Recently, many companies have planned for major investment in retail business. Increasing incomes, rise in living standards, government policy of liberalisation and its favourable attitude towards modernisation has favoured their decision.
Identify the various dimensions of business environment and explain their effect on business.
Recently, many companies have planned for major investment in retail business. Increasing incomes, rise in living standards, government policy of liberalisation and its favourable attitude towards modernisation has favoured their decision.
Identify the various dimensions of business environment and explain their effect on business.
Various dimensions of business environment affected are:
(i) Rise in living standards affect the 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.
For example, Traditions refer to such social practices that are followed since decades. Traditions like celebrations of festivals provide greater opportunities to businesses like confectionary, sweets, greeting cards, gift galleries, etc.
(ii) Increasing income affect the economic environment- The economic environment consists of the factors and forces concerned with means of production and distribution of wealth.
It comprises of interest rate, a rate of inflation, value of GDP, per capita income, tax rates, disposable income, etc. For example, With an increase in inflation rates, there is a rise in the cost of production. This affects the profits of the business adversely.
(iii) Liberalisation policy is an element of a legal environment- Business has to function within the framework of laws and regulations of the country. Legal environment include various legislations passed by the government, court judgments, decisions of various commissions and agencies at every level of administration.
Non - compliance of these regulations can create legal problem for business enterprises. A number of laws have been implemented by the government through the enactment of the Companies Act, Foreign Exchange Management Act, Factories Act, Competitions Act, etc.
For example, the advertisement of alcoholic beverages is prohibited, which affects the marketing of such products.
(iv) Favourable attitude of government is an element of political environment- The political environment consists of the forces concerning management of public affairs and their impact on business.
It includes political conditions in the country and attitude of the government towards businesses and business policy. For example, decisions regarding offering a subsidy to the producers gives a boost to such industries.
Various dimensions of business environment affected are:
(i) Rise in living standards affect the 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.
For example, Traditions refer to such social practices that are followed since decades. Traditions like celebrations of festivals provide greater opportunities to businesses like confectionary, sweets, greeting cards, gift galleries, etc.
(ii) Increasing income affect the economic environment- The economic environment consists of the factors and forces concerned with means of production and distribution of wealth.
It comprises of interest rate, a rate of inflation, value of GDP, per capita income, tax rates, disposable income, etc. For example, With an increase in inflation rates, there is a rise in the cost of production. This affects the profits of the business adversely.
(iii) Liberalisation policy is an element of a legal environment- Business has to function within the framework of laws and regulations of the country. Legal environment include various legislations passed by the government, court judgments, decisions of various commissions and agencies at every level of administration.
Non - compliance of these regulations can create legal problem for business enterprises. A number of laws have been implemented by the government through the enactment of the Companies Act, Foreign Exchange Management Act, Factories Act, Competitions Act, etc.
For example, the advertisement of alcoholic beverages is prohibited, which affects the marketing of such products.
(iv) Favourable attitude of government is an element of political environment- The political environment consists of the forces concerning management of public affairs and their impact on business.
It includes political conditions in the country and attitude of the government towards businesses and business policy. For example, decisions regarding offering a subsidy to the producers gives a boost to such industries.
