We live in a dynamic environment, nothing seems to stay constant. Similarly, the business environment is a dynamic universe in itself. To survive in this environment one must be updated to the latest level.
The term business environment refers to the combination of various factors and forces which have direct and indirect influence on the functioning and growth of individual business. These factors may be internal or external to a business unit.
Bayord O. Wheeler defines business environment as “the total of all the things, external to a business firm, which affect the organization and its operations‟.
Thus, business environment can be explained as a combination of Internal and External factors that have an impact on business.
Characteristics of Modern Business Environment:
The following characteristics of new modern business environment have emerged:
1.Bulk Size of Business: The mass production has become an integral part of modern business. As volume with expected lower costs rises, it helps to attain higher rates of output at low unit cost. It has become a common strategy to cope up with competition and earn higher profits.
2.Diversification: presently, every businessman invests his capital in diversified economic activities so that he can avoid negative effects of market fluctuations. Many firms invest their funds in different market locations and foreign economies in order to avoid the impact of adverse business situations, such as recession, high inflation, lockout, strikes etc.
3.Change in Consumers’ Taste and Preference: The tastes and preferences of modern consumers have completely changed because of change in standard of living, consumption pattern, technology advancement etc. Now, people spend more money on services. A large proportion of consumers‟ income has been spent on entertainment, electronic gadgets, and luxuries.
4.Change in Distribution Channel: The revolutionary change in technology has drastically changed the conventional distribution system. Introduction of e-commerce has narrowed down the distribution channel
5.Globalization of Business: Modern business has now become global. MNC‟s are dominating the global markets. The Government of different countries are also liberalizing their economies by allowing foreign countries to enter their domestic markets.