Business and its Environment

Chapter
1
Business and
its Environment

Copyright 2001, S.S. Gulshan

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 Business and its Environment

Business and its environment

What is Business? Business is as old as civilization itself. Also, it is the greatest
thing in the world as no development could have taken place in the absence of
business. Business provides to the society the things it needs in order to survive,
enjoy life and improve its material and social well-being. Besides, it undertakes
productive utilization of wealth-producing resources of the society. It also leads to
innovation and improvements in production process and thus enriches the life of
people by enhancing the functional capacity of the available resources.
Today business enterprises dominate our lives. There was a time when business
played very insignificant role in economic, social, political and technological
affairs but now it plays a very significant one. It is not too much to say that the
wealth of a country is, to a great extent, created and controlled by business. This
gives business and executives thereof the enormous power to affect the lives of
different segments of society, such as customers, employees, shareholders, etc.
Cont.
Copyright 2001, S.S. Gulshan

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 Business and its Environment

What is the Environment of Business? Systems approach considers business

unit as an open system which has continuous interaction with its external
environment for its survival and growth. Thus, a business unit exchanges
information, materials and other resources with the environment. It gets inputs
such as materials, capital, energy, human resources, information from the
environment. ENVIRONMENT

E E
N N
V V
I I
R R
O Business O
N N
M M
E E
N N
T T

Cont.
ENVIRONMENT Copyright 2001, S.S. Gulshan

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 Business and its Environment

Also, the relationship between business and its environment is one of mutual
benefit and therefore, it has been shown as a two-way relationship in Figure. This
may be referred to as a symbiotic relationship as business functions in such a
way that it both takes from and gives nurture to the various segments of its
environment. Only through such a relationship, a business can survive and
prosper.
Social Political
System System
Including Including
Moral Legal

Business

Scientific
And
Technology Economic
System System

Cont.
Relationship between business and its environment Copyright 2001, S.S. Gulshan

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 Business and its Environment

What are the Different Segments Constituting Environment of Business?

Business cannot function in isolation or in a vacuum. Its environment has, more
or less, a direct bearing on its success or otherwise. Business is a part of the
total environment in which we live, being influenced by it, while being a force in
influencing it. The environment of business comprises several segments which
may be classified as under:
Social environment
Economic environment
Politico-legal environment
Technological environment
International environment

Copyright 2001, S.S. Gulshan

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 Business and its Environment

Legal Environment of Business

The law is almost a universal human need. No society can exist without a legal
order. We need institutions and a framework of rules and regulations to provide
firmness to our mutual relations. Without law, there would be complete anarchy
in society. That is why we regard rule of law as the essence of civilised society. It
provides certainty to our relationships. It emphasises that laws ought to be
general in character so that there is no arbitrariness in their exercise. It also
emphasises complete equality before law and equal conformity to law by officials
and individuals. Law seeks to control concentration of economic power. It is
assumed that business which has economic power will abuse it to the detriment
of its Publics as it is rightly said that power corrupts and absolute power
corrupts absolutely.
the legal environment of business is one of the major factors in regulating its
conduct though some of the laws may act as facilitators for some segment of the
business at some time or the other. Almost every aspect of business is controlled
by law. Business managers cannot be absolutely assured of knowing all the legal
ramifications of their decisions. Copyright 2001, S.S. Gulshan

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