The term Business Environment is composed of two words Business and Environment. In simple terms, the state in which a person remains busy is known as Business. The word Business in its economic sense means human activities like production, extraction or purchase or sales of goods that are performed for earning profits.
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On the other hand, the word ‘Environment’ refers to the aspects of surroundings. Therefore, Business Environment may be defined as a set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components:
Internal Environment
External Environment
Internal Environment
It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise.
External Environment
Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors, Demo-Graphical factors etc. It is of two Types:
Micro/Operating Environment
Macro/General Environment
Micro/Operating Environment
The environment which is close to business and affects its capacity to work is known as Micro or Operating Environment. It consists of Suppliers, Customers, Market Intermediaries, Competitors and Public.
Suppliers: – They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier.
Customers: – Customers are regarded as the king of the market. Success of every business depends upon the level of their customer’s satisfaction. Types of Customers:
Wholesalers
Retailers
Industries
Government and Other Institutions
Foreigners
(3) Market Intermediaries: – They work as a link between business and final consumers. Types:-
Middlemen
Marketing Agencies
Financial Intermediaries
Physical Intermediaries
(4) Competitors: – Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the Competitors.
(5) Public: – Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product.
Macro/General Environment:
It includes factors that create opportunities and threats to business units. Following are the elements of Macro Environment:
Economic Environment: – It is very complex and dynamic in nature that keeps on changing with the change in policies or political situations. It has three elements:
Economic Conditions of Public
Economic Policies of the country
Economic System
Other Economic Factors: – Infrastructural Facilities, Banking, Insurance companies, money markets, capital markets etc.
Non-Economic Environment: – Following are included in non-economic environment:-
Political Environment: – It affects different business units extensively. Components:
Political Belief of Government
Political Strength of the Country
Relation with other countries
Defense and Military Policies
Thinking Opposition Parties towards Business Unit
(ii) Socio-Cultural Environment: – Influence exercised by social and cultural factors, not within the control of business, is known as Socio-Cultural Environment. These factors include: attitude of people to work, family system, caste system, religion, education, marriage etc.
(iii) Technological Environment: – A systematic application of scientific knowledge to practical task is known as technology. Everyday there has been vast changes in products, services, lifestyles and living conditions, these changes must be analysed by every business unit and should adapt these changes.
(iv) Natural Environment: – It includes natural resources, weather, climatic conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall etc. Every business unit must look for these factors before choosing the location for their business.
(v) Demographic Environment :- It is a study of perspective of population i.e. its size, standard of living, growth rate, age-sex composition, family size, income level (upper level, middle level and lower level), education level etc. Every business unit must see these features of population and recognize their various need and produce accordingly.
(vi) International Environment: – It is particularly important for industries directly depending on import or exports. The factors that affect the business are: Globalization, Liberalization, foreign business policies, cultural exchange.
Characteristics:-
1. Business environment is compound in nature.
2. Business environment is constantly changing process.
3. Business environment is different for different business units.
4. It has both long term and short term impact.
5. Unlimited influence of external environment factors.
6. It is very uncertain.
7. Inter-related components.
8. It includes both internal and external environment.
Political Environment of Business.
Political environment can affect a business either positively or negatively depending on the prevailing situation in a country. It mainly forms the external factors which are part of the macro-environment and whose control is beyond the ability of human beings.
These factors touch on the way politics are conducted in a country, which directly reflects on what is happening within the government. This means that a democratic country will accord freedom to its people to vote in a government that has their interests at heart.
On the other hand, a dictatorial government will not earn the respect of its citizens leading to economic as well as political instability and uncertainty. Even though such a government will go, businesses suffer a lot since they are not sure of their future underlining the importance of a democratic government to a country and business.
It is needless to say, that once a country is stable, more investment opportunities will be realized thus attracting more and more investors. This will reflect positively and directly to the local businesses, as even the citizens will have full confidence with them.
In the politics of the day, business success depends on politics by a great percentage and in many ways. Politicians are usually the people controlling the operations of a government and will decide which countries to trade with as well as the trading conditions.
“The Form of Government” in the prevailing political environment in India
India is a federal state with a parliamentary form of government. It is governed under the 1949 constitution (effective since Jan., 1950). The president of India, who is head of state, is elected for a five-year term by the elected members of the federal and state parliaments; there are no term limits. Theoretically the president possesses full executive power, but that power actually is exercised by the prime minister (head of the majority party in the federal parliament) and council of ministers (which includes the cabinet), who are appointed by the president. The ministers are responsible to the lower house of Parliament and must be members of Parliament.
The federal parliament is bicameral. The upper house, the Council of States (Rajya Sabha), consists of a maximum of 250 members; the great majority are apportioned by state-each state’s delegates are chosen by its elected assembly-and 12 members are appointed by the president. In addition, one member represents the union territory of Pondicherry. Members serve for six years, with one third retiring every other year. The lower house, the People’s Assembly (Lok Sabha), is elected every five years, although it may be dissolved earlier by the president. It is composed of 545 members, 543 apportioned among the states and two chosen by the president. There is a supreme court consisting of a chief justice and 25 associate justices, all appointed by the president.
Administratively, India is divided into 28 states and seven union territories. State governors are appointed by the president for five-year terms. States have either unicameral or bicameral parliaments and have jurisdiction over police and public order, agriculture, education, public health, and local government. The federal government has jurisdiction over any matter not specifically reserved for the states. In addition the president may intervene in state affairs during emergencies and may even suspend a state’s government. In India, we have a democratic government where people are free to vote for the party they like the most and want it to be in power to run the country for next 5 years. People exercise their right to vote and select a party from two main fronts, the national defense alliance (NDA) and the union progressive alliance (UPA). These two parties comprise the republic of India.
The ideology of the ruling parties.
Many political parties base their political action and program on an ideology. In social studies, a Political Ideology is a certain ethical set of ideals, principles, doctrines, myths, or symbols of a social movement, institution, class, or large group that explains how society should work, and offers some political and cultural blueprint for a certain social order. A political ideology largely concerns itself with how to allocate power and to what ends it should be used. Some parties follow a certain ideology very closely, while others may take broad inspiration from a group of related ideologies without specifically embracing any one of them.
Economic Stability
Equal distribution of income
Increase in the rates of GDP and per capita income
Corruption free India
Increase in the rates of global trades
By encouraging foreign investors to invest in India-to increase FDI( Foreign Direct investment)
Strength of opposition
India is a democratic country where people have the right to choose their own political party. There are many contenders during elections and the contenders who wins the elections form the ruling government. The ruling government can comprise of single party or a group of parties.The ruling party forms the government while the other parties form the opposition. Opposition also may consist of a single or a group of parties. The parties in the opposition may unite and fight against the ruling party or can fight individually. In the present scenario we have two parties who are fighting against the UPA, the ruling party. Initially, spare headed by Anna Hazare the anti corruption campaign supported by Arvind Kejriwal and Kiran Bedi started at Maharashtra.He introduced Janlokpal Bill.
Role and responsibility of bureaucracy
Fundamental Understanding
[1] As persons having the power to legislate and who represent the people, politicians will
carry out their responsibility for oversight, to ensure that public administration is
conducted impartially and neutrally. In addition, under the parliamentary system they
will join the government as ministers, senior vice ministers, parliamentary secretaries,
etc. (hereinafter, “minister/ ministers etc.”) and responsibly formulate, coordinate and
decide upon policies for public administration while also engaging in the guidance and
supervision of the bureaucrats.
Bureaucrats, as servants of the entire nation, will respect the principle of political
neutrality and primarily implement policies and undertake the execution of individual
public administrative duties in keeping with their areas of expertise, based on laws and
ordinances.
[2] Politicians will take responsibility for formulating, coordinating, and deciding upon
policies. In keeping with the needs of the public grasped during the course of their
duties, bureaucrats will assist politicians in formulating, coordinating, and deciding upon
policies, such as through providing basic data and information for those policies,
presenting multiple options, and so on.
[3] Politicians and bureaucrats will have a relationship characterised by separate duties.
They will act as one in executing their duties for the nation and the people, each on the
basis of these separate duties.
[4] Politicians and bureaucrats must each respect these separate roles for which they are responsible and always endeavor to create a relationship based on trust.
Guidelines for Responses
The following measures will be taken from the viewpoint of thoroughly instilling
leadership by the Cabinet into decision-making on government policies. With regard to the
relationship between politicians and bureaucrats, senior vice ministers and parliamentary
secretaries etc. will, based on instructions by the minister, carry out the roles stipulated in the
Rules Governing Ministers, Senior Vice Ministers and Parliamentary Secretaries in an
appropriate and timely manner.
Politico-legal institutions
Political system is a set of formal legal institutions that constitute a “government” or a “state.” This is the definition adopted by many studies of the legal or constitutional arrangements of advanced political orders. More broadly defined, however, the term comprehends actual as well as prescribed forms of political behavior, not only the legal organization of the state but also the reality of how the state functions. Still more broadly defined, the political system is seen as a set of “processes of interaction” or as a subsystem of the social system interacting with other nonpolitical subsystems, such as the economic system. This points to the importance of informal sociopolitical processes and emphasizes the study of political development.
Traditional legal or constitutional analysis, using the first definition, has produced a huge body of literature on governmental structures, many of the specialized terms that are a part of the traditional vocabulary of political science, and several instructive classifying schemes. Similarly, empirical analysis of political processes and the effort to identify the underlying realities of governmental forms have yielded a rich store of data and an important body of comparative theory. The third definition has inspired much scholarly work that employs new kinds of data, new terms, and some new concepts and categories of analysis.
