Let's Break The Term: Business Activities and Its Types
Let's Break The Term: Business Activities and Its Types
Let's Break The Term: Business Activities and Its Types
Characteristics of Business-
5.Profit Motive
Business Environment
Definition: The combination of internal and external factors that are
uncontrollable in nature and influence a company's operating situation.
Why do we need to study Business Environment ?
1.Identification of strength and weakness
2.Identification of opportunities and threats
3.Optimum use of resources
4.Survival and growth
5. To plan long-term business strategy
6.Coping with changes
Inland Environment:
Environment which lies within the origin is known as internal
environment. Internal factors are generally regarded as controllable
factors.
2. Values
5. Human Resources
The attributes of the employees like soft and hard skills, eminence, self-
esteem, dedication, attitude and aptitude etc could add to the strength
and weaknesses of an organization.
6. Owners
Owners are people who have invested their fund in the company
and have property rights and claims on the organization. Owner can
be an individual or a group of persons who created the company; or
who purchased the shares from the share market. They have the
right to change the company policies at any time. Hence it can be
said that they are a decisive component of the internal environment.
7. Board of Directors
The plans and policies of the firm should be properly framed taking
into consideration the objectives and resources of the firm. Proper
plans and policies help the firm to accomplish its objectives.The
higher authority must analyse the internal environment to foresee
the changes and frame appropriate policies well in time.For
example: the personnel policy in respect of promotion should be
based on merit rather than seniority.
I. Micro Environment:
Micro environment is also known as operating environment. It
consists’ of company’s immediate environment that affect its
performance. It includes customers, suppliers, intermediaries,
competitors etc. The micro environment consist the elements that
directly affects the company.
1. The customers:
Consumer is the king of the market. They are the centers of the
business. They are one of the most important factors in the external
environment. Customer satisfaction has become more challenging
due to globalisation.
2. The competitors:
The company has to identify its competitor’s activities. Information
must be collected about competitors in respect of their prices,
products, and promotion and distribution strategies. World is
becoming a global market.
3. The Suppliers:
Suppliers supply raw material, machines, equipment’s and other
supplies. The company has to keep a watch over prices and quality
of materials and machines supplied. It also has to maintain good
relations with the suppliers.
It is necessary to have reliable source of supply for the smooth
working of the firm. Uncertain supplies compel the firm to maintain
high inventories resulting into increase in the cost. The business
should not only rely on the single supplier but also have relations
with multiple suppliers.
4. Society:
Society affects company’s decisions. The expectation of the society
from the business is increasing. Therefore the business firm
maintains public relations department to handle complaints,
grievances and suggestions from general public. The members of
the society include:
i. Financial institutions
ii. Shareholders
iii. Government
iv. Employees
v. General public
5. Marketing intermediaries:
Market intermediaries include agents and brokers who help the
business firm to find the customers. They help the firm to promote
and distribute the goods to the final consumers.
They are the link between the firm and the final customers. Market
intermediaries include wholesalers, retailers, advertising firm,
media, transport agencies, banks, financial institutions etc. They
assist the company in promoting and targeting its product to the
right market.
Macro Factor:
Demographic Economic Technological Cultural Political Natural
Legal
1. Demographic Environment:
Demographic Environment relates to the human population with
reference to its size, education, sex ratio, age, occupation, income,
status etc. Business deals with people so they have to study in detail
the various components of demographic environment.
For example: If the population is large, then the demand for goods
and services will be more. It will have favourable effect on the
business. In the same way educational level is also an important
factor affecting business.
2. Economic Environment:
i. Economic environment consists of economic factors that influence
the functioning of a business unit.
3. Technological Environment:
Technology has brought about far reaching changes in the methods
of production, quality of goods, productivity, and packaging. There
is a constant technological development-taking place.
5. Political Environment:
The political environment in a country influences the legislations
and government rules and regulations under which a firm operates.
a. Legislature:
This includes parliament, legislative assemblies. They are the law
making bodies that frame rules and regulations.
b. Executives:
They include government beurocracy who implements the decision.
c. The Judiciary:
It includes Supreme Court, High Court who sees whether the
decisions taken and implemented by the executive are within the
constitutional framework. They are also known as dispute
settlement bodies.
6. Natural Environment:
Resource availability like land, water and mineral is the
fundamental factor in the development of business organisation. 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.
7. Legal Environment:
The state sets the formal rules, laws and regulations for the
country’s operational system. It creates a framework of rules and
regulations within which a business has to operate. The business
should have complete knowledge of laws and policies to run the
business effectively. Some of the laws are:
b. Factories Act-1948
d. FEMA Act-1999