Business Environment: Meaning, Features and Importance: 20 flashcards
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1. What is the business environment?
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The sum of all external forces, factors and institutions—economic, social, political, legal, technological and natural—that surround and influence a business but are largely beyond its control.
2. Name the six dimensions of the business environment classified by NIOS.
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Economic, social, political, legal, technological and natural environments.
3. What is the internal environment?
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The part of the environment within the firm's control—employees, culture, resources and management structure—that can be changed by management decisions.
4. What is the external environment?
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The forces largely beyond the firm's control—economic, social, political, legal, technological and natural—that the firm must adapt to or influence collectively.
5. What is the general environment?
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The broad forces affecting all businesses—economic, social, political, legal, technological and natural—that set the rules of the game.
6. What is the specific environment?
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The immediate actors a firm deals with—customers, suppliers, competitors, distributors, financiers and regulators—that affect the firm directly and quickly.
7. What does the economic environment include?
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Inflation, interest rates, income levels, demand patterns and economic policies.
8. What does the social environment include?
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Customs, traditions, values, family structure and consumer lifestyles.
9. What does the political environment refer to?
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The broader ideological and stability context—political stability, government ideology and policy direction.
10. What does the legal environment refer to?
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The specific laws, regulations, court rulings and compliance requirements that bind business conduct.
11. What does the technological environment include?
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Innovation, automation, digital infrastructure and R&D—fast-changing and capable of making existing skills and equipment obsolete.
12. What does the natural environment include?
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Climate, geography, natural resources and ecological conditions, which affect industries differently.
13. What are the four steps of environmental scanning?
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Scan (collect signals), monitor (track trends), forecast (project futures) and assess (judge implications for the firm).
14. Why is the business environment described as dynamic?
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Because factors change continuously—sometimes gradually and sometimes abruptly—so analysis must be continuous and iterative, not a one-time exercise.
15. What is the dual nature of the business environment?
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The same environmental change can be a threat to one firm and an opportunity to another, depending on how prepared and flexible the firm is.
16. What is an inflection point in environmental analysis?
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A moment when a slow trend suddenly accelerates, requiring close monitoring and quick strategic response.
17. Why must businesses be politically aware but legally compliant?
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Political change often precedes legal change, so ignoring political signals leaves a firm unprepared for future rules, while ignoring current law invites immediate penalties.
18. What is the strategic skill required in the technological environment?
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Timing and fit—matching technological adoption to the firm's resources and market position, since adopting too late or too early both carry costs.
19. How do natural factors create locational advantages?
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A firm near raw materials or markets may have lower transport costs, while climate and geography can support industries like agriculture and tourism.
20. What is the common mistake regarding the business environment?
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Treating the environment as static—scanning once and stopping—when in reality it changes continuously and requires regular review cycles.
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