What we do, how we behave, what is our value based approach is all formulated on the basis on the environment that we live in. Our very personality traits are imbibed by the environment we are grown up in and the embodiments that make us exactly who we are. Similarly, a company’s imprints can be taken from the business environment it survives in. Business environment is the holistic term for all those factors that make a particular company survive in the longer run. It is therefore of utmost importance that a company should adapt to the environment of the businesses, to establish itself and excel in the longer period.
If a company does not effectively adapt to its environment it is bound to fail, the evidence of which is declining profits and revenues. With better understanding of the business environment come better profits that will increase furthermore, given that the company is in harmony with the elements of the business environment. It is very important to understand that business environment is divided into two realms and both are major drivers of profit. These two parts of business environment are:
Internal Business Environment:
The environment here constitutes of the all the forces that affect the working of the employees and define the culture being practiced in the company. Strengths and weakness are the major drivers of the internal business environment.
External Business Environment:
This environment is the environment that blankets all the business firms and constitutes all the elements that define a general approach to the businesses. It obscures opportunities and threats for the firms that need to be understood by developing a clear insight regarding business environment holistically.
It is important for any company to have a stabilized relationship with the internal and the external business environment. It constantly keeps on changing and evolving so it has to be monitored rather with a hawk’s eye. Marks & Spencer a retail chain that once was on the epitome of success made a humungous mistake, which declined their profits greatly.
They did not pay any heed to the marketing strategy their competitors were adopting and they considered themselves indispensible in the market. This was one major mistake that they made they did not pay any attention to the threat that was posed to them from the external market despite being the one of the best and having the most sorted internal environment. Competitors check mated Marks and Spencer by deserting most of their loyal customers due to which the company bore huge losses.
Business environment is the amalgamation of many factors like political, economical, sociological and technological factors. Each plays a significant role in defining the aspects of business environment and the way it would influence the companies. The core objectives of any business are stability, survival, efficiency, profitability, and growth.
Business Environment is thus very important for the achievement of these objectives. Understanding of business environment is important to increase the profit margins of the company as it helps in understanding the competitor’s position in the market and provides you a base for strategic thinking to combat the competitor in all possible ways.
To increase the profits of a company the strategic analyst has to understand that this environment is subject to constant changes and therefore it brings along a lot of uncertainty, which has to be dealt with. This can only happen with extensive research and preparedness to face all that come as a challenge and thereby converting it to opportunities that increase the profits of the companies.
Summary: Business Environment is a constituent of business forces that largely affect the companies. These forces need to be carefully analyzed and understood in order to survive in the competitive market in the longer run.