Business Environment is apart and parcels of the environment surroundings it. Its activities are influenced by the needs and requirements of the environment. A business exists for satisfying social and economic needs. It’s working in influenced by the economic, social and political environment. For producing goods and services to satisfy consumer needs, business needs necessary inputs such as materials, energy, and money, human force etc. all these inputs are obtained for the society. These inputs are transformed into products and services by passing through various production/manufacturing processes and are offered to society for its use. The society does not get these products and services free of cost but pays a price for it known as price I.e. the price received from the society is used to acquire various inputs for continuing production processes. Business and society are both keeping each other. A business will exist so far as its output is demanded by the society. In case the products of an enterprise are not in demand then either it will have to change its line of production or close down its working.
A business organisation does not exist in a vacuum. It exists in a world of concrete places and things, natural resources, important abstractions and living persons. The sum of all these factors and forces is called the Business Environment. ‘Environment refers to those aspects of the surroundings of business enterprise and circumstances of businesses unit which affect or influence its activities and operations and decides its effectiveness. ‘; Environment refers to all external forces which have a bearing on the functioning of business.’ Business environment may be defined as the set of external factors-such as the economic factors, socio-cultural factors, government and legal factors, demographic factors, geophysical factors, which are uncontrollable in nature and affects the business decisions of a firm or company. The environment of the business is always changing and it is uncertain the business environment can be divided into two ways
Know About the Micro Environment of Business in Full Detail
The Micro Environment of Business: The micro environment consists of the forces in the company’s immediate environment that affects the company. These forces are more closely linked with the business than the macro factors. The micro factor may affect different firms in a particular industry in different ways. Some of the micro factors may be particular to one firm only. When competing firms in an industry have some micro factor the relative success of the firms will depend upon, how effectively they deal with these elements. We shall now discuses these factors in detail.
Suppliers: Suppliers are an important force in the micro environment of business. Suppliers are the people who supply the inputs like raw material and components to the business. Suppliers are important:
For the smooth functioning of the business it is very important to have reliable sources of supply. Uncertainty regarding to the supply or other supply problems will compel the companies to maintain high inventories which will cause increase in costs.
Why Multiple Sources of supply?
It is very risky to depend on a single supplier because a strike. Lock out or many other production problems with that respire may seriously affect the company. A change in the attitude or behavior of the supplier may also affect the company. Multiple sources of supply often help to reduce such risks. Because of the importance of this factor many companies give high importance to vendor development.
Customers: On the micro environment of businesscustoms have dirt impact. A company may have different categories of customers viz.
1. Industrial customers 2. Retailer’s customers
3. Wholesalers customer’s 4. Government Bodies customers
Foreign customers etc.
To succeed in capturing customers, a business must try its best to know what people want and will buy. The consumer acceptance imposes a constant challenge because non-economic factors in the environment such as attitudes, desires and expectations of people also influence consumer behaviour. The choice of customer segments should be made by considering the following factors:
Relative Profitability, Dependability, Stability of diamond, Growth prospects, extent of competition
Market Intermediaries: Marketing intermediaries are the vital between the company and final consumer. A dislocation or disturbance of this or a wrong choice of the link may cost the company very heavily. The marketing intermediaries include the following:
Middlemen: Agents and merchants who helps the company to find the consumers and finalize the sales with them.
Physical distribution firms: Such as warehouses and transport firms which assist the company in stocking the goods and moving the goods form the places of their origin to their origin to their destination.
Marketing Service Agencies: These include advertising agencies, market research firms, media firms and consulting firms and these agencies in the promotion of sales.
Financial Intermediaries: These persons or institutions finance the marketing activitiesand insure business risks.
Competitors: Competitors play a vital role in running the business enterprise. Business has to adjust its various business activities according to the behaviour of the competitors. There are various types of competitors:
Desire Competition: Such competition is generally found in the countries characterized by limited disposable income and many unsatisfied desires of the customers. Under this type of competition the primary task is to influence the basic desire of the customer. Firm competitors include not only the other firms which produce the same or similar products but all those who compete for the discretionary income of the consumer. Every consumer has a limited income ad he can’t fulfill all his desires with his income. Either he can buy a T.V. or a refrigerator or a washing machine or he can invest his money in the various investment schemes. The competition among these desires among these desires is termed as desire competition.
Generic competition: The competition among alternatives which satisfy a particular category of desire is called denric competition. For example, if particular person wants to invest his money, he has got various alternatives. He can invest his money with the Unit Trust of India, with the post office, with the banks or he can purchase the shares or debentures of a company. In this case, the competition among various investment schemes is called Generic Competition.
Product Form Competition: In this type of competition, the consumer has to choose between different forms of the product. For example, If the consumer decides to go in for a washing machine, the next questions is, which form of the washing machine –semi automatic or fully automatic front loading etc.
Brand Competition: Finally the consumer encounters the brand competition i.e. the competition between different brands of the same product. For example, if the consumer decides to buy a fully automatic washing machine, the next question will be which brands: IFB or Videocon or Godrej or Whirlpool etc. Thus there are a number of enterprises dealing in the same type of product or service. Every one of them tries to capture as much market as possible. In a free economy there is intense competition among various producers. It will be necessary to know the strengths and weaknesses of competitors.