Question

What are the dimensions of business environment?

Answer 1

The Dimensions or the factors constituting the business environment include political, social, technological, legal and economic factors which are considered important for taking decisions and for improving the operations of a firm.

These are a part of general environment which influences the performance of many firms at the same time.

1. Economic Environment:

Economic Environment consists of factors like inflation rates, interest rates, consumers’ incomes, economic policies, market conditions etc. which affect the performance of a business firm.

(a) Interest Rates:

Changes in the interest rates greatly affect the demand for goods and services. For example, low long term rates on home loans are beneficial for banks and consumers both.

(b) Consumer Income

Increase in the incomes of the consumers leads to increase in their purchasing power. Hence, demand for goods and services rises.

(c) Inflation Rate:

High inflation rate increases the cost of production and hence puts constraints on firms.

Economic Environment is fully regulated by RBI (Reserve Bank of India). RBI influences the interest rate in the country, has full control on the flow of money in the economy. It also regulates the working of all banks in India.

Answer 2

the dimensions or the factors of constituting the business enviroment include political ,social,economictechnological and legal factors which are considered important for taking decisions and improving the operations of a farm