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INTRODUCTION
A business firm is an open system. It gets resources from the environment and supplies its goods
and services to the environment. There are different levels of environmental forces. Some are
close and internal forces whereas others are external forces. External forces may be related to
national level, regional level or international level. These environmental forces provide
opportunities or threats to the business community. Every business organization tries to grasp the
available opportunities and face the threats that emerge from the business environment.
The term business typically refers to the development and processing of economic values in
society. Normally, the term is applied to portion of economic activities whose primary purpose is
to provide goods and services for society in an effective manner. It is also applied to economics
and commercial activities of institutions which having other purposes.
Business may be defined as the organised effort by individuals to produce goods and services to
sell these goods and services in a market place and to reap some reward for this effort.
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A variety of factors can affect company's business. Such factors can be national level, regional
level, and international level environmental forces. These factors are also known as societal
factors or macro level business environment factors. In general, five forces are taken as the
general environmental factors namely economic, socio-cultural, political-legal, technological,
and international. Some writers included natural environment as a distinct component but the
growing social awareness on natural environment shows that this component can be included
into the socio-cultural environment.
Set of these environmental factors is mostly referred by first four factors PEST (Political-legal,
Economic, Socio-cultural, and Technological). The logic behind this is pervasiveness of the
international environment because it affects all these four sectors. Fast growing technological
development, outsourcing business, emergences of multinational companies, and global and
regional alliances have made the world a global village.
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Environment is Complex
Business environment principally consists of a number of factors, events conditions. These are
influenced to different departmental source in the organisation. These conditions do not exist in
isolation and create entirely new set of influences which interact with each other. This is difficult
to influence to organisation. All these factors have to be considered as environment analysis is
complex and rigid and totally very difficult to grasp by the functional manager and top level
employees in the organisation.
Environment is Dynamic
Business and company environment is constantly changing in different nature. Micro and macro
environment factors are influenced to business. It impact to change on the business conditions.
Dynamic environment is flexible and dynamic nature in company. This is causing due to change,
strategic manager can shape strategy and formulate short term and long term objectives.
Environment is Multifaceted
Strategic observer can shape and observe different characteristics of environment. Strategic
observer observes a particular change or latest development in the business. It may be viewed as
different opinions from different observers in the organisation. These things are frequently seen
when the development happens. All are happy to welcome it and think as an opportunity for the
company, even also as threat to company.
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Geographic Distribution
It refers to geographic region and population that shifts from one region of a nation to another or
from village/rural areas to urban areas. This is may be an impact on a companys strategic
competitiveness in market.
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NATURAL ENVIRONMENT
Natural environment is the study of an important component of the nature i.e., natural
environment.
Natural environment includes geographical and ecological factors areas as below:
Natural resource endowments,
Weather
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GLOBAL ENVIRONMENT
Global environment is one of the important elements to macro environment of the business.
Today competitive scenario changes rapidly and its impact on business of company. For this,
reasons, strategist should understand the global environment, its characteristics, functions and
merit and demerit to company. Global environment treated as whole world just as village and has
changed how individuals and organisations relate to each other. These are influenced to
organisation to get project from global clients.
Assessments of the global environment factors are outlined:
To know the potential positive and negative impact of significant international events like a
sport meet or a terrorist attack.
To identify both emerging global markets and global market which are ensuring changing. It
includes newly industrialized countries like in Asia. In developing countries that imply the
opening of new markets for new products, thats result is to be increased competition from
emerging globally competitive companies in India and South Korea and China.
To know the difference between in cultural and institutional attributes of individual global
markets.
Globalization of markets refers to the process of integrating and merging of the distinct world
markets into a single market. This process involves the identification of some common norm,
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INTERNAL ENVIRONMENT
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SWOT Analysis
(environment analysis, opportunities and threats identification) with the internal factors (companys
resources analysis, companys strengths and weaknesses identification).
SWOT analysis is very important. The entrepreneur is able to access the feasibility of his goals
and objectives using the outcome of SWOT analysis and identification of the companys
opportunities. The entrepreneur who has conceived an idea in his minds would then be able to
evaluate whether such plans, mission and objectives are even close to realism or are in the wave
of air only. If they are realistic, the entrepreneur can continue to formulate strategies. But if they
are not realistic, the entrepreneur should amend and modify plans or discard the same to
originate a new one which has more odds of the success.
This tool can use it in two ways - as a simple icebreaker helping entrepreneur to analyze the plan
and judge the feasibility, or in a more sophisticated way as a serious strategy tool wherein the
entrepreneur checks SWOT every stage of his formulating the plan and then put forward the idea
as a business.
There are four components to this analysis. Strengths and weaknesses are often internal to your
organization, while opportunities and threats generally relate to external factors. For this reason the
SWOT Analysis is sometimes called Internal-External Analysis and the SWOT Matrix is
sometimes called an IE Matrix.
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Conclusion
Small scale businesses are indispensable catalyst and important contributor to the economic
growth in every nation due to their vast irreplaceable prospect in the economy. Small businesses
serve as laboratory for the development and innovation of new ideas and offerings before market
commercialisation in order to prevent the production of goods and services that does not meet
consumer expectation. This unique nature of small scale business makes the personalization and
modification of product to meet consumer preference easy. Hence, small business operators must
develop and adopt scientific and rational business management strategies that will aid and
increase their understanding of both their business and its environment. A sound knowledge of
the dynamic business environment will facilitate the planning and predictions on the most
significant factors that affect business survival. This study indicated that competition,
inflationary trend, technological changes, government policy, Infrastructural facilities
accessibility, changing consumer behaviour and income are still problems to small business
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