These are.
1.
Demographic
2.
Economic
3.
Geographical
4.
Ecological
5.
Social
and Cultural
6.
Political
& Legal
7.
Technological
1. Demographic
Factors:
Demography is a study of
human population with reference to its size, density, distribution and other
connected vital statistics. This information is very essential in modern days
for planning and development and also for framing laws relating to society and
business. The density of population, the extent of their standard of living,
the level of their education and the nature of their occupation etc., greatly
influence the type of business the entrepreneurs could undertake. The business
units require customers for its survival and growth; naturally business can
thrive in populace regions, though now-a day’s transportation helps a lot in
bringing the commodities to the scarcely populated areas.
2. Economic Factors:
The business enterprise is
affected by various economic forces which cannot be controlled by the business.
These economic forces, can be divided into two categories, ie. Demand Force and
Competitive Force. For a business firm to survive and thrive, it should have
adequate demand for its products. At the same time, the firm has to complete
with the rival firm producing similar products or substitute products.
Economic forces
affecting demand:
For customers to buy the
commodity of the firm, they should have the ability to buy and willingness to
buy. The ability to buy a commodity depends on the income of the customer, to
be very precise, the disposable income of the customer. Out of the total
income, the individual has to pay taxes due to the government and the
disposable income will be less if the taxes are high. Secondly, if the
individual wants to save more, the amount for spending will be less. Thus, the
ability to buy a commodity depends on the a) Total income earned out of the
employment of the individual b) The taxes of the government and c) The savings
of the individual.
An increase in tax will
reduce the demand for the commodity. The attitude of the individual towards
‘Saving’ will affect the demand. A change in ‘Price’ of the commodity will
affect the demand. Expectation of a further change in price or change in taxes
will also affect the demand.
Competitive forces: The competitive tools are price cutting,
advertisement, product
differentiation, marketing strategies and consumer
service.
Price cutting: Price cutting or price reduction is a method
which has to be adopted very cautiously, as it may ultimately lead to price-war
between firms competing, resulting in reduction of profits.
Advertisement: Advertisements in modern days have become a
very powerful tool in persuading the consumers of a product to a particular
brand. In monopolistic competition, a large share of the market is entrenched
by firms making effective and aggressive advertisement.
Product differentiation: A firm tries to get competitive strength by
differentiating its product from those of its rivals. By having special design,
colour, packing and features, the firm tries to get competitive edges.
Marketing strategies and Consumer Service: Modern firm adopt various
types of marketing strategies to create market for their products. Installment
system, credit system, hire-purchase, etc., are the prominent ways by which
firms try to cut through the poor segments of the society and convert them
their customers. Besides customer service like, free door delivery, quick
service, after sales service, guarantee from defects up to a certain period are
adopted to have more and more demand for their commodities.
3. Geographical and
Ecological Environment:
· Geographical conditions,
to a greater extent, influence the type of industries and business in a region.
Generally, the people of a particular geographical region will have similar
tastes, preferences and requirements. The geographical situation, the physical
feature, the climate, rainfall, humidity, the vegetation, etc., decide the type
of living in a particular region and only those industries which could cater to
the needs of the people, could develop. In other words, geographical conditions
exert profound influence on the location of the business.
· Ecological is a study “dealing with the interaction of
living organism with each other and with their non-living environment”. It is a
science telling about the relationship of all living beings. (ie., human
beings, animals, plants) with non- living beings (air, water, soil represented
by atmosphere, rivers, lakes, mountains and land).
4. Social and Cultural
Environment:
Social and Cultural attitudes
of a region influence the business organizations of the region influence the business
organizations of the region in a verity of ways. The business practices and the
management technique of the organization should cope with the social and
cultural attitudes of the people.
The modern business is a
social system in itself, but it is also part of a larger social system
represented by society in general. Clearly, there should be some reciprocal
relationship between business and this larger society. To put it shortly, the
business should adopt itself to the social and cultural environment.
It is the class structure of
the society. It tells about the social roles and organizations and the
development of social institutions. The class-structure depend upon the
occupation of the people, their education, income level, social status, their
mobility, their attitude towards living, work and social relationship and above
all, their attitude towards business.
Every society develops its
own ‘culture’ which means how the members of that society behave and interact
with each other in society, as well as outside society. The term culture
includes values, norms, customs, ethics, goals and other accepted behaviour
patterns.
5. Political and Legal
Environment:
Political Environment:
All business firms are
directly affected to a greater or lesser degree by the government and its
programmes. Political forces will decide the nature of business, programmes and
projects to be undertaken for the development of the country. These political
forces can
be classified as long term forces, quick changes, cyclical changes and
regional factors.
Long term forces denote the secular trends in business
activities due to the political conditions prevailing and the adoption of a
particular line of policy in business.
Quick Changes consist of sudden political changes due to army
coup or revolt or capturing of the government machinery by the dissident group.
The quick change may also be the result of proclamation of ‘emergency’ or
‘Martial Law’ due to sudden outbreak of war with a belligerent nation. In all
these cases, the business manager has to take quick decisions to adopt his
business to the changed environment.
Cyclical Changes denote periodical anticipated changes like
’General Election’ which may change the government and consequent change in
plans and programmes as well as priorities by the new Government.
Regional Factors the regional
consideration may dominate the political scene. Development of agricultural or
development of an industrially backward region may draw the attention of
politicians and government. Consequently, special legislations or policies will
be framed to help the backward regions or sector. In such changes, the business
has to adopt itself by studying and estimating the risks and dangers involved
in taking decisions.
Legal Environment:
Business in a country can be
started and nurtured to grow into big business only within the legal system of
the country. In this connection, all countries of the word have a separate set
of laws for the control and direction of business. The business law of the
country is a complex system of regulations and intervention that form the legal
environment of the business. All business managers should have the knowledge of
business law for taking management decision.
6. Technological
Environment
Technology means “the
systematic knowledge of the industrial arts”. ‘Technique’ denotes the method of
performance. These two are increasingly used in modern literature on industrial
production. The present age is the age of technology. Technology affects the
business in two ways.
Its
impact on the society and
Its
impact on business operation.
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