Business Environment

Top Factors Affecting Business Environment

A business environment is influenced by a lot of factors that are affecting the business of all scale, both directly and indirectly. A business firm is influenced in both ways, not just by one but several factors that shape the world. These factors provide specific opportunities, challenges and threats, hence proving the business world to be multi-dimensional and complex. Stick around to know the top factors that are influencing the business environment.

Geographical, Natural and ecological factors

Geographical factors, like the area of establishment of the business, play a crucial role in the very first step of setting up a business. This is mainly because of the preferences and conditions for one area differs from another. For example, the cuisine of south Indian states is very much different from that of the north Indian states and hence, restaurants and other local businesses need to find a fair establishment according to the region.

The climatic conditions, humidity and vegetation also play a crucial role is deciding the place. For example, the cotton textile industries are located in Mumbai and Coimbatore, India, as they provide favourable conditions for their cultivation. Establishment of the business also depends on the types of raw materials available in the area.


Demographic environment

An environment that includes different sizes, sex, and people of varying age groups constitute a demographic environment. The impact and effects of these kinds of environments is maximum in India due to the heterogeneous population of diverse cultures and economic status of people. This demographic environment has a direct impact on the business as they require different marketing strategies to please various audiences. Due to this factor majority of the Indian companies and startups have a limited area of operation and also has significantly affected the more prominent companies.

Economic Environment

The impact of the economy on business is more deliberate than any other factors. It includes three main factors:

  • Economic systems that depend upon the country’s’ import and export
  • Economic policies laid down by the government and the business
  • Economic conditions of the country that directly affects the prospects of an individual firm

The political and legal environment

Most of the countries across the world, including the capitalist countries, government controls or rather permits most of the business and business-related activities. However, the degree of control will differ from one country to another. Generally, the government interacts with businesses (both large and small scale) on three different levels – local, state and the central level, which exerts various influences over businesses.  The government manages multiple roles like a coordinator, caretaker, competitor and a customer in handling one’s business. All these factors also fall under the political umbrella.


Technological environment

The increase in technology and its advancements every day has caused a significant impact on the business as well.  The new business and companies that employ these new technologies immediately after their discoveries will result in a thriving and exciting product that will increase the future of the company as well. In the last three decades, many new technologies like Blockchain and augmented reality have been employed by industries and business that are changing the world at a higher rater.

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