CS Exam Main Elements or Factors of Business Environment

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Micro Business Environment

This is also known as internal business environment because business has power to control them. In this environment, factors can be divided with following way.

  • 1st Supplier: A supplier provides raw material to business. This is also main factor of business environment because, it affects business very closely. If supplier delay to supply raw material or stop to supply. At this time production of business can be stopped due to not getting raw material. So, for controlling this factor, it is the duty of businessman to make good relation with more than one supplier so that, if one stop or delay at this time, goods can be purchased from other supplier.
  • 2nd Customers: Customers are those people or companies which buy goods from our business. Business sells them his finished product. But time to time tastes of customers also change. So, according to the taste of business customers, new products must be supplied by business. That is the formula for living long life of business.
  • 3rd Market Intermediaries: For promoting sale, it is required to ads by different way, so market intermediaries include sales man and middle man. This environment is under control of business because, if business starts selling with more ads, his selling will surely increase.
  • 4th Competitors: Competitors of business also create internal business environment. According to competitors, policies, business changes his policies for winning in competition.
  • 5th Financial Intermediaries: As business grows, it needs more money for his growth; either this money can be gotten by issuing new shares or by borrowing money from financial intermediaries. So, financial intermediaries plays a vital role in business environment. If they provides loan at very low rate, at that time business can get and grow fastly but, if they increase in interest rate, at that time business will not get at this rate and its growth may decrease due to lack of fund.

Macro Business Environment or External Factors of Business Environment

  1. Economical Environment: Economic environment is main element of business environment. Economy is factor which affects business with following way
    1. Economic policies: Economic policies related to budget, industrial policy, fiscal policy, export and import policy and business should see what changes are done in these and business has to changes their business policies according to these changes.
    2. Economic regulation: Different laws and regulations are at international level and national level. These are all called economic regulation and business has to respect all of these while it is operating business.
  2. Natural Environment: Natural environment is also external factor of business. Because, business can not fully control on natural environment. Many points like season, raining, floods, earth quake are natural and happens according to fluctuation in it. These are also main element of business because business has to face all these factors. But some of loss from these factors can be transferred with effective schemes of insurance.
  3. Demo-graphic Factors: Size of population and their growth rate includes in demo graphic element and factor of business environment. Increasing trend of population will increase demand of products and support business to produce more products. But if death rate is increasing or demo graphic factor like religion are preventing to use the products of business. At that time business has to change their business or make other plans according to situation.
  4. Technological Environment: This is fully concerned with changing of technology and its effect on product. Many technical products are fastly changed by coming new technology. At that time business also have to cover new products according to changes in technology.
  5. Political Environment: All above factor affects business and business has to make rules and regulation according to Govt. And political rules and regulation. Political environment is composition of three factors which are following
    1. legislature
    2. executive
    3. judiciary
  6. International Environment: International environment includes WTO, IMF, WB, SARC and G20 meetings and their rules and regulations can effect on any type of business. Business has to exist in world market, and then it should understand their effect and take action according to these rules and regulation.

Definition of Economic Environment

Economic environment is very important factor of business. It means any environment which becomes from economic system, economic planning and economic policies. Main motive of this environment is to effective utilization of resources.

From above definition we get three factor that are:

  1. Economic system: Economy works always in any system. There are main three economic systems; any country can adopt any system for making economic planning and economic policy.
    1. capitalistic economy: In this economy all powers are in private hands, they are free to choose any business and also invest money in any type of business. Govt. Just cares the security of country and life of people but it does not disturb to anyone on the basis of business. This economy is in USA.
    2. Socialistic economy: This economy is basically in poor and developing countries and main motive of this economy is to welfare of people and develop the economy. In this economy all businesses are under fully control of govt. And nobody can operate any business freely. Govt. Makes rules and regulation for operating business and also appoints authorities for operating it. Because, all powers are in the hand of govt. so there are huge chances of corruption in govt. Departments.
    3. Mixed economy: Any country in which both capitalistic and socialistic economy works, and after mixing of both economy, the new economy will comes in our eyes that is called mixed economy. In this economy govt. Fixes some sector which are reserves only for govt. Investment and no private person can do that business. India is the good example of mixed economy.
  2. Economic policies: An economic policy means any policy which is related to fund of nation and its utilization. It also includes fiscal policy and budget of nation.
  3. Economic planning: For equal distribution of money and wealth, it is very necessary to make economic plans of development in socialistic economy. These plans are known as economic plans.