Write the components of business environment?

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Write the components of business environment?

There are three main components of business environment internal environment, economic environment and non-economic environment. The economic and non economic environment collectively comprise non-economic environment. The internal environment comprises of factors which are within the control of the firm, for example, firm’s resources, management, organization structure, policies and objectives. External environment comprises of factors which are not related with the firm and are outside its control. External environment of business comprises of economic and non economic environment.

- The economic environment of business comprises of economic conditions, economic policy and economic system.

Economic conditions refer to state of economy, development stage, income level, resources, income and wealth distribution and nature of economy.

- The nature of the economy describes the distribution of resources and concentration of economic power. Depending upon nature, economy can be capitalistic economy, communist economy or mixed economy.

- Economics can be market driven or planned economics, on basis of extend of market mechanism allowed in distribution and allocation. In market economics, prices are determined by market forces. In the planned or command economics, price are dictated by central planning authorities.

The economic system in a country depends on its government and people, and a firm has no control over it. However, policies and practices of a firm depends on the type of economy and it is very important that the management considers the existing state and nature of economy.

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