What is Business Environment? Definition, Salient Feaures and Components

Summary

Sophie's video tutorial on the business environment offers a comprehensive overview, highlighting its dynamic and multifaceted nature. She explains how it encompasses all factors influencing a business, both controllable and uncontrollable. The tutorial delves into the internal environment, emphasizing the company's value system, vision, mission, organizational structure, and human resources. It also covers the external environment, detailing the micro and macro factors like suppliers, customers, competitors, and the global landscape. Sophie's presentation aims to clarify the concept and encourage viewer interaction through likes, shares, and comments.

Takeaways

• 🏢 The business environment refers to the surroundings in which a business operates, including all factors that can influence or be influenced by the business.
• 🔄 Business environment is dynamic and ever-changing due to various factors that can alter a company's strategies, policies, and operations.
• 🌐 It is multifaceted, meaning small changes can be interpreted differently by various experts, analysts, and observers.
• 🌟 The impact of the business environment is far-reaching, with a single change potentially affecting the survival, growth, profitability, and performance of an enterprise.
• 📍 Relativity is a key feature, as the environment is influenced by local conditions and varies across different geographical locations.
• 🤔 The complexity of the business environment makes it difficult to pinpoint which factor is causing change, due to the multitude of interrelated events and conditions.
• ❓ Uncertainty is inherent in the business environment, as the future is unpredictable and can only be estimated through forecasts.
• 🔗 Interrelatedness is evident as many factors in the business environment are interconnected, leading to potential chain reactions from small changes.
• 🛡️ The internal environment includes factors that a business can control or modify, such as value systems, vision, mission, objectives, organizational structure, corporate culture, human resources, and technical capabilities.
• 🌍 The external environment comprises elements outside the business's control, offering opportunities and posing threats, and is divided into micro and macro environments.
• 🛍️ Micro environment factors include suppliers, customers, intermediaries, competitors, employees, and stakeholders, all of whom have a direct impact on business operations.
• 🌆 Macro environment factors encompass political and legal, economic, socio-cultural, physical, technological, and global environments, which can significantly influence business strategies and performance.

Q & A

What is the definition of business environment according to the video?

The business environment can be understood as the surrounding in which the business enterprise operates, covering all factors that can affect or be affected by the company's plans, strategies, policies, and operations.

What are the salient features of the business environment mentioned in the video?

The salient features of the business environment are that it is dynamic, multifaceted, has a far-reaching impact, is relative, complex, uncertain, and consists of interrelatedness among its factors.

How is the business environment categorized in terms of internal and external factors?

The business environment is divided into two categories: internal environment, which contains factors that directly affect the business and can be controlled by the firm, and external environment, which is subdivided into micro and macro environments.

What are the components of the internal environment of a business?

The internal environment components include value system, vision, mission and objectives, organizational structure, corporate culture, human resources, and resources and technical capabilities.

Can you explain the concept of the micro environment in the context of the business?

The micro environment covers factors that fall under the immediate periphery of the business enterprise, such as suppliers, customers, intermediaries, competitors, employees, and stakeholders.

What does the macro environment consist of and how does it affect a business?

The macro environment consists of factors outside the control of the business that can directly affect its functioning, efficiency, strategies, performance, and profitability. It includes political and legal, economic, socio-cultural, physical, technological, and global factors.

How does the video describe the role of employees in the business environment?

The video describes employees as the most valuable asset of the company, which determines its success and failure. An eligible and qualified workforce can make a significant difference to the company.

What is the significance of the media in the business environment as per the video?

Media holds a strong position in the business environment, as every company requires media to promote its products and services. Negative news or publicity can lead to losses for the company.

How does the socio-cultural environment impact a company's operations?

The socio-cultural environment reflects a company's social and cultural values, which are implemented through corporate social responsibility. It is a way of giving back to society and nature for the resources used.

What are the implications of the technological environment for a business?

The technological environment implies that a company must continuously work on and adopt new technologies to stay ahead of its competitors. Failure to do so can make survival difficult due to rapid technological changes.

Why is the global environment important for multinational companies?

The global environment is important for multinational companies because it includes factors such as foreign policies, foreign trade, foreign investment policies, trade practices, and trade rules that can affect their international operations.

Outlines

00:00

📚 Introduction to Business Environment

Sophie introduces the concept of the business environment, which encompasses all factors that influence and are influenced by a business enterprise. She explains that it includes both controllable and uncontrollable elements that directly or indirectly impact a company's survival, growth, performance, and profitability. The dynamic, multifaceted, far-reaching, relative, complex, and uncertain nature of the business environment is highlighted, emphasizing its interrelatedness and the need for businesses to adapt to ever-changing conditions.

05:03

🏢 Internal and External Business Environment Components

The second paragraph delves into the components of the business environment, distinguishing between the internal and external environments. The internal environment is described as controllable and directly affecting the business, including factors such as value systems, vision, mission, objectives, organizational structure, corporate culture, human resources, and technical capabilities. The external environment, which is not under the business's control, is further divided into micro and macro environments. The micro environment comprises suppliers, customers, intermediaries, competitors, employees, and stakeholders, while the macro environment includes political and legal, economic, socio-cultural, physical, technological, and global factors that can influence a company's operations and strategies.

Keywords

💡Business Environment

Business Environment refers to the external and internal conditions that influence the operations and decisions of a business. It encompasses a wide array of factors including economic, social, political, legal, and technological aspects. In the video, it is the central theme, explaining how it affects a company's survival, growth, performance, and profitability. The script discusses both internal and external factors that make up the business environment.

💡Salient Features

Salient features are the most noticeable or important aspects of something. In the context of the video, these are the key characteristics of the business environment, such as being dynamic, multifaceted, having a far-reaching impact, relativity, complexity, uncertainty, and interrelatedness. These features are crucial for understanding how the business environment influences a company's strategies and operations.

💡Components

Components are the individual parts that make up a whole. The script breaks down the business environment into internal and external components. The internal environment includes factors like value systems, vision, mission, organizational structure, corporate culture, human resources, and technical capabilities, which a company can control or modify. The external environment is further divided into micro and macro environments, consisting of factors outside the company's control.

💡Internal Environment

Internal Environment pertains to the factors within a company that directly affect its operations. These factors are controllable by the firm and can be adjusted to align with the broader business environment. The script mentions value systems, vision, mission, objectives, organizational structure, corporate culture, human resources, and technical capabilities as elements of the internal environment, highlighting their significance in determining the strength and weaknesses of an organization.

💡External Environment

External Environment refers to factors outside the company that can influence its business indirectly. These factors are beyond the company's control and can provide opportunities or pose threats. The script distinguishes between micro and macro environments, with micro environment factors such as suppliers, customers, intermediaries, competitors, employees, and stakeholders, while macro environment factors include political, legal, economic, socio-cultural, physical, technological, and global aspects.

💡Micro Environment

Micro Environment includes the immediate surroundings of a business enterprise, such as suppliers who provide necessary inputs, customers who purchase products, intermediaries who facilitate distribution, competitors who offer similar products or services, employees who contribute to the company's operations, and stakeholders who have an interest in the company's performance. The script emphasizes the direct impact these factors have on a company's day-to-day functioning.

💡Macro Environment

Macro Environment consists of broader factors that affect a business on a larger scale and are generally outside the control of individual companies. These include political and legal factors, economic conditions, socio-cultural aspects, the physical environment, technological advancements, and global factors. The script explains how these factors can have a significant impact on a company's strategies, efficiency, and profitability.

💡Stakeholders

Stakeholders are individuals or groups who have an interest or stake in a company's actions and outcomes. This includes shareholders, employees, customers, suppliers, and the community at large. The script mentions stakeholders as part of the micro environment, indicating that their interests and actions can directly or indirectly influence the company's decisions and performance.

💡Corporate Culture

Corporate Culture refers to the shared values, beliefs, and behaviors that characterize a company. It shapes the way employees and management interact and work together. In the script, corporate culture is highlighted as a part of the internal environment, emphasizing its role in defining the company's identity and influencing its success.

💡Human Resources

Human Resources represent the employees and workers of a company, who are considered its most valuable asset. Their skills, qualifications, and contributions can significantly impact the company's success or failure. The script discusses human resources as a key component of the internal environment, where the right workforce can make a substantial difference to the company's performance.

💡Technological Environment

Technological Environment refers to the technological context in which a business operates, including the latest advancements, innovations, and the rate of change in technology. The script notes that companies must continuously adapt to and invest in technology to stay competitive, as it rapidly evolves and affects communication, operations, and social interactions.

Highlights

Business environment is the surrounding in which a business operates, influencing its plans, strategies, policies, and operations.

It encompasses all individuals, forms, forces, and factors that impact a business, either directly or indirectly.

The business environment is dynamic and ever-changing due to various influencing factors.

It is multifaceted, meaning small changes can be interpreted differently by various experts and observers.

A single change in the business environment can have a far-reaching impact on a company's survival, growth, profitability, and performance.

Business environment is relative and varies depending on local conditions and geographical locations.

It is complex, with a plethora of factors, events, and conditions that can be challenging to identify and understand.

Uncertainty is a key characteristic of the business environment, as the future is unpredictable and can only be estimated.

Interrelatedness is evident, as factors in the business environment often influence and are influenced by each other.

Internal environment includes factors that a business can control or modify, such as value systems, vision, mission, objectives, and organizational structure.

Corporate culture and human resources are critical components of the internal environment, affecting a company's success.

Resources and technical capabilities are tangible assets that determine a company's competitiveness.

External environment consists of factors beyond a business's control, such as the micro and macro environments.

Micro environment includes suppliers, customers, intermediaries, competitors, employees, and stakeholders.

Macro environment encompasses broader factors like political, legal, economic, socio-cultural, physical, technological, and global environments.

Political and legal environments significantly influence a company, especially with changes in government or legal policies.

Economic conditions are interdependent with a company's performance, affecting its ability to secure production factors.

Socio-cultural values are reflected in a company's corporate social responsibility and its relationship with society and nature.

The physical environment, including geographical location, affects business plans and decisions related to resources, markets, and transportation.

Technological advancements require continuous adaptation for a company to stay competitive in the rapidly changing landscape.

Global environment considerations are crucial for multinational companies operating in multiple countries.

Transcripts

hello everyone I am Sophie and I welcome

you all in my channel key differences in

this video tutorial I am going to

explain you what is business environment

its salient features and components so

friends without further ado let's get

started

[Music]

business environment in simple words the

town business environment can be

understood as the surrounding in which

the business enterprise operates it

covers all the factors which can be

affected by its plans strategies

policies and moves as well as the

factors which can affect the forms plans

policies strategies and operations

basically it is the combination of all

the individuals forms forces and factors

which may or may not be under the

control of the business organization and

has a direct or indirect impact on its

survival

growth performance and profitability so

we can say that each and every element

which can influence and be influenced by

the business enterprise is covered under

the town business environment now we

will discuss the salient features of

business environment dynamic as of a

natural environment business environment

is ever-changing in nature because there

are a number of factors which exist in

the business environment whose influence

can lead to change in the shape

character policies plans and business

strategy of the company multifaceted

business environment is multifaceted

that is a small change in the

environment can be viewed differently by

different experts analysts and observers

far-reaching impact business environment

has a widespread impact meaning that a

single change can affect the survival

growth profitability and performance of

the enterprise relativity business

environment is very much affected by the

local conditions and situations in which

the business is set up and that is why

business environment is different in

different geographical locations complex

business environment is a plethora of

different factors events and conditions

arising from a number of factors so it

is quite difficult sometimes to identify

which factor is causing it to change

uncertain uncertain it is the basic

characteristic of business and so does

the business environment as one can not

exactly what can happen in future only

predictions can be made

interrelatedness there are many factors

in the business environment which are

interrelated and that is why sometimes a

small change in one factor can led to

the change in another factor also now we

will discuss the components of business

environment business environment is

divided into two categories internal

environment and external environment

further the external environment is

subdivided into micro environment and

macro environment what is internal

environment internal environment refers

to the environment that contains those

factors which affects the business

enterprise directly these factors can be

controlled by the firm as well as the

firm can modify it accordingly so as to

be in sync with the overall business

environment basically the internal

environmental factors reflects the

pillars of the business which impart

strength or cause weakness to the

organization now we will discuss

internal environmental factors value

system a company's value system covers

the culture climate policies and norms

in short it is a basic framework of the

organization and every member of the

organization has to work within this

framework which can be modified as per

the requirement vision mission and

objectives a company's vision says about

its future destination mission defines

its business and the reason of its

existence

whereas objective state its ultimate aim

and the ways through which it can

achieve those objectives organizational

structure forms organizational structure

describes the way its activities and

operations are directed such as

organizational hierarchy delegation of

tasks composition of board of directors

etc corporate culture corporate culture

refers to the organization's values

belief and behavior which determines the

way in which organizations employees and

management communicate Human Resources

human resources that is employees and

workers are the most valuable asset of

the company which decides its success

and failure

resources and technical capabilities the

tangible assets which our company owns

comes from the physical resources which

determines its competitiveness secondly

technical capabilities determine its

technical know-how external environment

external environment refers to the

environment which can affect the

business directly or indirectly as it

contains those elements which are not

under the control of business

these factors provide opportunities of

post rate to the business

it contains micro environment micro

environment covers those factors which

fall under the immediate periphery of

the business enterprise macro

environment macro environment covers

those factors which are outside the

control of business and can directly

affect its functioning efficiency

strategies performance and profitability

now we will talk about factors covered

by micro environment suppliers suppliers

are the individuals and firms that

supplies raw material and various

factors of production required for

running the business customers customers

are the individuals that purchase the

product and pays the price for it

customers are regarded as king of

business the primary purpose of the firm

is to satisfy its customers by providing

the best quality product at reasonable

prices intermediaries intermediaries

implies the channel of distribution

opted by the company for the

distribution of its product competitors

competitors are the business rivals they

can be market leaders followers

challengers etc employees as we have

already discussed employees are the

biggest asset of an enterprise which

creates a difference an eligible and

qualified workforce can do miracles to

the company the company's success or

failure depends on them stakeholders

stakeholders include all the interested

parties which can be directly or

indirectly affected by company's actions

it includes debtors creditors

shareholders etc lastly media media owns

the strongest place at present every

company requires media to promote its

products and services further any

negative news

the company or its offerings may let the

company to losses come let's have a look

on macro environmental factors political

and legal environment the political and

legal environment of the country in

which the company operates has a great

influence on it whenever there is any

change in the government or legal rules

and policies economic environment the

economic conditions of the country and

the performance of the company are

interdependent as the form is dependent

on economic for various factors of

production and so if the economy is

doing well it will be reflected in the

performance of the enterprise

socio-cultural environment a company has

certain social and cultural values which

are reflected in its corporate social

responsibility implemented by the

company it is just a way of paying back

to the society and nature for the

resources used physical environment

physical environment refers to the

environment in which the form is set up

the geographical location often affects

and determined most of the business

plans and decisions such as availability

of raw material locational decisions

nearby market transportation facilities

etc technological environment as we all

know that technology is changing rapidly

with time and in the last few years we

have seen a drastic change in the way we

communicate travel and socialized so a

company has to continuously work on the

technology to walk a step ahead of its

competitors or else the survival would

be difficult global environment there

are some companies which operate in

multiple countries and so along with the

national environment they also have to

look after the global environment the

factors that affect the multinational

companies include foreign policies

foreign trade foreign investment

policies trade practices trade rules etc

so friends this brings me to the end of

this lesson

I hope this concept has been cleared

from today's lesson so guys please like

this video share it with your friends

and if you have any queries or feedback

for me then feel free to comment below

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