Question

What do you mean by business environment? How is it created? Also classify the types of businesses on the basis of business environment.

Answer 1

• Each and every business is related to several factors of the society. These factors could be economic, social, cultural, technological, political and legal. These factors include many groups like consumers, competitors, suppliers of raw materials, employees, etc. The environment created by the group of all such factors that directly or indirectly affect the business is called business environment.
• No business can operate on its own aloof from the society i.e. the factors of the society affect the business environment and hence the business.
• Business environment is highly dynamic and also quite uncertain.

The businesses can be classified into three types on the basis of business environment. They are:

1. Business units that anticipate the environmental aspects well in advance and make necessary changes to the business.
2. Business units that bring necessary changes based on the existing environmental situation.
3. Business units that are not in a position to adjust to the existing environment easily.