country
3. Government intervention in business
4. The foreign policy of the government

Legal Environment

The legal environment constitutes the laws and various legislations passed in the parliament. The businessman cannot overlook the legislation because he has to perform his business transactions within the framework of the legal environment.

The common legislation passed which has affected business transactions are Trade Mark Act, Essential Commodity Act, Weights and Measures Act, etc. Most of the time legal environments put constraints on the businessman but sometimes they provide opportunities also. Some Aspects of the Legal Environment:

1. Various laws and legislative acts.
2. Legal policies related to licensing.
3. Legal policies related to foreign trade.

Technological Environment

Technological environment refers to changes taking place in the method of production, the use of new equipment and machinery to improve, and the quality of products. The businessman must closely monitor the technological changes taking place in his industry because he will have to implement these changes to remain in the competitive market. Technological changes always bring quality improvement and more benefits for customers. Some Aspects of the Technological Environment:

1. Various Innovations and Inventions.
2. Scientific Improvements.
3. Developments in the IT sector.