Question 1

How would you characterize the business environment? Explain with examples, the difference between general and specific environment.

Answer

Business environment means all the external and internal forces that affect the performance of the organization directly or indirectly. Business environment ha the following features:

1. Totality of external forces: Business environment is aggregative in nature because it is the sum total of all the things external to business enterprise. One single factor does not make a business environment.

2. Specific and general forces: Business environment consists of both specific and general forces. General forces refers to social, political, economical, legal and technological conditions, which affects every organization indirectly. On the other hand specific forces are investors, customers, competitors and suppliers that affect individual organization directly.

3. Inter-relatedness: Every element of business environment are inter-related. For example an increase in the income of consumers (economic environment) will help in improving their living standard (social environment).

4. Dynamic Nature: Business environment is dynamic in nature because it keeps on changing in terms of technologies, consumer taste and preference, change in government policy or trend and traditions that is why it is important to monitor the environment continuously.



5. Uncertainty: Business environment is uncertain because it is difficult to predict future events such as technological changes, change in government policies etc, especially when the changes are taking place at a fast pace.

6. Complexity: Business environment is complex because it consists of numerous, inter-related factors affecting business enterprises at the same time. It is easier to understand the components in parts, but difficult to understand in totality.

7. Relativity: Business environment is a relative concept as it differs from country to country and region to region. For example government policy, regulations, consumers’ preference etc all differs from one region to another.

General environment and specific environment

General environment means that the forces that affect all the business enterprises indirectly. It does not only affect any particular organization but affects the performance of all the organizations. General environment consists of general forces that are economic, social, political, legal and technological conditions. For example change in any political condition affects all the organizations.

And on the other hand a specific environment means that the forces that affect an organization directly. Unlike the general environment it does not affect the performance of all organizations, it affects the performance of any particular organization. Specific environments consist of specific forces that are investors, customers, competitors and suppliers. For example, change in the taste and preference of the consumer will directly affect the demand of that product of that particular organization/company.

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