The Business Environment Influences the Decision Making - Essay Example

Running Head: BUSINESS ENVIRONMENT Inserts His/Her Inserts Grade Inserts 12th March BusinessEnvironment Introduction The current age is the age of globalization, technology and innovation. The spread of business on national and global level has reached heights. Due to this growth, every business organization operates in a particular environment suited to its nature, structure and functions. This environment assists the organization in keeping its human, financial and other resources well aligned with the goals and objectives within and outside the organization. In any business, the environment plays a vital role towards its development and success. Business Environment According to the business glossary, the concept of business environment encompasses diverse elements, which are capable of influencing the activities and operations of an organization directly or indirectly. These factors include competitors, customers, distributors, suppliers, substitutes, industry trends, government activities, regulations, demographics, economy, innovations, competitors, social and cultural factors, and all the technological developments. This environment of the business can also be termed the operating environment (Quantumiii, 2012).  Figure: The Business Environment of an organization The definition clearly exhibits that the external forces, which are aggregative in nature, are the significant players in the decision making of an organization and are the elements that make up the part of the business environment. They are specific as well as general in nature and keep the environment of the business dynamic so that it is well aligned with the changing preferences of customers as well as with the advancements in innovative technologies. However, these factors make up a largely uncertain business environment due to their varying nature and thus, the environment of one region or country can possibly be different from that of another region or country. Nature of Business Environment The nature of the business environment is significant. Some organizations operate with placid or static environment. In such context, it is reasonable for them to assume that the future of the firm will be a continuation of its past strategies and circumstances. Such organizations may be in a happy situation in current times and can afford to limit their anticipations and analysis of the environment management to the history only. However, such firms may not be properly aware of the changes occurring in the nature of their business environment. On the other hand, there are many organizations may also experience turbulent environment due to the brisk dynamism of changing forces. One of the alternatives may be the fact that their environment is complex, and thus, is complicated to analyze and anticipate in order to be proactive in decision making. Such environments are unpredictable and least certain (Kew, Stredwick, 2005, pp. 4). They need to possess such methods and procedures, which are able to sense the environmental changes in future, and thus, have a contingency planning for tackling with the variety of possible changes. Thus, the environment in a business activity plays a vital role in the decision-making and functioning processes. It either contributes to a positive gearing towards formulating future strategies or poses a negative impact on the activities and nature of businesses. Significance of a Business Environment A business and its environment have continuous and close interaction between each other. The environment helps in identifying the threats and opportunities for the business and creates new frontiers for the growth of the organization. It helps managers to update their business knowledge on continuous basis in terms of the upcoming challenges, and understand and learn new business management skills. Not only this, but the environment also assist a business in its image building amongst the corporate competitors. Moreover, an analysis of the environment gives a complete idea of the strengths and weaknesses that an organization might possess in terms of its activities and functions. Dimensions of Business Environment The survival and success of all the business organizations rely upon the successful analysis of their business environments. The business environments comprises of following elements: Economic Factors The economic factors in a region or country influence the business organizations and their operations greatly. This includes the per capita income, gross domestic products, the availability of capital, markets for goods and services, growth of foreign trade, foreign exchange reserves and the strength of the current capital markets. There is a direct influence of the economic policies on all the business operations and activities. These policies may comprise of monetary policy, industrial policy, foreign investment policy, fiscal policy and export import policy. The consistent variations in these policies, created by the governments from time to time, are in line with the developments and advancements occurring in the government scenario. Thus, all the business organizations have to function within the framework of these policies. Social Factors Every business has its own specific social environment, which constitutes of traditions, customs, values, beliefs, poverty, life expectancy, literacy rate, etc. The businesses and firms are considerably influenced by the values and the social structures of the society. For instance, the demand for the new clothes increases during a festive season. The variations in the social structure largely affect the living standards, styles and consumption patterns of the consumers in a society. Political Factors This factor includes the elements of a country’s political system such as the government’s policies and attitudes towards the corporate community and the utilization of unionism in the country. All these aspects affect the strategies, which are adopted by the firms in a business environment. The stability of government is also one major factor, which affects the activities of business to a large extent. It creates a situation of confidence and strength for many investors and groups who wish to invest in a business. Moreover, within a competitive business environment, the concept of trade unions has grown and has put in a positive contribution in the success of any business organization with the help of the participation of labour in the management of the firm. Legal Environment The legal factors involved in a business environment comprise of regulations, laws and policies that affect the operations and activities of a business organization. All the organizations, operating in any type of industry, have to obey and function within the set rules of law. For instance, Companies Act 1956 requires the organizations to be registered by it. Then, there are other laws and acts such as Foreign Exchange Management Act 1999, Industrial Dispute Act 1972, Trade Marks Act 1999 and other such regulations, which require to be implemented in a business organization. Technological Environment In a business environment, the technological aspect constitutes the techniques, methods and approaches for the distribution and production of services and goods. The product design is influenced by the variations in the technological environment of different regions and countries. In the current age of competitive advancements, the pace of change in technologies is swift thus, making it essential for the businesses to adapt to the technological changes on consistent basis in order to grow and survive. It is worth noticing that numerous large-scale industrial organizations opt for scientific research as the means for innovation and improvement in products and services on regular basis. Thus, in the present age, none of the business organizations can afford to continue or flourish with the obsolete technologies. Demographic Environment The concept of demographic environment pertains to the density, size, and distribution and population growth. All of these elements impose a direct bearing on the consumption and demand of company’s services and goods. Considering this elements, management experts also experience the varying demands of people of rural areas than those living in cities and towns. An increased population depicts an excessive availability of the labour force. Encouraged from this factor, the business enterprise utilizes more labour-intensive production techniques, and establishes their business units in such areas. Thus, a business organization, which constantly tracks the alterations on the demographic fronts, translates them exactly, will seek the opportunities. Natural Environment The natural environment comprises of ecological and geographical elements that affect the operations of any business. These include the easy access of natural factors of production, location aspects, climatic and weather conditions, and the topographical factors. The natural environment of any country or place greatly influences the business in surroundings. This is the reason that the businesses are usually recommended to set up their manufacturing unit at such a location where natural resources are easily available. Moreover, the policies of government impose added responsibility of conserving natural resources and maintaining an ecological balance on the business sector (Business Studies, n.d.). Managing the Business Environment The business organizations have choices in the management of their environment according to their nature of activities and functions. They either wait and watch the environment surrounding their businesses to change and do not wish to predict its behaviour beforehand. This results in their reacting to the altering business environment. The other option that they can avail is to anticipate the changing environment of the business and plan their responses accordingly. The former organizations are known to be reactive while the latter are proactive in their actions. While, there are a few organizations which tend to go even further than being any of the two alternatives, and manage their environment just as they see suitable. Such organizations are able to go way beyond the heights of progress and management; Sony, Ford, Microsoft, IBM and McDonalds have been able to shape their business environments in the most applicable manner. Conclusion The business environment is a complex and dynamic factor. It is subject to changes and requires organizations to be either proactive or reactive towards these changes. The economic, social, political, legal, demographic and technological factors make up a diverse environment for the businesses. Moreover, all these factors have an either direct or indirect bearing upon the functions and activities of a business organization. REFERENCES Business Studies, n.d., ‘Business Environment’. Web, Retrieved on March 17, 2012 Kew John, Stredwick John, 2005, Business environment: managing in a strategic context, Chartered Institute of Personnel and Development, pp. 4-5 Quantumiii, 2012, ‘Competitive Intelligence Glossary’. Web, Retrieved on March 17, 2012 Read More