Dimensions of business environment are as follows :
(i) Economic environment It consists of economic factors that influence the business in a country. These factors include Gross National Product, corporate profits, inflation rate, employment, Balance of Payments, interest rates, consumer income, etc. Economic environment in a country has strong influence on the business in that country.
(ii) Social environment It describes the characteristics of the society in which the organisation exists. Literacy rate, customs, value beliefs, life style, demographic features and mobility of population are the part of the social environment. The trend of change can be predicted well in advance. It is important for managers to notice the direction in which the society is moving and formulate progressive policies according to the changing social scenario.
(iii) Political environment It is the outcome of a combination of various ideologies advocated by different political parties. Every political party has a different attitude towards business community. A live example of this, can be seen during elections when there is a fluctuation in the share market.
(iv) Legal environment It consists of legislation that is passed by the Parliament and state legislatures. This component sets the framework of law within which the business is free to operate. Example of such legislation specifically aims at business operations which include the Trade Marks Act, 1969, Essential Commodities Act, 1955, Standards of Weights and Measures Act, 1969 and Consumer Protection Act, 1986.