Wednesday, May 18, 2011

How business environment influences business management? Explain with suitable examples.

How business environment influences business management? Explain with suitable examples.

Ans: The term business environment refers to the aggregate of all forces, factors and institutions which are external to and beyond the control of individual business enterprises and their managements, but which influences their functioning. Business environment is the macro framework within which the business firm-a micro unit carries out its activities. The business environment furnishes the macro economic context in which the firm operates.
The analysis of business environment assumes that business environment remains external to the firm. The internal dynamics of the firm is meant to adjust itself to the external environment. The business firm must show adaptability to as well as adoptability to the environment.
Managers must have both capability to deal with the environment. The manager has to stay in tune with the environment if he/she is to be successful manager, by running the business environment, he will not be able to survive as a manager, because his firm’s business will be in jeopardy.
The environment imposes several constraints on the enterprises and has considerable impact and influence on the scope and direction of its activities. The basic job of the manager of an enterprise is therefore, to identify itself with environment in which it operates, and to formulate its policies in accordance with the forces which operate in its environment.
The environment of a large developing country like India has huge human natural resources and a planned and mixed economy. It seeks to attain socialistic pattern as a welfare state within a democratic political system. It demands a specific type of role to be played by the managers of the business and integrate with global economy, the business organization being part and parcel of the economy, have to play a vital role in the ongoing processes of such as liberalization and globalization.


1.Economic problems and prospects: The economic problems like inflation, unemployment, recession, have to be analyzed with the objective of making the national economic management efficient.

2.Economic policy and legal aspects: Indian government has formulated fiscal cum budgetary policies, industrial policy and general policy statements on foreign trade, investment and technology transfer, collaboration , export and import and foreign exchange regulations.

3.The functioning of the economic: With the help of money flows the consumption, investment , saving income, employment and output , all these affect the price level and influences the real value of all macro variables. E.g. black economy results in tax evasion causing a huge loss to government . This results in the more taxes levied by the govt. and corporate sector is also a participant in the suffers.

4. India ‘ A mixed economy’: India is mixed economy. In India public sector and pvt. Sector co exist. There are joint ventures, cooperative workers sectors and also tiny sectors. The mixed economic system operates through the combination of planning and pricing.

5. Composition of Indian economic: Indian economic is composed of household, corporate business sector, govt. administration , capital market and foreign sector. Strength of all these sectors influence the economic environment.

6. The nature and level of economy: Availability of resources, human or material, the precipitate income, the occupational structure, the output structure , the foreign trade, investment , income distribution, rural an Durban population distribution all these affect the decisions of the corporate business sector.

7. Economic planning: India follows economic planning path of development in the form of five year plans. The resources are estimated and targets are set according to the needs and funds are allocated.

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