Main components of business environment

Generally Business refers to those activities that are related to the buying and selling of goods.

Business Environment consists of all those factors that have a bearing on the business.

The survival and success of a business firm depend on its strength, resources at its command, including physical resources, financial resources, human resources, skill and organisation and its adaptability to the environment and the extend to which environment is favourable to the development of the organisation. The survival and success of a fir, thus, depend on two sets of factors, viz., the internal factors the internal environment and external factors- the external environment.

Some of the external factors have a direct intimate impact on the firm (like the suppliers and distributors) of the firm. These factors are classified as microenvironment also known as task environment and operating environment. These are other external factors which effect an industry very generally (such as industrial policy, demography factors etc.). They constitute what is called macro-environment, general environment or remote environment.

Hence business environment has three components.

  • Internal environment

  • Micro environment/task environment/operating environment

  • Macro environment/general environment/remote environment