What is Business Environment?

Fundamentally, the term business environment embraces the sum total of surroundings influences and workplace eddies that exist in a specific locale, whether in a small office or amidst business circles that encompass an entire country. The magnitude of its importance is rooted in its intrinsic connection with each an every business decision that is employed. A business environment can be as small as a corporate hiring/firing policy or as deep rooted as racial discrimination and social values of a nation.

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Today Citicorp India has adapted to a more occidental and informal referral system. Employees of the company are on a first name basis with each other regardless of designation. This has resulted in casual banter between superiors and subordinates in turn catalyzing easy access of information and enhancing staff performance through more open communication channels. This system is a novel concept in India and yet is proving to be extremely effective. Without studying the business environment in other countries, Citicorp India may not have adopted a more casual work atmosphere. This may not necessarily have been detrimental to the organization, bit it has certainly proven to be beneficial.

This paper is an attempt at explicating the organic relationship between business environment and managerial dynamics. What is Business? A manager’s job can loosely be defined as a job that requires him to plan, organize, lead and control. One can also say that a managers job starts with planning, and an importance of an in depth study of the business environment is central in the forming of any strategic plan.


Strategy formulation is the set of processes involved in creating or determining the strategies of the organization. The starting point in formulating strategy is analysis. Careful evaluation of both internal and external environmental opportunities and threats. The best strategies accomplish an organizations mission by exploiting environmental strengths and neutralizing its weaknesses. The first step in strategy formulation is taken when an organization assesses its internal environmental strengths and then continues by looking outwards. For example, a particular cellular network provider offers the ability to make and receive calls, and wide, yet stable network coverage. At the same time, so do the others.

Although this is a strength particular to the organization, it is also implemented by other network agencies, which are able to provide equivalent standards of quality. It is, undeniably, in the best interest of an organization to strive for efficiency, providing profits and quality to the maxim. In view of this, an organization must be conscious of the level of competition that it is confronted with, and seek better contemporary standards. Once an organization looks beyond itself, it is able to creep out of mediocrity, and improve performances and output, hence ultimately thriving.

Thus, when assessing internal strengths must looks at the prevalent business environment and concentrate on distinctive competencies. A distinctive competence is a strength possessed by only a small number of competing firms. For example, the same cellular network provider may offer MMS (Multimedia Messaging Service) along with the standard SMS (Short Messaging Service). Therefore, by studying the internal and external environmental conditions an organization can discover its distinctive competencies and choose to implement strategies that exploit it’s unique organizational strengths. Once an organization implements a certain strategy that utilizes the full potential of its distinctive competencies; other organizations also studying the environment will adapt and imitate. To keep up with strategies and innovation of other firms, careful monitoring of the environment is necessary.