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Monday, 2 November 2020

What Is business environment? Discuss about business environment

Business environment represents all external forces, factors or conditions that exert some degree of impact on the business decisions strategies and action taken by the firm.the success of a business is generally dependent on its business environment. A successful business has to identify,appraise and respond to the various opportunities and threats in its environments. To be successful in the business has to not only recognise different elements of its own environment but also respect /adapt and manage and influence them.The business must continuously monitor and adapt itself to the environment if it is to survive and prosper. Modern authors include both internal and external forces that influences business policies and actions as integral elements of business environment.

Relationship between organisation and its environment:

in relation to the individual corporate enterprises the external environment offers a range of opportunities coma limitations threats and pressures and thereby influences the structure and functioning of the enterprise.the relationship between the organisation and its environment may be discussed in terms of interactions between them in several major areas.

Terms of Interactions which are outlined below:

1. Exchange of information:

the organisation scans the external environmental variables, their behaviour and changes, generate important information and uses it for its planning decisions-making and control purposes. Much of the organisational structure and functioning is is attuned to the external environment information.information generation is one way to get over the problems of uncertainty and complexity of the external environment. Information is to be gathered on economic activity and market conditions coma technological development coma social and demographic factor political-governmental policies and postures the activities of other organisation and so on. Both current and projected information is important for the organisation.

apart from gathering information, the organisation itself transmits information to several external agencies either voluntarily, in advertently or legally.other organisations and individuals may be interested in the organisation and its functioning and hence approach the organisation for information.

2. Exchange of resources: 

the organisation receives inputs-finance materials common power equipment etc.from the external environment through contractual and other arrangements. The resources are often categorised as 5 M's man, monkey method machine, material.it sustains itself by employing the above inputs for involvement for producing output of products and services. The organisation interacts with the factor markets for purposes of getting its input; it completes sometimes and collaborate sometimes with other organisations in the process of ensuring a consistent supply of inputs.

the organisation is dependent on the external environment for disposal of its output of products and services to a wide range of clientele.this is also an interaction process-receiving the needs of the external environment and catering to them were satisfying the expectations and demand of of the cylinder groups such as customers employees shareholders creditors suppliers local community general public and so on.

3. Exchange of influence and power:

another area of organisational-environmental interaction is in the exchange of power and influence. The external environment holds considerable power over the organisation both by virtue of its being more inclusive as also by virtue of its command over resources information in other inputs.it offers a range of opportunities, incentives and rewards on the one hand and a set of constants, threats and restrictions on the other. In both ways the organisation is conditioned and constrained full stop the external environment is also in a position to impose its will over the organisation and can force it to fall in line.

Sometimes,organisations are also in position to wild considerable power and influence over some of the elements of the external environment of virtue of its common over resources and information. To the extent that the organisation is able to hold power over the environment it increases its autonomy and freedom of action. It can dictate terms to the external forces and mould them to its will.in defining the relationship between the organisation and the environment, one has to be clear on the diversity of both these entities first of the nature of relationship depends on the size of organisation for its age the nature of business, the nature of ownership, degree of professionalization of management, etc.


Organisations response to its environment-organisations must have the capacity to monitor and make sense of their environments if they are to respond appropriately. They must identify an attempt to those environment factors and features they are closely related to goal achievement and performance. 

They must have the internal capacity to develop effective responses.

Three classes of responses are described below:

1. Administrative response:

the most common organisational response to the environment our administrative. These include the formation of classification of the organisations mission semi calendar development of objectives and policies and budgets for the creation of scanning units. These responses can be either proactive or reactive and are aimed at defining the organisations purpose and key tasks in relationship to particular environment.

2. Competitive response: 

competitive responses to the environment typically are associated with for-prophet forms but can also applied to non-profits and governmental organisations. Such action Sikh to enhance the organisations performance by stabilizing a competitive advantage over its rivals.to sustain competitive advantage, organisation must achieve an external position vis a vis their competitors or perform initially in ways that are unique and valuable and difficult to imitate.

3. Collective response:

organisations can cope with problems of environmental dependence and uncertainty to increase coordination with other organisations. Collective responses help control inter dependencies among organisations and include such methods as barbering contracting, co-opting and creating joint ventures federation of strategic alliances and consortia. contemporary organisations are increasingly turning towards joint ventures and partnerships with other organisations to manage environmental uncertainty and perform tasks that are too costly and complicated for singer organisation to perform.

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