This external environment represents a set of conditions, circumstances and influences that surround and affect the functioning of an organization. “Every organisation exists in an environment that extends beyond its formal boundaries. “An organisation’s external environment consists of those things outside an organisation such as customers, government units, suppliers, financial firms and labour pools that are relevant to an organisation’s operations.” -Professor Gerald Bell It is complicated and continuously changing.” -Professor Keith Davis A single firm’s environment is narrow in scope than the total environment of business. It is broad and ever changing as its separate elements interact. “Business environment is an aggregate of all conditions, events and influences that surround and affect it. “Environment consists of all external and internal influence the complex interaction of the market, production and finance, the three basic components of our business world.” -Mr. “It is set of those inputs to an organisation which are under the control of other organisations or interest groups or are influenced by interaction of several groups, such as economy” -Professor Paire and Anderson However, level of interaction may differ from organization to organization and the impact can vary overtime. Moreover, the organization does not operate in a vacuum but must interact with its environment in order to function. It may be in terms of receiving inputs, returning outputs and using feedback to modify inputs and the transformation process. In its operational behaviour, an organization interacts with the various forces in its environment. But progress, success and survival largely depend upon their capacity and ability to adapt successfully to environmental changes available in surroundings of a business. These factors are generally uncontrollable and beyond the control of business enterprises. These factors are treated as given and business enterprise is expected to operate under a particular set of environmental system. Business and its Environment :Ī business depends on certain internal and external factors.
A host of external factors influence a firm’s choice of direction and action. Regardless of the industry, the external environment is critical to a firm’s survival and success. Successful managers must recognize opportunities and threats in their firm’s external environment. Armed with an appreciation of the forces in their industry that give rise to opportunities and threats, managers should be able to make better strategic decisions. The process of thinking strategically requires that managers understand how the structure and competitive dynamics of their industry affect the performance and profitability of their companies. Businesses must understand the changes in the environment and how these changes affect their performance. We live in a dynamic environment that changes all the time. Hence, as Kenich Ohmae says that “environmental analysis is the critical starting point of strategic thinking.” Charles Darwin has said, “It is not the strongest of the species that survive nor the most intelligent, but the one most responsive to change.” George Salk says, “If you’re not faster than your competitor, you’re in a tenuous position, and if you’re only half as fast, you’re terminal.” The external changes might influence the activities and quality of decisions of both the firm and its competitors. The rapidly changing business environment might shorten the life of a given strategy. Opportunities and Challenges of Business Environment.
Business Environment: Meaning, Definition, Concept, Components, Significance, Scope, Factors, Features, Dimensions and More…
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