Legislative machinery promotes economic growth, efficiency and equity. Technology is changing at a fast pace and technical environment is dramatically affecting the business environment either because of easy import policies or because of technology upgradation as a result of research and development within the country. Seek foreign equity participation and foreign technology in Indian firms to expand business and improve competitiveness. It has created significant impact in the following areas: 2. They constantly watch competitors’ policies and adjust their policies to gain customer confidence. ii. The macro environment consists of the economic and non- economic variables that provide opportunities and threats to firms. The political and legal environment, thus, performs two important roles: It stimulates business enterprises by providing incentives either to small-scale sector in terms of reserving goods for them which cannot be produced by large-scale business houses, big industrial houses to set up in backward areas, providing development facilities to industries (industrial estates, financing facility etc.). A business operates in the environment of Government regulations. They are the links that help to promote, sell and distribute the products to final consumers. Required fields are marked *. The social environment consists of the social values; concern for social problems like protection of environment against pollution, providing employment opportunities, health care for the aged and old etc. Human resources represent the manpower with specialised knowledge that performs the business activities. Business organisations have to work within the legal framework of the country. In socialist economies, these decisions are taken by the public sector which is guided more by social welfare than profit maximisation. These factors affect the performance of a company and its ability to serve the customers. It enforces upon business enterprises the responsibility of social responsiveness (responsibility towards society) by welfare-state principles enacted through legislation that enforce minimum wages, commodity control, fair trade practices etc. Technology refers to application of scientific and organised knowledge to organisational tasks. A brief discussion of the firm’s micro environment is as follows: Customers constitute important segment of the micro environment. WTO monitors and regulates the business transacted in the international environment. Educational services. 5. The economic environment, thus, plays vital role in shaping the culture of the economy. (iv) The incentives and disincentives provided by the Government affect business enterprises in many ways. They are the physical distribution firms (transport firm), service agencies (media firms), financial intermediaries (banks, insurance companies) etc. Various organisational processes like motivation, leadership, control policies etc. Financial resources represent financial strength of the company. Industrial production, agriculture, infrastructure, national income, per capita income, money supply, price level, monetary and fiscal policies, population, business cycles, economic policies, infrastructural facilities, financial facilities etc. Classifications of Business Transactions. The economic environment of a country, thus, removes regional disparities and promotes equitable growth of the economy. There are laws to prevent restrictive trade practices and concentration of economic power in few hands. Are social objectives part of the overall objective framework of the company? (adsbygoogle = window.adsbygoogle || []).push({}); Copyright © 2020 Thames Notes. To enjoy the economies of scale, firms establish the business in large cities but the Government promotes them to establish their units in backward areas by providing various tax incentives. Copyright 10. (b) What is the income and education level of the consumers? Competitors form important part of the micro environment. etc. Decisions regarding allocation of resources which respect to what to produce, how to produce and for whom to produce; nature of technology and the techniques of production, timing of production etc. Plagiarism Prevention 5. A more general classification of services based on the type of function that is provided through them can be as follows: Business services. A restrictive import policy, for example, protects home industries but liberal import policy can harm the domestic industries. Their buying habits, buying capacities, tastes, preferences and education affect business enterprises. ), Government public, customer organisations, internal public (workers and managers), local public (neighbourhood or community residents) and general public (buyers at large). Technological resources represent the technical know-how used to manufacture goods and services. Environmental services. (c) How strongly do consumers believe in brand loyalty? Government interacts with the business in the following ways: It regulates the affairs of the business by promoting activities in certain areas and restricting in others. Legislative measures are also enforced by the Government (Pollution Control Board) to protect the natural environment. Industry involves production of goods and services whereas commerce is concerned with the distribution of goods and services. “The micro environment consists of factors in the company’s immediate environment”. It also affects the food supply which can be harmful on consumption. For Heidi with blue hair – Fleur Adcock Poem Analysis, 1.5 Business objectives and stakeholder objectives, 2.3 Recruitment, selection and training of workers, 3.1 Marketing, competition and the customer, 4.2 Costs, scale of production and break-even analysis, 5.2 Cash-flow forecasting and working capital, 6. There have been significant economic and political changes and increasing role for the private sector to play since then. The internal strengths represent its internal environment. After reading this article you will learn about the internal and external business environment. Inefficient firms have to leave the market. d) What is the firm’s financial strength in keeping itself updated regarding technological changes? Primary sector resources get used up e.g. 1. ADVERTISEMENTS: Business activities may broadly be classified into two categories namely (A) Industry and (B) Commerce. Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. Content Filtration 6. Facilitate global sourcing by Indian firms. Some of the laws that exist in the country for smooth operation of business enterprises are as follows: Economic Laws [Air (Prevention and Control of Pollution) Act, 1981; Consumer Protection Act, 1986; Essential Commodities Act, 1955; Foreign Exchange Management Act, 1999; Foreign Trade (Development & Regulation) Act, 1992; Industries (Development & Regulation) Act, 1951; Patents Act, 1970; Standards of Weights and Measures Act, 1976; Trade Marks Act, 1999]. Industry II. are framed within the constraints of cultural system of the country. The internal strengths represent its internal environment. This constitutes economic environment of the economy. They supply inputs (money, raw material, fuel, power and other factors of production) and help in smooth conduct of the business. Liberalisation policies have allowed the Indian industries to operate in international markets and foreign companies to operate in Indian markets. Is the market size large enough to provide desired rate of returns? wages in China/India are cheaper, People spend more on the tertiary sector as they become wealthier. could make em more longer though. Good… Multinational corporations operate world-wide and provide a number of benefits to host countries and home countries. Fishing, farming Secondary Sector – Manufacture goods using raw materials from primary sector. The economic decisions to invest, produce and sell are guided by profit motives. f) How conducive are the export and import policies to promote the imports and exports, etc.? This is largely uncontrollable and, therefore, firms adjust their operations to these environmental factors. Can the business meet these expectations? Market forces and State planning provide the constraints within which business enterprises carry out their functions. The political-legal system helps in answering questions like: a) Is the political climate stable in the country so that government policies do not change time and again? Improve efficiency and dynamism of the firms to survive in the global competition. e) Are the licensing procedures for entering into a new business lenient or strict? Even the renewable resources should be used wisely so that rate of consumption does not exceed the rate of replenishment.