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Economic Environment of Business: Unit 1 Dr. Misbah Jahan

The document discusses the economic environment of business. It defines business and lists its key characteristics. It states that business is an economic activity, a business firm is an economic unit, and business decision making is an economic process. It then explains that a business's environment includes all internal and external factors that influence it. The external environment includes the microenvironment of close players and the macroenvironment of broader economic and non-economic conditions in a country. It provides details on the various factors within a company's macroenvironment.

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Nowsheen Bilal
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428 views14 pages

Economic Environment of Business: Unit 1 Dr. Misbah Jahan

The document discusses the economic environment of business. It defines business and lists its key characteristics. It states that business is an economic activity, a business firm is an economic unit, and business decision making is an economic process. It then explains that a business's environment includes all internal and external factors that influence it. The external environment includes the microenvironment of close players and the macroenvironment of broader economic and non-economic conditions in a country. It provides details on the various factors within a company's macroenvironment.

Uploaded by

Nowsheen Bilal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ECONOMIC ENVIRONMENT OF

BUSINESS

Unit 1
Dr. Misbah Jahan
Business

• “A Business is nothing more than a person or group of


persons properly organized to produce or distribute goods
or services. The study of business is the study of activities
involved in the production or distribution of goods and
services-buying, selling, financing, personnel and the
like”.
Business characteristics
• 1. Dealings in Goods and Services

• 2. Production and/or Exchange

• 3. Creation of form, time and place utility

4. Regularity and Continuity in Dealings

5. Profit Motive
SOME BASIC PROPOSITIONS
• 1. Business is an economic activity.

• 2. A business firm is an economic unit.

• 3. Business decision-making is an economic process.


Business Environment
• The environment of any organization is "the aggregate of
all conditions, events and influences that surround and
affect it." Davis, K, The Challenge of Business.

• Business Environment literally means all those aspects


that have a bearing on the business such as its strengths,
weaknesses, internal power relationships and orientations
of the organization; government policies and regulations;
nature of the economy and economic conditions: socio-
cultural factors: demographic trends; natural factors; and,
global trends and cross-border developments.
Significances of Business Environment
• a) Revealing opportunities and threats
• b) Providing guidance for growth
• c) Makes a firm strong or weak
• d) Continuous learning
• e) Foster impression
• f) Meeting rivalry
• g) Retrospection
COMPONENTS OF BUSINESS ENVIRONMENT

• The environmental factors may be classified into three different

levels:

• Internal environment.

• Micro environment/Task environment/Operating environment.

These are very close to organisation.

• Macro environment/General environment/External

environment.
Internal Environment
• Culture and Value System

• Mission and Objectives

• Management Structure and Nature

• Human Resource
External Environment
Broadly, external environment of business may be
classified into:

(A) micro-environment, and

(B) macro-environment.
External Environment
• The micro-environment refers to such players whose
decisions and actions have a direct bearing on the
company.
External Environment
• Macro-environment of a company refers to all
those economic and non-economic factors which
exercise their influence on the business activity in
general and thus determine opportunities that a
company may have to promote its business.

• It may be classified as Economic environment;


and Non-economic environment.
Macro-environment
• a. Economic Environment The economic environment
of business refers to the broad characteristics of the
economic system in which a business firm operates
includes economic conditions, economic policies and
economic system of the country.
• b. Non-economic environment comprises social, political,
legal, technological, demographic and natural
environment. All these have a bearing on the strategies
adopted by the firms and any change in these areas is
likely to have a far-reaching impact on their operations.
Economic Environment
• a. Economic Conditions

• b. Economic Policies

• i. Industrial policy
• ii. Fiscal policy
• iii. Foreign investment policy
• Iv. Export–Import policy

• C. . Economic System:
• i. Capitalist economy
• ii. Socialist economy and
• iii. communism
• iii. Mixed economy.
Non-economic environment
• Social Environment

• Political Environment

• Legal Environment

• Technological Environment

• Demographic Environment

• Natural Environment

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