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Business Environment

Business environment is becoming highly complex, unstable and unpredictable in the globalised economy of today. The environment is the result of changing social and economic and political forces which creates challenges, opens up new opportunities and affects the strength and weaknesses of various business segment. Business contributes to economic growth, creates employment opportunities and provide all kinds of goods and services which we need for our consumption. Business operates in a risky atmosphere because of the profit motivation. It is an important institution in society.

Be it for the supply of goods and services; creation of job opportunities; offer of better quality of life; or contributing to the economic growth of the country; the role of business is crucial. The economic policies, political conditions, natural & human unsources and influence the business activity. In this chapter we will explain how environment influences business and for that chapter focus on the following points:

• Meaning of Business.

 • Business objectives.

• Meaning of Business Environment.

• Nature of Business Environment.

• Components of Business Environment.

• Determinants of Business Environment.

Meaning of Business In general business refer to all activities that are being organized and carried on with an important purpose, viz; earn profit by supplying goods and services

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to consumers to satisfy their felt needs. For our purpose this concept of business is too general and thus cannot be of great help in analyzing the role of environment in present day business activity. We shall, therefore, define business in modern concept. Modern business covers a complex field of industry and commerce which involve activities related to both production and distribution.

These activities on the one hand satisfy society’s needs and desires and on the other hand brings profit to business firms. Business include activities connected with production, trade, transport, finance, banking, insurance, advertising, and certain other activities related to industry and commerce. For example a ball pen necessitates a long chain of activities involved in bringing raw materials to the factory and the end product from there to the market constitute a business.

Thus, we can say that *business firm or unit is an economic unit which is engaged in the production or distribution or both the production and distribution of goods and services for the purpose of earning profits. * A business firm is an economic unit which is engaged in the production or distribution or both the production and distribution or both the production and distribution of goods and services for the purpose of earning profits.

Every business small or big in size have some objectives which it tires to fulfill while in operation. The business unit seeks to achieve more than one objective which may vary with the passage of time.

1. Maximum Profit :Making profit is the primary goal of any business enterprise. All the efforts of a firm are directed towards the achievement of this object. A firm can earn maximum profits at the point where Marginal Cost (MC) and Marginal Revenue (MR) are equal. Marginal cost means the cost incurred on the production of an additional unit of a commodity. Marginal Revenue is the revenue received from the sale of such additional unit.

2. Maximise total sales revenue : Second most important object of a firm is to obtain maximum sales revenue. The attainment of this object does not mean to have the maximum sale in terms of physical quantity but it means to obtain the maximum amount of revenue at the point when its marginal revenue is zero. No firm will take to increase its sales beyond this point, because beyond this point, the firm will be suffering a loss.

3. Minimum Cost : Another important object of a business firm is to minimize the cost of production of producing goods and services to that these goods and services may be provided to the consumers at minimum possible price. To attain this object, the business firm makes continuous use of various techniques of cost central.

4. Establish long-run survival: Long-run survival is a prime object of all the business firms. For this purpose, every firm makes best efforts to provide best quality of goods and services to its consumers at reasonable prices. Some business firms change their marketing strategies and marketing approach from time to time so that they may maintain the demand of their products in the market.

5. Achieve Financial Soundness: No business firm can continue for long time if it is not financially sound. Banks and financial institutions stress upon financial soundness of the firms to grant them any sort of financial assistance. Therefore, every business firm takes due care and precaution in the use of funds of the firm.

6. Achieve Economics self-sufficiency: A business firm cannot be successful in achieving its objects if it depends only upon external sources for the programme of expansion and diversification. A firm should be self-dependent in economic affairs. If complete self-dependence is not possible, dependence on external financial sources should be minimum, for this purpose, all the business firms try to re-invest major part of their profits in their business.

7/ Maximum welfare and employees satisfaction – Some business firms aims at providing maximum facilities to their employees so that they may get maximum job satisfaction and thief efficiency and ability may be increased. Such firms spend huge amount on the welfare of their employees. The facilities of proper working conditions, canteen, education, training, incentive wage system, bonus etc. , are provided to the employees.

This is an important object and very helpful in the achievement of pre-determined objectives of the firm because if the employees of a firm are satisfied they will contribute their best efforts to achieve the objectives of the firm. 8. Dominate the whole market: Some business firms have an object of dominating the whole market. Such firms provide goods and services to consumers at the lowest possible price. They provide best after-sale-services to the consumers. Such firms also aim at selling product to the maximum number of customers so that they can capture the market and establish their business empire.

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