Professional Documents
Culture Documents
ENVIRONMENT
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Business Environment and Its
Elements
The business units need to adapt themselves
to these changes in order to survive and
compete in the market. Hence, it is necessary
to have a clear understanding of business
environment at the conceptual level and the
nature of its various components.
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Meaning of Business
Environment
The term ‘business environment’ connotes
external forces, factors and institutions that
are beyond the control of the business but
affect the functioning of a business enterprise
to a significant level
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Importance of Business
Environment
1. Determines Opportunities and Threats
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Features of Business
Environment
Business environment is the surrounding
situation
Environment is dynamic
Environment is multifaceted
External environment
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Economic Systems
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Types of Economic Systems
3. Mixed economy
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Globalisation and Business
Environment
Globalisation is the term used to describe the
process of removal of restrictions on
foreign trade, investment, innovations in
communications, and transport systems.
Firms often go global as part of their
business strategy. This is mainly because
of three reasons:
(i) They get access to more markets and customers.
(ii) They can create better ‘brands’ by means of expansion so that
the acceptance at the
home market also increases.
(iii) There could be a saturation point in the domestic business1-12
Driving factors of
Globalisation
increased international trade
growth of multinational corporations
internationalisation of finance
application of new technologies to these
operations, especially in IT
Two macro factors seem to underlie the trend
towards greater globalisation. They are as
follows:
decline in trade barriers to the free flow of goods, services,
and capital that has occurred since the end of world war
technological changes, particularly the dramatic
developments that have occurred in recent years in
communications, information processing, and transportation
technologies
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Multinational Corporations
(MNCs): Benefits to the Host
Country
The income level and the investment level
increases consequent to the entry of MNCs.
The host country’s industry gets latest
technology from other countries through the
MNCs.
The host county’s business firms and people
get to know about best international
management practices
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Multinational Corporations
(MNCs): Problems to the Host
Country
Since MNCs are not operating within the
national territory, their operations affect the
sovereignty of the host country government.
Small- and medium-scale domestic industries
find it difficult to compete with MNCs.
MNCs, sometimes, withdraw their capital and
shut down their production units suddenly,
which in turn creates labour problems in the
host country.
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Global Capitalism
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