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             SUBJECT: Business Environment 
              
             COURSE CODE: MC-103                     Author: Dr. Karam Pal 
             LESSON:  01          Vetter : Dr. B S Bodla 
              
                                 BUSINESS AND ENVIRONMENT 
             Objective :  The students will be able to understand the concept of business 
                          environment its meaning, scope and importance. 
             Structure : 
             1.1    Introduction to Business 
             1.2    Business Environment: Emerging Order 
             1.3 Technological Environment 
             1.4 Economic Environment 
             1.5 Political Environment 
             1.6 Socio-Economic Environment 
             1.7 Natural Environment 
             1.8 Summary 
             1.9    Self Assessment Exercise 
             1.10 Suggested Readings 
             1.1.  INTRODUCTION TO BUSINESS 
                    Business is an important institution in society. Be it for the supply of 
                    goods or services, creation of employment opportunities, offer of better 
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           quality life, or contribution to the economic growth of a country, the role 
           of business is crucial. So the first question arises in anyone’s mind is 
           what really a business is ? The following definition is an attempt to 
           provide appropriate answer. 
           “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”. 
           Practically the above said definition is true but in theoretical sense it is 
           incorrect. Before any activities can be considered in the business, there 
           must exist both the goal of profit and the risk of loss. Thus Business can 
           be accurately defined by K. Ashwathapa as “Complex field of commerce 
           and industry in which goods and services are created and distributed in 
           the hope of profit within a framework of laws and regulations”. 
           Understanding the Business : To understand any business the critical 
           step is to explore all the factors related to business and properly judging 
           its impact on the business. There are many factors and forces which 
           have considerable impact on any business. All these forces come under 
           one word called environment. Hence understanding the business means 
           understanding its environment. Environment refers to all external forces 
           which have a bearing on the functioning of business.  
           From the micro point of view,  a business is an economic institution, as 
           it is concerned with production and/or distribution of goods and 
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                      services, in order to earn profits and acquire wealth. Different kinds of 
                      organizations (i.e., sole tradership, partnership, joint stock company and 
                      co-operative organization) are engaged in business and are operating 
                      from small scale, as in case of grocry in a start, to large scale, as in case 
                      of Tata Iron and Steel Co., Bajaj Auto, Maruti Udyog, and Reliance 
                      Industries. Whatever may be the nature and scale of operations, a 
                      business enterprise possesses the following characteristics : 
                
                      1.     Dealings in Goods and Services : The first basic characteristic of 
                             a business is that it deals in goods and services. Goods produced 
                             or exchanged, may be consumers' goods, such as bread, rice, 
                             cloth, etc. or producers' goods such as machines, tools, etc. The 
                             consumer goods are meant for direct consumption, either 
                             immediately, or after undergoing some processes, whereas the 
                             producers' goods are meant for being used for the purposes of 
                             further production. Producers’ goods are also known as capital 
                             goods. Services include supply of electricity, gas, water finance, 
                             insurance, transportation, warehousing, etc. 
                      2.     Production and/or Exchange : Every business is concerned with 
                             production and exchange of goods and services for value. Thus, 
                             goods produced or purchased for personal consumption or for 
                             presenting to others as gifts do not constitute business, because 
                             there is no sale or transfer for value. For example, if a person  
                             cooks at home for personal consumption, it is not  business 
                             activity. But, if he cooks for others in his 'dhaba', or restaurant 
                             and receives payment from them, it becomes his business. 
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                      3.     Creation of  form, time and place utility : All business 
                             activities create utilities for the society. Form utility is created, 
                             when raw materials are converted into finished goods and 
                             services. Place utility is created, when goods are transported from 
                             the place of production to the place of consumption. Storage of 
                             goods creates time utility. This helps in preserving the goods, 
                             when not required and making them available, when demanded by 
                             the consumers. 
                      4.     Regularity and Continuity in Dealings : Regularity of economic 
                             transactions is the essence of business. There should be 
                             continuity, or regularity of exchange of goods and services for 
                             money. An isolated transaction cannot be called a business. For 
                             example, if a person sells his flat and earns some profits, it cannot 
                             be called a business. But, if he purchases and sells flats regularly 
                             to earn his livelihood, it will be called his business. 
                      5.     Profit Motive : Another important feature of a business activity 
                             is its objective. The chief objective of a business is to earn 
                             reasonable profits or 'surplus' as it is called in case of public 
                             enterprises. The survival of a business depends upon its ability to 
                             earn profits. Every businessman wants to earn profits, to get 
                             return on his capital and to reward himself for his services. 
                             Actually, profit is the spur that helps in the continuation of the 
                             business. Profit is also essential for growth. Recreation clubs and 
                             religious institutions cannot be called business enterprises,  as 
                             they have nothing to do with the profit motive.