Business Environment

Business is dynamic in nature. There is no business which is pervasive in nature. The business keeps changing constantly because of its vulnerability to the environment around it. Even proper analysis is needed about the environment so as to make a strategy for the business. The business environment is the surroundings of the business in which it exists. It is constantly and consistently affected by the elements or the components of the nature. These factors are commonly known as ‘PESTLE’ which is: Political, Economic, Social, Technological, Legal and Environmental.

This can be understood by the following:

1. Political Factors:

The political factors are one of the most important determinants of the business policies and goals. The political factor means the condition of national government and its stability, the policies made by the ruling party, its implementation, taxes imposed by them and their strategies to enhance the industrial growth in the country. The politics plays a major phase changing role for the business. The political parties in rule pass the budget or the strategies it has formulated for the economy every year. Every year this policy change affects several businesses. The tax rates are decided which change the whole scenario of the business. Moreover, the restrictions of working, licensing, import or export tariffs etc. are a huge definer of business.

If the political stability prevails in the political sector, they will concentrate on the upliftment of the businesses and formulate policies which are beneficial for the businesses. An unstable government will cause the business policies to fluctuate because of its own instability. They would not be able to concentrate on the core functions of the business. Thus, it is very important to formulate the policies of the politics very carefully. A government with a good intellectual level and a stable mindset must be elected to foster the growth of the business.

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2. Economic Factors:

The economic factors are the most frequently changing factors in the business environment. They influence the business policies and health the most. The economic policies influence the financial and the policy factors the most. The economic factors include the policies like the demand and supply policies, monetary policies, fiscal policies etc. The banks are the major determinants of setting the economic policies. The Central bank of any country regulates the economic policies of that country. Economic policies will decide if the business is working on economies of scale or going into loss.

Business Environment

For example, if according to the policies there is a good demand for a product, then the relevant business can produce on a large scale and enjoy the economies of scale.

Thus, if the economic policies are set with keeping in view the interest of the economy and its growth then it will be beneficial for the business as well. A stabilized economy is a good condition but not a desired one. The fluctuating economy is better but it should be the one which is moving upward. This will increase the opportunities for the business to increase its market.

3. Social Factors:

The social factors are associated mostly with the people linked with the business. The business comes in contact with many people in its day to day functioning such as consumers, supplier, employees etc. It has to deal with such people and it is an important dimension of the business. The consumers jump from one product to another in order to satisfy their needs. Thus, the business needs to know what the preferences of the buyers are, what they would like to buy, at what price and where the market should be established. Every minute detail of the psychological level of the consumers has to be taken in consideration. The needs of the employees need to be taken care of as well. Any business works with the proper efficiency of the employee only. As long as their needs and goals are not united with the business’s goals, they would not work properly. Apart from this the society in which the business prevails and does its dealings also influence the business’s policies. The business has a responsibility against the society if it is using the society’s resources.

4. Technological Factors:

The technology defines the level of functions to be carried out in a business and the efficiency of the processes. The technology keeps on changing constantly. Any innovation comes, but it does not last longer than a few months until a new and more efficient strategy or technology comes in the market. These technological factors influence the business policies. If a business cannot be adaptive it may fail in its functions and dealings. The businesses need to cope up with the changing technology, adopt them, use them and then get used to the next new one too. The cycle of technology keeps on moving. The business whose technology becomes obsolete will be lagged behind and will not be able to compete in the market.

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5. Legal Factors:

The legal factors refer to the legal provisions and the obligations imposed by the constitution. The business needs to abide by the rules and regulations of the constitution to avoid any hindrance or interference by law. The legal rules must be formulated by the group of professionals who know about the dynamic nature of business and know the implication of other factors n the business. There are many legal obligations businesses need to follow on their incorporation, working and then winding up. It is a hectic yet an important task for the business.

6. Environmental Factors:

The environmental factor means the natural effects the nature has on the business. The climatic conditions of the area in which the business prevails, the surroundings and the flora and fauna of the region influence the working conditions of the business. A better environment means better business opportunities. Environmental factors affect the processes of the business and also the availability of the raw material. The business must be set up in the areas which are suitable for the business process and are easily assessable. For example, A company which produces the product which requires moisture must be situated in a coastal region.

Thus, we see how crucial part Factors of business environment play in the proper functioning of the business. It needs to be implemented with utmost care and only after examining each and every dimension of the business.

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