Q. "Business is the product of environment". Explain. Also discuss the relationship between business and environment.
Ans. No business enterprise functions in a vacuum. Each business operates in its unique environment. Business is the product of the environment as various environmental factors directly influence it. A business firm might be regarded as a social institution that is surrounded by external forces that affect how it operates. Both living and nonliving entities are part of the environment. Decisions of the whole business unit such as nature, location, product/service, various policies of the business unit etc are influenced by the business environment. Success or failure of any business organisation is also depend on its environment. Thus, we can say that business is the product of environment.
Relationship between business and environment: Business and environment are closely related to each other. A business enterprise can expand itself as and when favourable changes take place in the environment. On the other hand, when the prevailing environment is unfavorable, the business may face challenges and problems. The relationship between business and environment is as follows:
i) Mutually Related: There is a correlation between business and its environment. Both influences/affects each other. For example, when the competition is more, the business may decide to go for aggressive advertisement. So, here environment is affecting business. Hence, business and environment are mutually related to each other.
ii) Environment Requires Business to be Dynamic: Because of changing environment business policies and strategies have to be dynamic. Many elements in the environment are constantly changing e.g. the economic, social, political, cultural, technological factors of environment never remain constant. These factors are flexible or dynamic, so policies should be dynamic enough to adjust to the changing environment.
iii) Opportunities and Threats: If the prevailing environment is favourable for business growth and prosperity then business unit respond positively. For example, business unit is often changed to produce more when government gives subsidy or reduces tax burden. On the other hand, if business environment poses threat to the business, then it is unfavorable for business unit. For example, when the government imposes high Taz rates on profits then it acts as hindrance in the growth.
Thus, business and environment are mutually dependent on each other. The business affects environment and environment affects business. Both business and environment are closely related to each other.
"Business is the product of environment". Explain. Also discuss the relationship between business and environment.
