Business Environment in Nepal: Types and Concept, Organization-Environment Relationship

Business environment is the collective term for all external economic factors that affect businesses. The business environment has an impact on decisions regarding the allocation of resources, expenses, profitability, and expansion. They don't work in a vacuum; they have an environment to work in. Thus, the business environment is the culmination of all the factors that surround and have an impact on an organization's existence and growth. It depicts the totality of all external elements (factors, forces, and institutions) that have an impact on an organization. The factors that affect an organization's capacity to conduct operations successfully and achieve its goals make up the business environment.

A firm is influenced by a combination of internal and external factors. Both factors have the potential to have an impact on one another and on a firm. One example of an external factor that affects the internal environment of corporate operations is a health and safety requirement. Additionally, there are some outside influences that are out of your control. These elements are sometimes referred to as external constraints. Let's examine some important environmental factors:

Types of Business Environment

Interior environment:

There are a number of forces at work inside an organization. The interior environment is shaped by these forces collectively and includes the following elements:

• Employees :
  • The key assets of an organization are its employees. Despite being employees of the company, they are a valuable source of outside knowledge. Employees occasionally fight against managerial, technological, and other changes that have an impact on them and their jobs. Organizations are unable to achieve their desired objectives without the participation of their workforce and their productivity.
• Structure :
  • The organizational structure serves as the overarching framework for responsibilities, regulations, hierarchy, relationships, and authority. An organization's structure is always evolving. It also encompasses people, groups, and units, as well as how they relate to one another.
• Shareholders :
  • ​​​​​​​An organization's primary owners are its shareholders. The effectiveness of the board of directors is directly relevant to shareholders. The management updates the shareholders on the organization's operations and financial situation on a regular basis.
• Unions :
  • ​​​​​​​A union is a collection of workers or employees who speak up for the concerns and sentiments of their fellow employees to management. Collective bargaining procedures are employed when labor and management interact to negotiate pay, working conditions, hours of work, and other issues. In consultation with the unions, management institutionalizes collective bargaining and grievance handling processes to prevent needless disruption.

External Environment:

• Economic Environment :
  • The business environment's economic climate is determined by the nation's economic system. The system of economic planning and control, fiscal, monetary, and industrial policies, the circumstances in the agricultural, industrial, and service sectors, as well as a variety of other economic circumstances that exist in the nation, are the main components of the economic environment.
• Socio-cultural Environment :
  • It is comprised of the class structure, social institutions, as well as the desires, expectations, beliefs, and practices of individuals living in a certain society. A cultural environment, which comprises values, standards, and acceptable human behavior patterns, is closely related to the social environment. Business organizations are directly impacted by this facet of society.
• Political Environment :
  • Governmental actions and political situations that could have an impact on your firm are known as political settings. Laws, rules, tariffs, other commercial barriers, war, and societal instability are a few examples. It mostly refers to political structure, bureaucracy makeup, the ideology of the in power government, political stability, public opinion, and business-government ties. The level of political risk in a nation affects the environment for investments there.
• Legal Environment :
  • Legal environment refers to the framework of laws, rules, and court rulings designed to support, direct, and regulate commercial activity. Some are made to safeguard communities, customers, and employees. Others are made to control how managers and their staff behave in the workplace and other organizations.
• Technological Environment :
  • Over the past few years, communications, technology, and automation, including robotics, have undergone radical change. Business organizations will benefit greatly from this growth in terms of increased performance, but they will also face significant demands due to the fiercely competitive marketplaces. Some technological advancements, like computer software and automated manufacturing, can boost your productivity and profit margins. On the other side, some technical advancements present a business with an existential threat, such as internet streaming undermining the DVD rental industry.
• Global Environment :
  • ​​​​​​​The progress of the world has an impact on domestic industry. For instance, companies engaged in import-export commerce are most impacted by changes occurring in the global market.

Organization –Environment Relationship

An entity made up of functioning, interconnected elements that operate in a big environment is called a system. A business organization is an open system when seen in this light. A business system and its surroundings are always in communication with one another. These environmental factors have a significant impact on how well the business system operates. Without taking them into consideration, the business system would essentially be unable to exist and develop. Therefore, for an organization to function, the environment is necessary.

It should be recognized that situations frequently alter drastically with time. They vary greatly from company to company, sector to sector, and market to market. The effectiveness of an organization would therefore be primarily dependent on its capacity to create mechanisms for dealing with these environmental impacts, according to the open systems perspective of an organization.

An enterprise system performs input-process-output operations. With the outside environment, it exchanges resources and capabilities that are necessary for its functioning.

For instance, it imports resources from the outside world such as capital, technology, labor, and raw materials. Following processing within the business system, these inputs are converted into beneficial outputs in the form of goods and services. For ultimate consumption, these outputs are exported or transmitted back to the external environment. An organization must deal with an endless stream of possibilities and threats when selling and exchanging goods and services.

References:

• bcispom.blogspot.com/2014/02/unit-1-environmental-context-of_9.html
• csit.merospark.com/third-semester/internal-environment/
• Pant, Prem R. Principle of Management.kathmandu,Nepal:Buddha Academic Publishers and Distributors Pvt. Ltd, 2011
• scribd.com/doc/308613504/Business-Environment-As
• seminarprojects.org/t-kannada-business-environment-pdf?pid=161928
• slideshare.net/AvadhSharma3/business-environment-56307835.