Business Environment and SWOT analysis is a very important factor when starting a business.
From the previous article about What is Business Definition, we explain about What is a business and Its functions and aims. So I think now you have a better understanding of what is a Business?
This article will help you to make an idea about what is a business environment & its factors? What are the effects and how to influences your business from the Business environment? Business is a part of the environment.
Also, it is in the business environment. So businesses cannot work alone, they need to work with other parties in the environment. So businesses need to depend on external factors.
You can easily establish a business but for successfully sustain your business you need to depend on resources which it has depended on external organizations in the business environment. From buying materials to selling in the market you need to depend and connect with other external resources which in the business environment.
So every business organization is influenced by divergent and inter-related forces in a particular environment in society. So you should understand this, the Business environment is a complex network with changing forces that affect your business performances. In the present, the environment is dynamic and rapidly changing.
Also, it became one of the leading contingencies for which business organizations should plan and which business organizations must adapt.
The Business environment consists of diverse stakeholders. Every business organization has a relationship with its environment. However, the nature of that business organizations environment relationship is determined by several key factors, Business Environment factors are very dynamic and ever-changing.
Features of Business Environment
- Dynamic – Its Continuously changing
- Complex – Many forces, events and, conditions
- Uncertain – No anyone can predict what is going to happen in the future
- Multi-faceted – A single change can be viewed differently by different observers because factors perceptions vary
- Relative – the notion of business the environment is relative from one location to another
What is the Importance of Business Environment for business?
Let take a simple example If you are going to swimming in the river, before swimming it’s better to know about the Nature of river and widen of river and other factors, if you have a better idea about those factors you can easily swim as you expect but if you haven’t a better idea about those factors you will fail. That river similar to the environment and you similar to your business.
So if you want to successfully achieve your business targets then You should have a better understanding of your business environment, otherwise, you will fail. So it’s very important to know about your business Environment.
The importance of knowing the Business Environment
- Its help to understand the nature and Important of business Environment and its components
- For successfully achieve your business achievements
- It helps for SWOT analysis
- To identify business Environment’s trends
- For identify business opportunities
- Helps in tapping useful resources
- Helps to improve performance
What is the business environment?
For define business Environment we haven’t a global definitions.
“Organizational Environment is a set of forces surrounding an organization that have the potential to affect the way it operates and its access to scare resources.”– jones
“Organizational The environment is the sum totality of all the internal and external factors and forces affecting the organizational performance.”
But we can make a simple definition for Business Environment “The sum total of all individuals (collection of all individuals), entities and other factors, which may or may not be under the control of the business, but business still depends upon them and effect for business’s performances, profitability and overall performances and stability of business.”
The forces which included in the Business Environment are its customers, suppliers, investors, competitors, consumer groups, technologies, trends, governments, and other factors which including in the Business Environment but externally from the business organization. These factors affect and influence the business organization even though they are outside the business boundaries.
For example, lay a new tax or increase the tax rate by the government can make increase the product price and customers buyings can be less. Also, customers will move to other competitor’s low prices goods or for other similar products. So business has to re-establish their prices of products to survive the change.
Classification of organizational environment
The conditions and forces within an organization, Imparting strength or causing weakness to the organization, comes under internal environment. Internal factors help to indicate strong and weakness of your business. That include,
The number of owners, their knowledge and experiences, Financial ability, their popularity.
Their knowledge and skills, training and experiences
Their training and experiences, their attitude
4. Organizational culture
Values, Principles, Traditions, Way of doing things of the organization
5. Organizational Structure
Hierarchy of resource and power allocating and hierarchy of departments
Physical and nonphysical resources which company have
7. Vision and Mission of your business
The external environment is All elements existing outside the boundary of the organization that has the potential to affect the organization. External factors provide opportunities and pose threats to the business.
There are two classified on External environment
The environment that closer to the organization and includes individuals, groups and institutions directly influencing the organization’s basic operation and performances. This is the immediate periphery of the business that has a continuous and direct impact. That include,
Persons who consume business products. Business work to satisfy these customers. Customer preferences can be different, So you need to get details about your customers from different methods and work to satisfy them.
You and your managers should have a better idea of your competitors. Your competitors can be complete by Price, innovative or developed products or services. They can influence your business so you should be able to identify competitor’s activities and make quick response for them.
Persons who supply the materials, resources, and power for the organization. You should try to get quality supply materials continuously at low prices.
4. Finance institutes
5. dealers and distributors
Person or company who channelizes manufacturing product from producer to market. Their active role in delivering the products to the end-user and ensuring that commodities or products are well and availability in stores or retails.
Persons who looking to invest money on your business or like to do more investment in your business.
The environment influences the functioning and performance of the business organization in general. The macro-environment is the outer layer that is widely dispersed and affects organizations indirectly. Every business organization work in that macro-environment, so you have to face those environmental changes.
Regulations from government and law, Interaction between government and business, political stability of Country
The overall health of the economic system- Interest rate, per capita income, employment, Unemployment, variations of share markets, the inflation rate
When doing business, you have to comply with your society such as Social Values, Customs, and Tastes. Your business operations want to adjust with changes in your society changes or if you are doing business in another county you need to do business according to that country’s social and cultural environment.
That is the most Uncertain and changeable environment. You should update with that Technological Environment changes daily if isn’t you cannot compete with other business
Simply this is a Globalization. Products are moving across countries without any barriers.
The market is build up with peoples. So this is the most important environment. It includes factors such as Age, Sex, Ethnic, Education, Geography, Lifestyle
7. Natural Environment
This is about our natural environment. It includes factors such as Depreciation of natural resources, increments of fuel price, Environment pollution.
SWOT analysis for Business Environment
A careful analysis of the business organizational environment is necessary to diagnose SWOT (Strengths, Weaknesses, Opportunities, Threats). With that analysis, you can identify the advantages and disadvantages of Your internal and external environment.
With analyzing the internal environment, you can identify the Strengths and weakness, with analyzing the external environment you can identify opportunities and threads to build competitive advantages to the high performance of a business organization. If internal and external environmental factors are favorable
If you like to start your own business for work like a boss, you need a better understanding of your Business Environment. Because all business must be doing business within a business organization environment. Your business organization is only a part of environment. SWOT Analysis will helpful for you to do that task successfully.
Any changes in that business environment will be effect and influence for your business. So you need to be aware of your business environment and your business should respond and adapt accordingly. If you have an understand about the business environment, you can easily recognize, analyze, react and adapt according to the changes/effect.
I hope the above details help you to Explain What Is Business Environment And SWOT Analysis? And if you have any problem or know more on What Is Business Environment And SWOT Analysis? Please share with us in the comments section below. Thanks!
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