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Question

Explain, with examples, the various dimensions of the business environment.

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Solution

Dimensions of the business environment

(i) Economic Environment: The economic environment consists of the factors and forces concerning with means of production and distribution of wealth. It comprises of interest rate, rate of inflation, value of GDP, per capita Income, tax rates, disposable income, etc.

(ii) Social Environment: The social environment consists of all the social and cultural forces within which business firms operate. It comprises of customs and traditions, values, social trends, etc.

(iii) Technological Environment: It refers to the change, taking place in the method of production and use of equipment to improve the quality of the product.

(iv) Political Environment: The political environment consists of the forces concerning the management of public affairs and their impact on business. It includes political conditions in the country and the attitude of the government towards businesses and business policy.

(v) Legal Environment: The legal environment consists of laws and regulations of the country. These laws have been implemented by the government through Companies Act, Factories Act, Competitions Act, etc. It is necessary for business enterprises to comply with these laws.


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