It might be a full-fledged digital advertising agency or a software company. It can be a design start-up or an academic coaching institute. One thing that is common in all of them is the business environment.
Every business and its environment have a close and constant interaction, which in turn empowers the company to grow with effective resource management.
The definition of business environment
Keith Davis has defined business environment as “the aggregate of all conditions, events, and influence that surrounds and affect it”.
To be precise, a company’s business environment is the total of all the external and internal factors, including management, customers and their needs, employees, technologies in use, suppliers, media, competitors, government, and so on.
The business environment is an ever-evolving entity. It is also dynamic and uncertain because some of its factors are continuously changing or upgrading. Such changes create opportunities as well as risks, which affect the business environment and the future of business.
Prominent features of business environment
- Complexity arising from the diverse nature of various influences, factors, conditions, and events
- Interdependence of an array of factors including cultural, political, social, economic, and so on
- Impact on business, which may be long term or short term
- Continuously changing process of the various aspects involved in the business environment
- Inter-connectivity of various factors affecting the other factors and the overall environment
- Unpredictability and uncertainty of the involved elements
Having an enriching business environment is crucial for any company to succeed. The business environment helps identify new opportunities, build planning strategies, improve organizational behavior, tap suitable resources and increase the profitability of the business.
Importance of business communication
Defines focus areas of growth
When the interaction between a business and its environment is healthy, the growth prospects of the company multiply. It helps the company to expand. The strategists of a company get answers to various questions, such as are the company’s customers preferring another brand? Are the competitors offering some extra benefits? What needs to be done to stay relevant? And many more.
Leads to new business opportunities
One of the major advantages of the business environment is that it helps the company identify new business opportunities in the market. It also assists in pointing the threats that might hamper the prospects of the company.
Increases customer satisfaction
Understanding the business environment gives the management insights into the customer psyche, their aspirations, expectations, and needs. The focus is firmly on the customers, resulting in enhanced customer experience and satisfaction.
Aids in strategy formation
Proper analysis and attention to the business environment build the foundation for excellent strategizing. The relevant information of various factors increases the knowledge level and helps the company form a comprehensive strategy for a progressive future.
Helps in image building
If the company is keen about its environment and takes efforts to build it positively, it has a favorable effect on the company’s image. Being sensitive to the business environment and responding to its demands, is important for any company to move ahead and prosper.
Gives competitive edge
The business environment aids the companies in doing competition analysis and chalking out their own action plans. Being aware of the competitors’ thought processes and actions is extremely helpful for any organization.
Techniques of business environmental analysis
- Environmental Threat and Opportunity Profile Analysis (ETOP)
- Quick Environment Scanning Technique (QUEST)
- SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
- PEST Analysis (Political Factors, Economic Factors, Social Factors, Technological Factors)
Any company which ignores its business environment and does not focus on creating relevant business communication is not aware of the threats as well as opportunities. It lags behind. To overcome this challenge, it is imperative to understand, analyze and manage the business environment effectively.
