Dimensions of Business Environment Class 12 Notes – Elements and Components

Dimensions of Business environment Class 12 explains the different dimensions or factors that constitutes business environment. All the dimensions of the business environment are given below you can click on the relevant dimension to get a detailed explanation.

• Economic environment
• Technological environment
• Social environment
• Political environment
• Legal environment

What are the Dimensions of the Business Environment

The business environment is the collection of both the internal and external environment of the business. All the factors, companies, organizations, institutions or forces which are part of this environment have a direct or indirect influence on the organization. There are different dimensions of the business environment. These dimensions should be analyzed properly for proper decision-making and taking proper steps towards the achievement of the targets and goals of the organization.

When some changes occur in the external environment it has an effect on the business as well. That is why proper analysis and understanding of these elements is a must to avoid huge threats to the company and convert them into opportunity. There are five elements of business environment. They are economic environment, technological environment, social environment, political environment and legal environment.

Economic environment under Dimensions of Business environment

The first dimensions of business environment class 12 is economic environment. It includes all the economic factors which are mostly not in control of the organization. These factors are the changes in economy which can be either in favour of the business or may be against the business. These factors are of different types and can  be at the micro or macro level. These factors may affect each company differently.

At micro level these changes are:

• Demand for the product or service
• Supply of the product or service
• Local or state government policy changes
• Market size

At macro level these changes are:

• Inflation rate
• Interest rates
• Unemployment rate
• Tax rates
• Central government policies
• Banking sector changes
• Fiscal or monetary policy changes

For example;

1. Disposable income: when the income of consumers rises then the demand for certain products is also likely to rise. When they have higher income then they may demand luxury products or products for a better lifestyle.
2. Inflation: inflation means a gradual increase in prices of goods and services in an economy. When there is inflation in an economy then there will be more demand for a product and less supply. Businesses should properly analyze this area to know how much to produce and what to produce. In long run, companies will have to learn how to control the cost of products and keep the products available to consumers to remain in the market.

Technological environment

Technology generally means the application of scientific knowledge. This is very important for a business organization as it is useful for its operations or may be useful for other purposes such as advertisement, promotion, recording etc. there are many businesses that solely depend on technology such as telecom business. These businesses need to regularly update themselves according to the updates and developments in technology. This constant upgradation not only helps them to keep up to date and efficient but to bring mind-blowing strategies for their work in the market.

Technological up-gradation may many times help the firm in keeping their cost of production low and bring in better products or services and thus keep the consumers attracted towards that product or service.

For example;

1. There was a big change when the televisions came and radios were out of sight. This was the big technological change at that point in time.
2. Now-a-days every possible business is turning towards online business or online applications such as food delivery apps like Zomato and Swiggy, medicine delivery apps like Practo or NetMeds etc.

Social environment under Dimensions of Business environment

This dimension of business environment class 12 includes the beliefs, behaviours, values, traditions, customs and trends. Business does not operate in isolation it has to return the favours taken from society in form of resources, manpower etc. every society has its own social environment and it may or may not match with other societies. For example, the social environment of India and China will be completely different.

1. Our attitude, liking and disliking towards a particular product is based on the society we live in. For example, people of India may like spicy food and restaurants serving spicy food may be preferred in India but the same restaurant may not be liked by people in America.
2. Organizations are also affected by the increase and decrease in the population of that area or society. This indicates the demand for the product. If the area in which the business is sunning starts showing a decline in the population then the demand for the product also decreases in that area.
3. Tradition: tradition means the practices which the society is following over a period of time. Keeping in mind that tradition is very important and thus aligning the practices of businesses with these traditions will benefit the business in the long run. For example, Domino provides special discounts and offers on the occasion of Diwali and Christmas.
4. Values: values mean the moral practices and principles prevailing in a society. Such as social justice, equality etc. when an organization follows such values then the goodwill of that organization increases. For example, many businesses have started reserving seats for women candidates in an organization.

Political environment

Political business plays a crucial role in the working of the organization. Political environment means the working of the politics, the government and their policies. It largely depends on the government and their working and practices. There are many factors such as stability of the government, peace in the country and support of the government towards the business that affects the operations of the business.

For example:

1. Political stability: when the government is unstable, there will be disruptions and proper working will not be possible. There will be changes in government policies with changes in each government party. Peace in the country is also a must for the proper functioning of the business.
2. Government policies like fiscal policy, monetary policy, and tax rates affect businesses very much.
3. When a business is producing a medicine at Rs.10 and keeps the price at Rs. 30 but government declares that medicine as essential and fixes its price at Rs. 15 then it affects the business and desired profit is not attained.

Legal environment under Dimensions of Business environment

The legal environment is the laws, rules and regulations framed by the government for the business entities. Every business should be well versed with these laws because not following these can bring heavy fines, penalties, and punishments and thus huge losses and maybe closure of the business.

The legal environment helps the business run ethically and serve society by following the acts and laws and functioning morally. There are different laws created by the government which are to be followed by the businesses.

For example;

1. Companies act, 2013
2. Consumer protection act,1986
3. Competition act, 2002
4. The minimum wages act, 1948

Dimensions of business environment are thus the areas which are present in the environment where a business operates and can affect the business directly or indirectly. It may sometimes be in favour of the organization but the proper analysis is still important to keep the business up and running.

Business Environment Class 12 Notes

1. Introduction & Meaning & Importance of Business Environment
2. Dimensions of Business Environment