What are the 5 Elements of the Business Environment?
Various factors influence the industry in various ways. Various authors and researchers have identified numerous elements of the business environment while describing the impact of the elements of business environment. For example-
According to Naums, “In all the factors that influence industrialization, external support of financial resources, technology, management, and production capacity, etc. are significant.
Vesper and Albaum mentioned various environmental components, namely internal market, artificial production, industry, technical knowledge labor force, research and laboratories, public and private laboratories, sources of capital, and government cooperation influence a new industrialist. Many such researchers and authors have identified many such elements.
What is the business environment?
Business environment refers to the surrounding conditions or influencing forces, which affect the organization’s activities, operations, or decisions.
Business is a socio-economic institution. The external environment of the business that affects the launch and performance of an entrepreneur’s business or industry is called the business environment.
An area’s political, social, cultural, economic, legal, and technological environment considerably influences business development. These are considered elements of business environment. These elements are business organizations, policy-making; Influences decision-making, and management. Following are popular notable definitions of business environment:
(i) According to Philip Kotler, “Business environment is all the forces influencing the business organization.”
(II) According to Professor N.C. Ray Chowdhury, “The conditions that influence the development of business are called business environment.
So it can be said that the business environment is a condition consisting of all the forces and surrounding elements, which directly and indirectly affect the business activities.
What are the elements of business environment?
What are the internal components of business environment? Following are the internal elements of business environment:
(1) Political environment
(2) Socio-cultural environment
(3) Economic environment
(4) Legal environment
(5) Technological environment
Explain the components of business environment
Following are the main factors influencing the industrial environment:
1. What is the political environment?
An important component of the business environment is the political environment. Industrialization has a positive relationship with the political environment of the country. If the political environment of the country is stable and favorable, entrepreneurs are encouraged to start new industries.
If the political environment is unstable and there is an unfavorable environment for industrialization, entrepreneurs tend to become industrialized. Because then chaos, anarchy, and insecurity arose in the country and the rule of law collapsed. As a result, entrepreneurs are not encouraged to invest. So it can be said that industrial and economic activities are greatly affected by the political environment.
2. What is the socio-cultural environment?
Each country or region has its own social and cultural environment. The social and cultural environment is the sum total of the behavior, religious and social norms, beliefs, values, tolerance, and practices of the people of a country.
An entrepreneur’s venture is largely controlled and guided by these elements. For example, in Western countries, drinking has become a culture of society; As a result, there is no dearth of entrepreneurs in wine production and marketing.
On the other hand, for our country and Muslim countries, the expansion and promotion of such business are absolutely limited as it is contrary to social and religious beliefs.
So it can be said that social and cultural norms are either creating obstacles or encouraging them in business. Thus the social and cultural environment is considered to be an important factor influencing industrialization.
3. What is the economical environment?
Economic environment refers to the income, savings, inflation, deflation, developed capital market, stock market, commodity market, etc. of the people of a region or country. These encourage and in many cases discourage an entrepreneur from investing.
If the financial condition of the people is good, consumption and purchasing power increases. As tastes change, interest in buying new and better quality products grows, which in turn encourages entrepreneurs to set up new industries. As a result of the favorable economy, various entrepreneurs, businessmen, and industrialists feel encouraged to invest. As a result, business and trade developed in the country, and economic development was achieved.
On the other hand, when people fall into financial distress and inflation occurs, purchasing power gradually declines. As a result, entrepreneurs are not encouraged to take up any new venture. Not only the country, but the international economic environment also affects the industry. So it can be said that the economic environment is one of the most important factors in industrialization.
4. What is the legal environment?
To live in a fair and beautiful society, one has to follow some customs, traditions, and rules. All these rules and regulations are called legal environments.
Legislation is also very important for environmental industries in any country. It plays a helpful role in maintaining peace and stability in the country. Industrial and labor laws have been enacted all over the world to maintain law and order in trade and commerce.
Again, separate commercial courts have been established in some countries. If only the law and its proper enforcement are effective in the country, then new initiatives are observed in the industry. If the government of the country properly enforces the law to protect the interests of the businessmen, the business and trade in the country expand.
So it can be said that the legal environment is a component of the business environment, which has a significant influence on the legal environment for industrialization.
5. What is the technological environment?
Technology is a product of modern science. And the more advanced the country is in technology, the more advanced the country is in industry. Technology can revolutionize a country. New technologies are encouraging people to become more entrepreneurial. New and improved technology has resulted in more profitable companies in less time. In this, due to consumers getting products at lower prices, their tendency to consume has increased, resulting in increased demand. New initiatives are needed for this.
So it can be said that the development of technology is having a great impact on the industry. So, day by day, the number of entrepreneurs is increasing.
From the above discussion, it can be said that the government takes various reforms including legal, cultural, political, and industrial policies to bring the political, social and cultural, economic, legal, and technological environment favorable to the industrialization of the country; So that local and foreign entrepreneurs can be encouraged to invest by creating more opportunities.