Businesses do not operate in a vacuum; they operate in an environment.
Business means all activities which generates wealth. In these activities, goods are produced or purchased and then are sold on profits.
Following are main features of business.

  • Objective of business is to earn profit.
  • There are lots of risks in it.

Following are main business objectives:
1. Economic objectives
a) To earn profit
b) To Grow the business
c) Innovation of new products

2. Social objectives
a) Service to society
b) Employee satisfaction and development
c) Quality products and services
d) Fair return to investors
e) Good corporate citizenship

Whenever any businessman is operating or working then he has to interact with the customers, suppliers and he has to perform the transactions within the rules and regulations of
the government.
All these persons, institutions and policies form a part of business environment.
Understanding all these factors, persons and institutions carefully is a must for every businessman.
The complete awareness and understanding of business environment is known as environment scanning. Environment scanning is conducted to find out the influence of different factors and persons on the business transactions.

Environment scanning can be defined as a process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business.
No company can survive in a market by ignoring the effects of Business Environment. The management analyzes the environment and makes changes to the organizations’ policies to integrate its activities with Business Environment. The most suitable example to prove the impact of Business Environment is the controversial case of Pepsi and Coke Company.
What is Organizational Environment?
The organizational environment is the set of forces surrounding an organization that have the potential to affect the way it operates and its access to scarce resources. The organization needs to properly understand the environment for effective management.
Organizational environments are composed of forces or institutions surrounding an organization that affect performance, operations, and resources. It includes all of the
elements that exist outside of the organization’s boundaries and have the potential to affect a portion or all of the organization. Examples include government regulatory agencies,
competitors, customers, suppliers, and pressure from the public.
To manage the organization effectively, managers need to properly understand the environment. Scholars have divided environmental factors into two parts: internal and external environments. Scholars have divided these environmental factors into two main parts as,
A) Internal Environment,
B) External Environment



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