Business Environment Meaning
Global warming is the word which we all are familiar with because due to global warming our environment has been changing which ultimately affects all human beings adversely as the environment does not choose people based on income age or sex rather it affects all equally. In the case of companies, they are also concerned about the environment but not with the general environment rather they are worried about the business environment. Business environment in simple words refers to the impact of all factors whether they are internal like employees of the company, suppliers of the company and management of the company or they are external like government policies, consumer taste, change in technology and so on the business of the company. In order to understand more about this concept one should look at some of the important characteristics of the business environment
Characteristics of Business Environment
Dynamic
The first and foremost feature of business environment is that it is very dynamic implying that it changes very fast and in this age of technology where things change overnight company cannot relax rather it should be prepared to use any change in the environment to its advantage. Hence for example, before smartphone came Nokia was the market leader but with the advent of smartphones companies like Apple, Samsung and Xiaomi took the market share in mobile market and Nokia is way behind all of them.
Complex
Another feature of this environment is that it is very complex because varieties of factors are at play simultaneously and companies can easily misinterpret the change in the environment leading to a big loss for a company. Hence, for example, an increase in income tax rate will not affect only individuals but indirectly it also affects automobile industry because when a consumer has less disposable income they tend to curtail their expenses on automobiles and other discretionary items leading to fall in demand for such products.
Unpredictable
It can be highly unpredictable implying that no matter how strong a company’s internal research team is they can never accurately forecast the change in the environment. Hence for example due to sudden war in gulf countries, the price of oil rises fast than all companies which are using oil as their raw material will suffer due to rise in production cost leading to fall in their profit margins.
Impact on Company
Business environment does not impact all companies in the same manner while some companies are affected more while some companies have minimal impact. Hence for example, if the government imposes taxes on multiplex chains and not on single screens theaters than ticket prices of movies in multiplexes will be higher than single-screen theaters thus giving single screen owners an advantage over multiplex chain owners.
Interconnected
Another important feature of the business environment is that all factors whether internal or external are not mutually exclusive rather they are interconnected in one way or other. Hence for example due to advent of smartphones now it is easier for companies to keep eye on marketing people and companies can easily monitor whether they are doing their job or not even if they are miles away from the headquarters of the company.
As one can see from the above characteristics that business environment plays a pivotal role in the performance of the company and just like human beings cannot ignore adverse effects of global warming on the environment in the same way no company in the world can ignore the business environment for a long period of time.