How would you characterise business environment? Explain, with examples, the difference between general and specific environment.

Following are the chief characteristics of the business environment:

(i) Totality of External Forces: Business environment is the sum total of all those factors/forces which are available outside the business and over which the business has no control. It is the group of many such forces, that is why, its nature is of totality.

(ii) Specific and General Forces: The forces present outside the business can be divided into two parts — specific and general.

(a) Specific: They are the forces which affect the firms of an industry separately, e.g., customers, suppliers, competitive firms, investors, etc.

(b) General: They are the forces which affect all the firms of an industry equally, e.g., social, political, legal and technical situations.

(iii) Inter-relatedness: The different factors of business environment are co-related. For example, let us suppose that there is a change in the import-export policy with the coming of a new government. In this case the coming of new government to power and change in the import-export policy are political and economic changes respectively. Thus, a change in one factor affects the other factor.

(iv) Dynamic Nature: As is clear that environment is a mixture of many factors and changes in some or the other factors continue to take place, therefore, it is said that business environment is dynamic.