LEARNING OBJECTIVES
By the end of this topic, you should be able to:
A business is any activity that is undertaken aiming at making a profit. Environment means the surroundings or circumstances influencing something. A business environment refers to factors or circumstances surrounding a business that can have an influence on its operations. The business environment can either be internal or external.
INTERNAL ENVIRONMENT
Internal environment refers to the factors in the control of the business.
Human resources; they are important to an organization because they take an active part in the production. Employees or workers with relevant skills promote the chances of a business succeeding.
Financial resources; the availability of finances makes it possible for a business to acquire relevant facilities needed to achieve the objectives.
Management styles; this refers to the formal arrangement of day to day activities and relationships of people in such a way that work is directed towards the achievements of certain objectives. A well-managed business will be successful.
Goals and objectives; these are targets set by managers to be achieved by a business. A business unit is only considered successful if it strives and achieves its objectives.
Physical resources; these are tangible facilities like machinery, buildings and motor vehicles belonging to a business. When such facilities are available and are organized properly, they promote the success of a business.
EXTERNAL ENVIRONMENT
External environment means those factors that are beyond the control of a business.
Economic environment; this refers to a situation that influences the willingness and ability of consumers to buy goods and services like the price of goods and services and salaries. A favorable economic environment will promote the success of a business.
Population/demographic; population is the number of people in a given area. An increase in population leads to an increase in the demand for goods and services therefore the success of a business.
Cultural values; these are practices that regulate the behavior of society such as beliefs and customs. Culture dictates the manner in which people live as well as the products that they consume. Business units should assess the culture of people in order to serve them appropriately.
Competition; this is where firms try to outdo each other in their business activities such as in selling their products. A business unable to compete effectively will not succeed.
Government policy; this refers to rules and regulations affecting the business such as licenses and taxes. Favorable policies of the government promote the success of businesses.
Technology; this is the application of scientific knowledge in the process of production of goods and in the provision of services. The use of modern technology facilitates the success of a business.
Physical environment; this includes infrastructure (roads, water and power), climate, relief (valleys and mountains) etc. A favorable physical environment enhances the expansion of a business.
