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An Analysis of Business Environments and Organizational Structures - Page 1

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An Analysis of Business Environments and Organizational Structures

Discusses the impact of economic, social, and legal factors on business environments and organizational structures.

Ava Martinez
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An Analysis of Business Environments and Organizational Structures - Page 1 preview imageAn Analysis of Business Environments and Organizational Structures:Economic, Social, Legal Influences, and Forms of Business OrganizationsQuestion :-Describe the basic environments (legal, social, economic) in which a businessoperates.Solution :-BUSINESS ENVIRONMENTThe business has got two dimensional relationship with the environment. On the one hand itaffects the social, political and economic environment and on the other hand it is affected bycountry’s social, political, economic and legal environment. The competent and successfulmanagement must be capable of adapting to the environment. The knowledge of the environmenthelps in capitalizing emerging opportunities, activating management and image building of theorganization.COMPONENTS OF BUSINESS ENVIRONMENTBusiness, these days is vitally affected by the economic, social, legal, technological and politicalfactors. These factors collectively from business environment.Business environment as such isthe total of all external forces, which affect the organization and operations of business. Theenvironment of an organization has got internal, operational and general levels. Managers mustbe aware of these three environment levels, their relationship and importance.ECONOMIC BUSINESS ENVIRONMENT
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An Analysis of Business Environments and Organizational Structures - Page 2 preview image
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An Analysis of Business Environments and Organizational Structures - Page 3 preview imageThe successful businessman visualizes the external factors affecting the business, anticipating theprospective market situations and makes suitable plants to get the maximum with minimum cost:1.Market situations–The business produces goods according to the demand. If thedemand of the commodity increases, its price also increases, so the profit margin alsoincreases. Consequently, production of the commodity should be increased.2.Sources of Capital–If the capital is easily available, business activities flourish. In case,capital is not available business cannot expand. This is why, during pre-independenceIndian business could not develop. After independence capital was made available by thegovernment through specialized financial institutions and soft lending policies of thegovernment. Consequently business has developed at faster rates.3.Income level of the masses–In case, general income level increases in the economy,purchasing power with people increases. Increased demand includes business to producemore and grow faster. Low income level reduces purchasing power resulting in lesserproduction and slower economic development.4.Economic policies of the government–The government controls the business in theinterest of the public. Licensing by the government, levying excise duty, fixing price ofthe commodity, providing subsidy to certain industries, factory legislation, policy ofnationalization etc. affect situation, size, type and expansion of the business.5.Changes in the rate of interest–Low rate of interest provides easy capital, so thebusiness grows at faster rate. High rate of interest adversely affects the growth ofbusiness.
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An Analysis of Business Environments and Organizational Structures - Page 4 preview image6.Changes in the income tax rates–Low income tax rate promotes business activities.On the other hand, higher rate of interest discourages growth of the business.SOCIAL BUSINESS ENVIRONMENTConsumer’s satisfaction is the foundation stone of successful business. Business has to producegoods according to the needs of the customers. While producing commodities, business has totake into consideration the tradition, customs, belief, value, lifestyle, habits, education, thinking,behavior and income level of the people. Changes are must. It has to come slowly and quickly.The management should not ignore these inevitable changes.After independence our traditions, customs, habits have been changing continuously due toexpansion of education. Increase in the income level has increased the demand for televisionsets, fridges, scooters, cars and other goods of comforts and luxuries. There has been change inthe standard of living of the people.The competent, efficient and successful manager takes into consideration the various externaland internal factors affecting business, formulates effective policies and leads the enterprisetowards prosperous future.Social Environment affecting Businessi.The size, composition and distributions of population between males, females, rural,urban, rich and poor etc.ii.Social customs, beliefs, values, lifestyle, behavior of the people etc.
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An Analysis of Business Environments and Organizational Structures - Page 5 preview imageiii.Education level of people.iv.Social consciousness regarding corruption, pollution, status of minorities, women andmedia.v.Level of consumers satisfaction.Examplesi.Attitude towards equality between male and female leads to equal pay for equal work forboth males and females.ii.Increase in the demands of nourished food due to health consciousness.iii.Public opinion towards high prices.iv.Social consciousness about pollution problem generated by industry.LEGAL BUSINESS ENVIRONMENTLegal environment consists of legislation passed by central and state governments. It prescribesrules and laws which must be followed by business units.These days thegovernmentregulates the business according to its economic, trade and industrialpolicy. Due to its economic policy the government restricts certain industry and trade to publicsectors. In order to encourage private sector, we are now adopting the policy of liberalization,globalization and privatization. Our monetary and fiscal policies also affect business activities. Itshows, that thegovernmentregulates the business according to its defined priorities.
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