The business has to prepare for the foreseen as well as unforeseen general environment factors that are most likely to affect it either positively or negatively. The trends on most business performances dropped during this period and Burberry experienced a low just like any other business. All these facts clearly reveal that Government has an upper hand in all the business policies in India. Further, more emphasis is being laid for the promotion of sanitation, health, forestry, soil conservation, housing etc. Richard Eelles explains this point with a beautiful illustration. Legal environment. Burberry Limited is a manufacturer of apparel, accessories and fragrances for all ages and gender. Technology refers to the knowledge of how to do things. Demographic environment includes a number of sub-factors viz., size, growth, age and sex compositions of the population, educational levels, languages, caste, religion etc. Therefore, the industrial units cared very little about the pollution prevention norms prescribed, and polluted water and air recklessly. Adjusting with the social and cultural development, of course, will enable the firm to reap a rich harvest. political upheavals can see the premises of a business broken into and equipment vandalized or damaged. In all economic situations low rates of interest encourage borrowing and the Federal government in a bid to improve this lowered the Federal fund rate from 6.5% to 1%. These may include market fluctuations, changes in government policy, inflation, emerging technology trends and other environmental factors affecting business growth and revenue. A decade ago, we were all under an impression that natural resources like air and water are not exhaustible and their supply is unlimited. Factors Influencing Business Environment may be internal or external to the business environment. In addition, there is price and distribution control over a number of commodities. According to the business dictionary, “The combination of internal and external factors that influence a company’s operating situation. Any successful organization pictures out the external factors that affect the business, anticipates the prospective market situations and work to minimize the costs while maximizing the profits. Even big business houses have to remain confined within a limited area or region. Politics always has a way of affecting the environment of any business and it can sometimes have disastrous effects on a business e.g. Business Environment Definition: Business Environment means a collection of all individuals, entities and other factors, which may or may not be under the control of the organisation, but can affect its performance, profitability, growth and even survival. Naturally their tastes, preferences, beliefs, temperaments are bound to differ. The report will give insight into the demographics and political, economic and legal systems of Myanmar. The entrepreneur while promoting a new firm should give due consideration to all these factors. Economic system can be classified into three broad categories viz.. Capitalist economy is at one end and the communist economy is at the other end. Similarly, the long-term view of the graphical representation below shows how the economic trends in business and household debt to Gross domestic product change with times and it is easily notable that in the periods of peak moments of the rate there is a high level of economic challenges such as the 1930s period and the 2000 to 2010 period. The society as we all know is not static. All these factors have big impact on the business. If a priority sector industry is started in a backward area, it can avail both the benefits available to priority sector as well as those meant for backward areas. Similarly, the various trade barriers (including tariffs) created by different countries affect the domestic firms and their export efforts. This is because the people of a particular geographical region will have similar tastes, preferences and requirements. business environment factors affecting business environment 2. BUSINESS ENVIRONMENT Business environment means all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand.There are various factors that are included in internal and external environment. This is particularly important for the reason that developments/changes in the remote environment influence the business organizations. When Burberry noticed the high demand of rainwear, it utilized this opportunity increasing its production in the market. 1. social classes and their influence on the society, 2. average disposable income level, 3. wealth of people, 4. economic inequalities, 5. level of education, 6. access to education (free, paid), 7. level and access to health-care, 8. health consciousness in society (smoking, drinking, drug use, safe driving, etc. The doctrine of “Laizze-faire” has become an outdated or discarded principle and the Government all over the world regulate the business activities. 6 Important factors of Business Environment and their Influence on Business, Factors of Business Environment and its Influence, 1. The business enterprises should constantly watch the developments taking place and make necessary adjustments in their production and marketing plans and strategies to fulfill the new social demands. The macro factors are generally termed as PESTLE which is Political, Economic, Social, Technological, Legal, and Environmental factors. The supply of the resources is very much limited. Globalization as government policy too has influence on the business. Economic condition or the health of the national economy implies the consideration of many elements namely, the stage of development, economic resources, the level of income, the distribution of wealth and income etc. Even the very survival of the business firm depends on how the firm reacts and responds to the Government policies. Geographical and Ecological or Natural Factors, 6. As the principle guiding force, macro environment agents play a pivotal role in determining the decisions of an organization. 1. COPYRIGHT © 2013-2020 PAYPERVIDS. These include economic, social, legal, technological and political factors. From these observations, it has become clear that scientific discoveries as such of no use or have no meaning unless they are used for making new and useful goods and services for people. The social changes in life also lead to new fashion trends that affect business in any part of the economy. It is here that the Government acts as a regulator or controller, coordinator, caretaker and guardian, and supplier. Mixed economy refers to a situation where public and private sectors co-exist. Kotler and Armstrong (2004) explain that different restrictions are imposed on all organizations by the environment. Hence the Governments all over the world prevent the businessmen and industrialists from recklessly exploiting the scarce resources for their immediate gains. In the Indian context, the Government’s role and influence on business policy are multifarious. Administered prices are also there. 5 Factors that Influence Business Environment. Here we have discussed about 6 important factors that influence business environment in brief. The Central Government has also constituted a Central Pollution Control Board. It is also a component of the FTSE 100 Index. At the same time, certain external factors can also affect a company's chances of success. The dominant features of technology have been made in the last three decades. It took more than a century of applied research and engineering in photography to develop the basic discovery into a saleable product. It has branded stores and franchises globally, and sells through allowances in third-party stores. So let us start with the introduction to business environmentand learn its importance. The forces which constitute the business environment are its suppliers, competitors, media, government, customers, economic conditions, investors and multiple other institutions working externally. The disposal of wastes, emission of gas from factory chimneys has also created severe problems of air and water pollution. Particularly for the last ten years, technology has worked wonders. Before implementing any business policy, it is important for the company to understand its business environment. The Government under the banner of rapid industrialization drive, had allowed industrialists to start new factories anywhere and everywhere in the country. The control of big business is exercised through MRTP Act. It has also utilized licensing and brand extensions to plead to a younger customers of their fashion. Economic Environment: Business environment is therefore, the total of all external forces, which affect the organization and the business operations (Kotler &Armstrong 2004). Since failure to make provision for such preventive means will entail punitive action, the industrialists should bear additional financial strains and liabilities. P.J. Natural environment includes factors such as seasonal variations, climatic differences, soil conditions and natural terrain.In consumer markets, the natural environment affects companies because of the differences in the nature of products bought by consumers due to variations in seasons and climate. It is the main institution that translates discoveries into application for public use. decide the type of living in a particular region. We have a dynamic i.e. Examples of environmental factors affecting business include: Climate; Climate change; Weather; Pollution; Availability of non-renewable goods; And consequently, Availability of certain renewable goods; Existence of certain biological species; Workplace efficiency; Environment-related laws; Here is how some of the aforementioned examples can affect business: The economic environment can be defined as the combination of all the economic factors such as, inflation, income, employment rate, etc. This diversity is apparent even in small areas where the people are speaking the same language. Above all, tax laws and policies play a decisive role in business policy. Shaikh S, 2010, "Business environment" New Delhi: Pearson, 2010. He says as follows. Examples of Environmental Factors Affecting Business. Bearing this point in mind most big companies now-a-days show less profit than that they should have normally earned, just to create a public image. This trend portrayed by the graph shows how the economic situation may affect the economy and general spending and therefore the performance of any business within such an economy. We have only 0.052% of sweet water available to us in our rivers, lakes, crust of earth. In fact, a number of companies in our country are now spending money for society’s welfare. Of the various measures the following are noteworthy. Business Environment is not concerned with a single factor. Environmental policy is the commitment of a business to the regulations, laws as well as other policy mechanisms that are concerned with environmental issues. Despite directly affecting businesses, these variables refer to financial state of the economy on a greater level — whether that be local or global. The company should identify with the environment in which it operates and formulate its policies in accordance with the forces which operate in its environment (Mühlbacher, Dahringer & Leihs 2006). The Government exercises tight control over the extraction and exploitation of certain natural resources, which are essential for industrial performance. Any successful organization pictures out the external factors that affect the business, anticipates the prospective market situations and work to minimize the costs while maximizing the profits. Still on the economic aspect, it is undeniable that all business and non-business organizations felt the impact of the 2008 economic crisis, which rocked the whole world. Businesses can’t control external factors but must respond to them. These factors affect the threats & challenges of business. Internal Environment of a Business Factor 1# Value System: The value system of an organisation means the ethical beliefs that guide the organisation in achieving its mission and objective. These factors need to understand by every business for its success. They should look for the Government’s sanction at each stage. Burberry is extending its web reach so that its customers worldwide can view its brands. In addition to all such influences, there are public sector units to deal with various types of business and they directly compete with private business. Burberry was able to establish its first foreign outlets in Paris, United States and South America, and export its first shipment of raincoat to Japan because of the government’s globalization policy. The company should tackle the business environment well since internal environment will reveal its strengths and weaknesses, while the external environment will reflect the opportunities available to the organization and the threats it faces. At the same time, each factor should be studied individually. It comprises of several factors and each factor influences the business firm in its own way. It also includes the exact rulings and courts decision. Business environment determines the success or failure of this policy. has often been resorted to by the government. The availability of physical facilities limits the scope and prospects of business.Technology refers to the knowledge of how to do things. Business environment are categorized into three main categories; internal environment; operational environment; and general/external environment. Environmental Policies. Thus, environment is multi-dimensional and very complex in nature. The company targets people involved in hunting, fishing, skiing, archery, mountaineering, golf and tennis (Burberry 2012). For example, peoples’ demand determine the kind of products to be offered for sale; this demand is consequently affected by peoples’ attitudes, customs, cultural values, fashion and other related forces. Hence, entrepreneurs shall naturally tempt to go for priority sector. In the US the nature of business environment is dominated by the government regulations with a view to ensure a certain level of economic life to the people. Global Business Environment Factors Affecting Myanmar 1153 Words | 5 Pages. It also helps in … Profit is the ultimate object of all business endeavors. They need to undertake an analysis of the environment regularly. Generally, goods, which are largely preferred by people in one region, may not be liked in another region. affect the Marketing System of a country. These three elements of the economic environment should be analyzed individually as well as collectively as a whole. ALL RIGHTS RESERVED. Besides, it is the indicator of the efficiency of the business firm. This political environment is influenced by the political organization, philosophy, government ideology, nature and extent of bureaucracy, the country’s political stability, its foreign policy, defense and military policy, the country’s image and that of its leaders both locally and internationally (Shaikh 2010). They should strictly adhere to the conditions laid down by the Pollution Control Boards in matters of treatment and discharge of trade effluents and wastage. Burberry Company should study well its business environment before implementing its business policies. Required fields are marked *. For example, Burberry Limited makes a considerable portion of its income from licensing, which amounts to about £109 million pounds. The company has implemented different policies and strategies to since introduction to make its business successful. C. FINANCIAL FACTORS : Financial factors like financial policies, financial position and capital structure also affects a business performance and its strategies. These factors have a notable influence on business prospects. affects the business firm and the demand pattern of various goods and services. The code of conduct that is supposed to be followed by the business is determined by the socio-cultural environment. According to Shaikh (2010), any policy undertaken in a company is always affected by its environment. As stated already, there are certain spheres in India where no private enterprise is allowed to operate. Such encouragements are denied to non-priority sectors. Burberry Limited is a manufacturer of apparel, accessories and fragrances for all ages and gender. The enterprise has little influence on the environment and therefore, it is important for the company to identify with the environment of its operation and devise its policies in relation to the forces in that environment. The remaining is in the Polar Regions, ice burgs and glaciers. On the contrary to internal factors, external elements are affecting factors outside and under no control of the company. When economic activity is strong, unemployment rates are low, and income levels rise. Economic factors that influence the business are the collective of the nature of the country’s economic system, its structures, and economic policies, how the capital market is organized, and nature of factors of production, business cycles, and socio-economic infrastructure. For example, in order to reinvent its luxury brand status, the company launched the Prorsum designer collection. The activities of most business firms are affected by international factors like the raise of inflation in different countries with which they trade. Various internal and external factors affect the economic environment that a business operates in. The value system of a business organisation also determines its behaviour towards its employees, customers and society at large. There are numerous criteria considered as external elements. Because even a slight change in political circumstances can make the business environment vulnerable. Some companies have also been asked to be socially responsive. Changes in demand are also one great factor that determines success and business performance. Considering the outside environment allows businessmen to take suitable adjustments to their marketing plan to make it more adaptable to the external environment. Environmental policies are considered the major external factor that can impact the strategy of a business. These factors provide opportunities, threats and challenges to the firm. The then Prime Minister Mrs. Indira Gandhi appointed a High Power Committee to advise Government on this important issue. The Government also acts as a supplier as well as a financier through its financial institutions, supplies natural resources needed by the firms etc. The geographical situation, the physical feature, the climate, rainfall, humidity, the vegetation etc. enjoys a virtual monopoly over extraction of oil and mineral gas. Also, due to Japanese and American craving for prestigious designer goods, Burberry export business increased dramatically (Burberry 2012). In India, almost all the coal mines are nationalized and barring a few production of steel is also under state monopoly. Environmental factors: Environment factors such as weather, climate change, temperature etc. Taxes 6. News And Information From Around The World. In India, Government is the largest employer and the public sector controls a major share of the corporate sector. The labour force is also highly heterogeneous in many respects. Any unfavorable alteration of this natural environment is called environmental pollution. Changes in demand are also one great factor that determines success and business performance. Still on the economic aspect, it is undeniable that all business and non-business organizations felt the impact of the 2008 economic crisis, which rocked the whole world. All these factors directly limit the scope of performance of the business firms. In spite of this, we pollute and waste water”. The impact of the menace came into lime light only in 1984 when the Bhopal episode took 2,000 lives. The country’s social environment affects the functioning of the business since it determines the value system of the society. These are all internal factors since the company has control over them and can improve them through company projects. In the case of telephone, the time lag was over half-century; Radio took 35 years as contrasted to radar, which took 15 years. The Industrial Policy of India is an important consideration to our industrialists while starting their venture. New demands are created and old one lost in due course. Economic factors that influence the business are the collective of the nature of the country’s economic system, its structures, and economic policies, how the capital market is organized, and nature of factors of production, business cycles, and socio-economic infrastructure. increasing environment awareness has made this external environment factor a significant issue to be considered by business firms. Relevant Article: Social Factors Affecting Business Economic factors are connected with goods, services, and money. Before implementing any business policy, it is important for the company to understand its business environment. Technological factors affects business concerning technological investment, technological application and the effect of technology on markets. Some of these forces affect the business directly but others affect business indirectly. In the past, it took a long time. Environmental concerns are becoming more important with the wider impact of doing business increasingly recognized by consumers as a factor in their buyer behavior. The availability of physical facilities limits the scope and prospects of business. The priority industries shall get a number of incentives and other positive support from the Government as well as from other financial institutions. Burberry is listed on the London Stock Exchange. The degree of control or direction of the Government may differ from country to country but its impact cannot be ruled out elsewhere. The range of government l… “Economic development depends upon technical progress and innovations. Moreover, industrial units started in developed areas particularly within the specified limits of Metropolitan cities are made subject to various difficulties and handicaps. These include economic, social, legal, technological and political factors. In the case of India, price and supply regulation of products like iron, steel, cement, and drugs, etc. Some factors influence the performance of the firm directly while the influence of some other factors is only indirect. Economic environment within a country is closely linked with the political and legal environment there. Even banks are asked to ignore them while extending credit. This was meant to better business the economic situation after the 9/11. The economic policy of the Government has a very decisive impact on the business units. This fundamental difference gives rise to different demand patterns and calls for different marketing strategies. It is considered as the 98th most valuable brand globally. Their castes and customs differ widely. As an Amazon Associate I earn from qualifying purchases. Most important factors of micro environment of business are as follows: 1. competitors, 2. customers, 3. suppliers, 4. public, 5. marketing intermediaries, 6. workers and their union! Basically, the very environment of the economy can have an effect on two essential aspects – your company’s levels of production and the decision-making process of your customers.Some examples of economic factors affecting business: 1. There are several general environment factors and their impact on any form of a business. Therefore, any technological advancement affects highly the business in a country. Burberry has more than 500 stores that operate in more than 20 countries. Again certain sectors are identified for special encouragement and this discriminates against others. These forces include customers, creditors, competitors, government, socio-cultural organizations, and political parties, national and international organizations. Even in South India, people in different states may not have similar tastes, likes etc. The success or failure of an organization is primarily established by the effectiveness of its interaction with its environment. Business is affected by different factors which collectively form the business environment. These political, economic, social, technological, environmental and competitive factors are represented by the acronym PESTEC. On the basis of the committee’s report, a separate Department for Environment was set up on 1st Nov 1980. The demand for further lowering of the interest rates however, continued due to rising and high U.S current account deficit as portrayed by the above graph. Thereafter, the Government began to take serious steps to prevent this damage done to the ecological environment. Free Trade Economy or Capitalist Economy, Centrally Planned Economy or Communist Economy or Socialism, and. Joseph Schumpter was the first economist who recognized the place of technology in the sphere of economic development. Today developed countries are seeking good avenues for investment in developing countries. The impact of this environment is much more direct and deliberate than other factors. Therefore, it can be concluded that economic trends are indeed significant determinants of general economic and business performance. Demand / Supply Several constraints are imposed on the enterprise by the environment and it imposes huge impacts and influence on the scope and direction of the company activities. Further the Government is also very liberal in issuing license to consumer goods industries at the expense of the capital goods industry. The internal factors that affect a business are such factors as employees, competitors, customers, suppliers and the culture of the organization. These factors affect the performance of the business in several ways and understanding them is important for strategy formulation. Even Government organizations and departments (Public Sector Units) are not exempted from the purview of the punishment. These forces include customers, creditors, competitors, government, socio-cultural organizations, and political parties, national and international organizations. This is because this target market accounts for 30% of sales in its London stores (Burberry, 2012). This is made possible as portrayed by the graph below because of laws and regulations in its foreign destinations of operations, which allow it to charge licensing fee. These include economic, legal, political, technological, and socio cultural factors. The Government plays a number of roles as it interacts with business. 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