The Concept of Business Environment

Understanding the Environment of which the business is going to operate is very

important for running a business unit successfully at any place. The environmental factors are

key influencers of every aspect of a business, may be it its nature, its location, the prices of

products, the distribution system, or the personnel policies. The environment, according to

Macro and Micro Economic Factors Researchomatic (2012), is a complex combination of the

economic system, political system, legal restraints, society, industry, labor relations, customer

expectations, markets, competition, technology, culture, history, infrastructure, state of the

economy, shareholder demands, natural environment, labor conditions, and so on. The business

environment includes all the external factors that affect an organization specifically which it

cannot control. The most important factors of a business environment include the economic

system, the industry in which the organizations chooses to work and the market that it serves.

Despite having the fact that an organization cannot control any of these, it can opt to choose the

location in which it works and it particularly wants to choose an attractive industry and stable

market. The business environment can be classified into five categories- the physical

environment, political and legal environments, economic environments, socio-cultural

environments, and technological environment (Waters D., 2014)

The term “business environment”, based on the National Institute of Open Schooling

(2008), simply means external influences, factors and institutions that cannot be controlled by

the business and which provides a significant impact on the operations of the business enterprise

directly or indirectly. The business environment is composed of customers, competitors,

suppliers, government, the social, political, legal and technological factors and many more.
Location of Business

Location of a business is one key component of an Environment of a business (John E. et

al., 2015). Some may connect both ideas as one but they are two different concepts. The

location of a business simply refers to where a business is located. It is the physical space

wherein the business exists. This is where it carries out its daily operations and this has

something to do with the specific physical environment in which the business finds itself.

Moreover, store location is a business’ most costly and long-term marketing-mix decision (Fox

et al., 2007). It is the first key factor that a business considers before implementing other

marketing decisions. Thus, location of the business affects mainly the business operations, other

marketing decisions and its corresponding results.

Importance of Business Location

It is essential for business operators to put location at the top of their minds. If you're

preparing to open any business, putting your business in the proper location might be considered

the most important factor during startup. Despite having the need of a winning product, a

business must consider the question “how will anyone know about that product unless you get

them through the door?”. Hence, the three most important decisions you'll make are: “location,

location and location," as affirmed by Overbo (2014). Careful determination and identification of

new sites is critical for most retail, consumer service and direct manufacturing businesses

(Spaeder K., 2014).

Location of the store is also measured by its accessibility to its customers (Kotler et al.,

2004). Stores located in the center of a city benefit from their next door to remote customers

(Finn A., 1996). Therefore, distance from home and distance from workplace would have a
relationship with the amount of purchase they ought to buy from a store (Chaiyasoonthorn W.,

2011)

Proximity of Business Location to customers

Locations of retailers must be accessible to the potential target group of customers

(Kotler et al., 2004). Consumers tend to prefer stores that are easily accessible to them (Eppli et

al., 1996). Thus, a far distance has a negative effect on the selection of a store through reducing

frequency of customers visiting a store and businesses with highly accessible locations are more

likely to have more consumers. Therefore, the distance to where they will purchase their goods

and supplies will affect the number of times a consumer will visit the store to purchase.

Despite the advantages of having accessible location, some contend that instead of

emphasizing location since consumers seek to optimize their “total shopping costs” (Ailawadi et

al., 2004).  This suggests that in some instances; consumers may pay more consideration to other

factors (e.g., price promotions and bulk shopping) than location in determining the store of

purchase (John E. et al., 2015). For example, when raw material consumers of sugar for

production need to travel to the supplier, the consumers consider the amount of raw material they

purchase in order to limit the total shopping cost (e.g. transportation). This means that the

consumer may weigh in and opt to choose which is more favorable to the business and can

benefit the business positively.

Relationship of Business Location, Proximity, Price discounts and Repeat Purchases

The factors which Jere, Babatunde and Albertina (2014) identify as important influencers

of store patronage are Store image, product, price, promotion, and location. Focusing more on

the influence of location, they assert that for consumers, location of and access to the business
are important factors in the store choice decision. Location which is mainly perceived in terms of

time and distance is a particularly compelling value proposition that retailers offer low-income

consumers who tend to shop more frequently and make small purchases because of their limited

and unstable cash flows. Consumers tend to prefer stores that are easily accessible to them (Eppli

et al., 1996). While some authorities argue that location is a major determinant of the success or

failure of retails stores (Ownbey KL et al., 1994).

Similarly, in a multiple regression analysis to assess the importance of the predictors of

customer satisfaction, Jere, Babatunde and Albertina (2014) report that only location (place) was

found to be a significant predictor. This finding implies that it is important for retailers catering

for in low-income consumers to make place decisions that meet customer expectation;

particularly proximity and attractiveness and hygiene. Moreover, a study on importance of the

predictors of store loyalty shows that three of the six independent variables; store image,

promotion, and location; are significant predictors. Therefore, to encourage customer satisfaction

retailers need to focus on location, but to encourage loyalty and repeat purchases they need to

emphasize location, store image, and promotion as well.

In another article, Bell, Ho, and Tang (1998) find that location no longer explains most of

the variance in store choice decisions. Rather, store choice decisions seem to be consistent with a

model where consumers’ optimize their total shopping costs, effort to access the store location

being one component of their fixed cost of shopping. That is not to say that location is no longer

important. But, consumers’ store choice may be based on different criteria depending upon the

nature of the trip. For instance, small basket, fill-in trips are very unlikely to be made to distant

or inconvenient locations. And, retailers in some formats, like convenience, drug, or supermarket

have less flexibility in their location decision than mass merchandisers or warehouse clubs. This
implies that consumers may take in consideration other key factors rather than location in

determining the store of purchase and adjust in order to limit the cost. Therefore, consumers

consider the amount of purchase whenever they buy supplies because of the proximity of the

business since other factors are favorable.

Overall, the proximity or the nearness of the business to the consumers of raw materials

can affect bulk purchasing behavior of manufacturing businesses. The implication of all of these

studies is that consumers of raw materials at Ma-Vill Recycling Corporation would be affected

by proximity or nearness, low-cost, and promotional price discounts, rather than when they are

near the consumers but not direct to the supplier and low price discounts. Therefore, consumers

tend to adjust to the proximity of the store when other factors (e.g. production needs, price

discounts and etc.) are favorable.

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ad=rja&uact=8&ved=0CCoQFjAC&url=http %3A%2F%2Fcws.cengage.co.uk%2Fwate

rs%2Fstudents%2Fchapters%2Fchapter% 25202a.doc&ei=aAiGVJxIxq3sBpiogdAL&u

sg=AFQjCNE6gd0Gd2Y_ZDPQHK8-1YcZguP9bA&bvm=bv.80642063,d.ZGU

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Spaeder K. How to Find the Best Location. Entrepreneur Media; 2014.

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