Business Environment can be defined as the overall activities that affect the operation and smooth running of a business. For a business to survive it must consider what is going on in the environment. There are basically 7 factors that make up a business environment:
- Political Factor
- Technological Factor
- Demographical Factor
- Economical Factor
- Socio-cultural Factor
- Climatic or Ecological Changes
- Legal Environment
- Political factor: This involves the type of government, and how its activities affect the business environment.
- Technological factor: This relates to the degree of technological development e.g. the degree of mechanisation and automation in agriculture and other industries.
- Demographic factor: This factor is relating to the size, structure, and geographical distribution of population of the society. Demographic factor determines what to produce and the quantity of goods to produce based on the level of demand.
- Economic factor: This relates to the economic environment of a business. It could be a capitalist, socialist or mixed economy system,
- Socio-cultural factor: A business organisation must take into consideration the beliefs, attitude and lifestyles of the people. For instance in a sharia state, the consumption of alcohol is not allowed. Consequently, a brewery company would not set up its business in such state.
- Climatic or ecological changes in a particular environment. Ecological changes might involve erosion, pollution, and drought. All of these have effects on businesses.
- Legal Environment: This has to do with government laws, decrees or legislation.
Social responsibility is the belief that corporate organisations should balance profit-making activities with other activities that benefit the communities in which they are operating.
Corporate Social Responsibility
Corporate social responsibility (CSR) involves business initiatives that benefit the society. Businesses have different responsibilities to 5 entities:
Responsibilities to the Government
- Business organisations offer employment opportunities to citizens
- Payment of taxes to the government so as to contribute to the development of the county
- Business organisations must comply with rules and regulations guiding their operation.
- Business organisations must accept government role in business affairs.
Responsibilities to the Consumers
- They educate the consumers
- They provide quality service to the consumers.
- Provision of pre-sales services to consumer
- Must attend to customers’ complaint
- Must be truthful in advertising.
Responsibilities to the Shareholders
- They ensure business profit.
- They distribute dividends to shareholders.
- They organise annual general meetings
- They prepare statement of account
Responsibilities to the Community
- A business has the responsibility of controlling environmental pollution in the community.
- Should provide social amenities to the community.
- Employment of community members
- Provide support for sports and games
- Award scholarships to students from the community
- Provision of quality goods and services to the community member.
Responsibilities to the Employees
- Must ensure payment of wages and salaries.
- Provision of conducive working environment for the workers.
- Provision of Welfare Package.
- Recruitment and promotion of staffs.
- They provide training facilities to the staffs.