Business Environment

Lesson

Part 1 — what the business environment is, its features, and why firms must understand it.

In this lesson you will

Explain the meaning of business environment and tell specific forces from general forces
Explain the features of business environment and identify them in a case
Explain why understanding the environment matters for a business

Part 1 at a glance

Concept

What is business environment?

The business environment is the sum of all individuals, institutions and other forces outside a business that are beyond its control but may affect its performance.

Table contrasting what lies inside a firm (owners, staff, machines, its own policies, under its control) with the business environment outside it (customers, suppliers, competitors, investors and the general conditions, outside its control)
Inside the firm (not business environment)	Outside the firm (business environment)
Owners' decisions, staff, machines, office	Customers, suppliers, competitors, investors
Its own products, prices and policies	Economic, social, technological, political and legal conditions
Largely under management's control	Outside the control of any single firm

Diagram

Specific and general forces

Specific forces touch one firm directly; general forces touch every firm indirectly.

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