Table of Contents
Dimensions (or we can say factors that create a business environment) consist of external forces, which directly or indirectly affect the functioning of a Business enterprise.
The following are dimensions of the Business environment :
- Legal environment
- Social environment
- Technological environment
- Economic environment
- Political environment
Note – Trick to Remember all Dimensions of Business Environment.
As we know know that understanding the factors of the Business environment is a Logical step that why the trick to remember the dimensions of the Business environment is – “Logical STEP”.
L – legal environment
S – Social environment
T – Technological environment
E – Economic environment
P – Political environment
Legal environment
- Legal environment dealt with the laws & the various legislations passed in the parliament.
- It provides regulatory framework , within which business has to function .
- For example:- advertisement for packets of tobacco must carry the statutory warning – “ tobacco causes cancer”.
- Some aspects of Legal environment:
- Various laws & legislative acts
- Legal policies related to licensing
- Legal policies related to foreign trade
- Statutory warning essential to be printed on label
- Foreign exchange regulation & management act
- Laws to keep a check on advertisements
- Administrative orders
- Court judgement.
Social environment
- Social environment consist of all the social & cultural forces within which business firms operate like quality of life , values etc.
- For example:- The e-commerce giant Myntra has decided to change its logo after a Mumbai-based woman activist lodged a complaint with the state cyber police alleging it to be insulting and offensive towards women.
- Some aspects of Social environment:
- Quality of life
- Importance or place of women in workforce & society.
- Birth & death rates
- Attitude of customers towards innovation , life style etc.
- Education & literacy rates
- Consumption habits
- Population
- Tradition , customs , and habits of people
- Social trends
- Values
- Society expectation from business.
Technological environment
- It includes forces relating to scientific improvements & innovations , which provide new ways of production , method and techniques.
- For example :- with the help of technological advancements , it has become possible to book railway and air tickets through internet from home , office , etc.
- Some aspects of Technological environment:
- Various innovation & inventions.
- Scientific improvement.
- Developments in IT (Information Technology) sector.
- Import and export of technology.
- Technological advances in computers.
Economic environment
- It consists of the factors and forces that deals with means of production and distribution of wealth.
- For example :- a rise in the disposable income of the people of the country due to increase in GDP of a country also increase demand for products.
- Some aspects of economic environment:
- Value of rupees
- Inflation rate
- Role of private & public sector
- GDP , GNP , Per Capita Income
- Rate od saving & investment
- Balance of trade
- Balance of payment
- Transportation & communication system
- Money supply in the economy
- International debt
- Interest rates
- Stock market indices
Political environment
- It consists of the forces which dealt with the management of public affairs and their impact on business.
- For example :- in June 2020, when the GOI announced a ban on TikTok and 58 other mobile apps it deemed harmful to the “sovereignty and integrity of India“ which means due to political decisions the tiktok had to close its business & leave the country.
- Some aspects of Political environment:
- present political system
- Constitution of the country
- Profile of political leaders
- Stability
- Peace
- Government intervention in business
- Foreign policy of government
- Values & ideology of political parties
- Attitude of elected government representatives that impact the business entrepreneurs.
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