Dimensions of Business Environment

Dimensions of or the agents forming the business environment involve economic, social, legal, technological and political circumstances which are contemplated properly for decision-making and enhancing the achievement of the trading concern. In distinction to the precise environment, these aspects manifest the prevailing environment which often affects many companies at the same time. However, the administration of every business can profit from being informed of these dimensions rather than being unbiased in them. A concise argument of the multiple factors comprising the global environment of the company is provided below:

  • Economic Environment: Inflation rates, interest rates, stock market indices and the value of rupee, changes in disposable income of people are some of the economic aspects that can influence management systems in a business. Short and long term interest rates primarily influence the demand for goods and services.
  • Technological Environment: Technological environment involves forces associated with scientific developments and modifications which render new ways of manufacturing commodities and services and new ways and procedures of performing business. For instance, modern technological, progress in electronics and computers have changed the policies in which businesses promote their products.
  • Social Environment: The social environment of industry involve social forces like traditions and social trends, customs, values, society’s expectations from the company, etc., Traditions describe social practices that have persisted for decades or even centenaries.
  • Legal Environment: It involves multiple legislation legislated by the Government official regulations published by government officials, court judgments as well as the judgments given by various commissions and offices at every degree of the government – local, state or centre. It is necessary for the management of every company to accept the law of the land.
  • Political Environment: Political environment involves political situations such as global stability and harmony in the nation and particular approaches that selected government legislators to support towards business. The importance of political situations in business success rests in the predictability of business pursuits under constant political situations. On the other hand, there may be the risk of business ventures due to political uncertainty and perils to law and order. Political stability, therefore, builds up trust among business people to finance in the long term projects for the development of the economy.

Related Read: What Is Business Environment?

Q.1 “MANAGEMENT OF EVERY ENTERPRISE CAN BE BENEFITED FROM BEING AWARE OF DIFFERENT DIMENSIONS OF BUSINESS ENVIRONMENT.” EXPLAIN ANY FOUR SUCH DIMENSIONS.

(OR)

MENTION THE VARIOUS DIMENSIONS OF BUSINESS ENVIRONMENT. (NCERT)

ANSWER:

DIMENSIONS OF BUSINESS ENVIRONMENT

(A) LEGAL ENVIRONMENT
    • It includes various laws passed by the government, administrative orders issued by government authorities, court judgments as well as decisions rendered by the central, state or local governments.
    • Understanding of legal knowledge is a pre-requisite for the smooth functioning of business and industry.
    • Understanding the legal environment by business houses help them not to fall in a legal tangle.
    • The legal environment includes various laws like Companies Act 2013, Consumer Protection Act 1986, Policies relating to licensing & approvals, Policies related to foreign trade etc.

Example:

Labour laws followed by companies help them to keep away from penalties.

(B) POLITICAL ENVIRONMENT
    • It means that the actions were taken by the government which potentially affect the routine activities of any business or company on a domestic or at the global level.
    • The success of business and industry depends upon the Government’s attitude towards the business and industry, Stability of Government, Peace in the country.

Example:

Political stability and central government’s attitudes towards business, industry and employment, has attracted many national and international business entrepreneurs to invest in India.

(C) ECONOMIC ENVIRONMENT
    • The economic environment consists of an economic system, economic policies and economic conditions prevailing in a country.
    • Interest Rates, Taxes, Inflation, Stock Market Indices, Value of Rupee, Personal Disposable Income, Unemployment rate etc. are the factors which affect the economic environment.

Example:

A rise in the disposable income of people due to a decrease in tax rates in a country creates more demand for products.

(D) SOCIAL ENVIRONMENT

 

  • Social Environment consists of social forces like traditions, values, social trends, level of education, the standard of living etc. All these forces have a vast impact on business.
  • Tradition: It refers to social practices that have lasted for decades, such as Ugadi, Deepavali, Id, Christmas,etc.,
  • Impact: More demand during festivals provides opportunities for various businesses.
  • Values: It refers to moral principles prevailing in the society, such as Freedom of choice in the market, Social Justice, Equality of opportunity, Non-discriminatory practices etc.
  • Impact: The organisations that believe in values maintain a good reputation in society and find ease in selling their products.
  • Social Trends: It refers to a general change or development in the society, such as health and fitness trend among urban dwellers.
  • Impact: Health and fitness trend has created demand for gyms, mineral water etc.
(E) TECHNOLOGICAL ENVIRONMENT

 

    • It consists of scientific improvements and innovations which provide new ways of producing goods, rendering services, new methods and techniques to operate a business.
    • It is very important for a firm to understand the level of scientific achievements of a particular economy before introducing its products.
    • Technological compatibility of products also drives the demand for manufactured products by a company.

Example:

E-commerce has changed the scenario of doing the business, buying goods and availing services at the click of a mouse or through mobile, Digital India initiative by the government and move towards a paperless society.

Q.3 [HOTS]:

(I) THE COURT PASSED AN ORDER THAT ALL SCHOOLS MUST HAVE WATER PURIFIER FOR THE SCHOOL CHILDREN.

(II) SOCIETY, IN GENERAL, IS MORE CONCERNED ABOUT THE QUALITY OF LIFE.

(III) INNOVATIVE TECHNIQUES ARE BEING DEVELOPED TO MANUFACTURE WATER PURIFIER AT COMPETITIVE RATES.

(IV) INCOMES ARE RISING AND CHILDREN AT HOME ARE ALSO DRINKING PURIFIED WATER.

(V) THE GOVERNMENT IS ALSO SHOWING POSITIVE ATTITUDE TOWARDS THE WATER PURIFIER BUSINESS.

IDENTIFY THE DIFFERENT DIMENSIONS OF BUSINESS ENVIRONMENT BY QUOTING FROM THE ABOVE DETAILS. (DELHI 2013)

ANSWER:
ENVIRONMENT QUOTED LINES
(i) LEGAL Court passed an order…
(ii) SOCIAL Society, in general, is more concerned
(iii) TECHNOLOGICAL Innovative Techniques are being developed
(iv) ECONOMIC Incomes are rising and children ….
(v) POLITICAL The Government is also showing a positive attitude
Q.4

(I) THE COURT PASSED AN ORDER TO BAN POLYTHENE BAGS AS THESE BAGS ARE CREATING MANY ENVIRONMENTAL PROBLEMS WHICH AFFECT THE LIFE OF PEOPLE IN GENERAL.

(II) THE SOCIETY, IN GENERAL, IS MORE CONCERNED ABOUT THE QUALITY OF LIFE.

(III) THE GOVERNMENT DECIDED TO GIVE SUBSIDY TO JUTE INDUSTRY TO PROMOTE THIS BUSINESS.

(IV) INNOVATIVE TECHNIQUES ARE BEING DEVELOPED TO MANUFACTURE JUTE BAGS AT LOW RATES.

(V) INCOMES ARE RISING AND PEOPLE CAN AFFORD TO BUY THESE BAGS.

IDENTIFY THE DIFFERENT DIMENSIONS OF BUSINESS ENVIRONMENT BY QUOTING THE LINES FROM THE ABOVE PARTICULARS. (OUTSIDE DELHI 2013)

ANSWER:
ENVIRONMENT QUOTED LINES
(i) LEGAL Court passed an order…
(ii) SOCIAL Society, in general, is more concerned
(iii) POLITICAL The government decided to give subsidy.
(iv) TECHNOLOGICAL Innovative techniques are being developed.
(v) ECONOMIC Incomes are rising and people can afford.
3-4 MARKS QUESTIONS
Q.1 “DEMAND FOR ‘SAREES’ MAY BE HIGH IN INDIA BUT ALMOST NEGLIGIBLE IN EUROPE”. IDENTIFY AND EXPLAIN THE FEATURE AND COMPONENT OF BUSINESS ENVIRONMENT IS HIGHLIGHTED HERE.
ANSWER:
(a) RELATIVITY As per this feature of the business environment, conditions, tastes, preferences, customs, rules, regulations, etc. differ from place to place, region to region and country to country.
(b) SOCIAL ENVIRONMENT Social Environment consists of social forces like traditions, values, social trends, level of education, the standard of living, etc. All these forces have a vast impact on business.
Q.2 MR. MANMOHAN OWNS AN ELECTRONIC SHOP IN A SMALL CITY. HE HAPPENED TO ATTEND A SEMINAR ON IMPACT OF GLOBALISATION ON COMMERCE AND TRADE. HE WAS SURPRISED TO SEE HOW TECHNOLOGY HAS BROUGHT THE PEOPLE SO CLOSE THAT HAS INCREASED THE SCOPE OF DOING BUSINESS AT LARGE SCALE. HE WAS EXCITED TO APPLY THE TECHNOLOGY IN HIS BUSINESS.

(A) WHICH DIMENSION OF BUSINESS ENVIRONMENT IS REFERRED HERE? EXPLAIN BRIEFLY.

(B) WHAT MORE SHOULD MANMOHAN DO TO EXPAND HIS BUSINESS. (SUGGEST ANY TWO)

ANSWER:
(a) TECHNOLOGICAL ENVIRONMENT It consists of scientific improvements and innovations which provide new ways of producing goods, rendering services, new methods and techniques to operate a business.
(b) MEASURES TO BE ADOPTED (1)He may convert his business into a company form to raise further capital to expand his business operations.

(2)He should focus on customers’ preferences.

(3)He should provide after-sales services.

(4)He should sell goods at reasonable prices to keep and extend his market share.

The above mentioned is the concept, that is elucidated in detail about the Dimensions of Business Environment for the class 12 Commerce students. To know more, stay tuned to BYJU’S.

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