Business Environment

About this unit

Business environment means the sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance. This unit explains why firms must study their surroundings, and the economic, social, technological, political and legal dimensions of the environment. It helps students understand how changes such as new laws, new technology or shifts in consumer tastes create opportunities and threats.

Key ideas

• The environment is outside the control of the firm.
• Features: totality of external forces, specific and general forces, inter-relatedness, dynamic nature, uncertainty, complexity and relativity.
• Understanding the environment helps identify opportunities, warn of threats, tap resources and improve performance.
• Dimensions: economic, social, technological, political and legal.
• Firms must adapt to changes in the environment to survive and grow.

How to prepare

• Learn the features and the importance points with an example of each.
• Practise classifying a given change (a new tax, a fitness trend, online payments) into the correct dimension.
• Expect short case-based questions rather than long theory.