A business environment refers to the external and internal factors which have a direct or indirect influence on a business. The external factors that affect a business include political factors, macroeconomic factors, social and technological factors. The internal environmental factors include plans and policies, human resources, corporate image and financial resources.
The political factors are those that are influenced by the activities of the government such as laws, regulations, and tariffs. Such conditions may affect the business resulting in lower profits. Macroeconomic factors are those that affect the business due to the market size, the rate of demand and supply, and one's competitors. It may impact the business positively or negatively. The social, environmental factors are the sociological factors that are contributed by the society and the social relations that exist. A business will be affected by the social and environmental movement in a place such as the change in climate or change in customers preference. The technological factors that influence the working environment of a business are the innovations of technology that can result in benefiting the business or bringing harm to the firm. Some of the technologies once implemented in the firm can lead to higher quantity production like the use of computers in business. The plans and policies of an organization are formulated to help it achieve its objectives, and hence they should be framed properly. The performance of a business is dependent on its human resource. The behavior of its employees can cause either damage or improve the organization's reputation, and this can have a direct impact on the business. If a business has financial constraints, it will affect it negatively but a firm that has enough money it can carry out more research and also promotional activities hence increasing their income (Worthington & Britton, 2015).
Effect of economic conditions
The economy of various countries undergoes a period of fluctuations that tend to be associated with the good and bad economic activities that are being carried out. When the economy of a country is doing fine most business benefit from that but while the economy is weak, it results in the fall businesses. The change in interest rates, wage rates and the inflation rate in a country tend to affect the manner in which business is carried out. High inflation rate leads to the rise in the price of commodities. Companies tend to expand in an economy that is doing well such as an economy that has low-interest rates and increased demand for products and services.
Internal Structures of Organizations
Internal organizational structure refers to the manner in which an organization has been arranged to achieve its goals and objectives. The organizational structure involves the assignment of tasks, hierarchy and supervision structure. The structure varies from one organization to another depending on its nature, goals, and preferences of those who are in charge. Most organizations base their internal structure in the manner in which their employees will be able to complete their tasks faster and still maintain high-quality performance. A strong hierarchy structure of an organization is characterized by ranks whereby communication follows from the highest rank to the lowest rank. Those at the top level have the responsibility of assigning duties and supervising their subordinates (Tullock, 1992).
Use of Accounting
Accounting provides the management of various firms with the data that is required to assess if the business is operating at a loss or profit. It provides the financial over view of the firm. Through the accounting information, the managers are in a position to make good decisions at the right time. The managers can know when the sales of the firm are decreasing with the help of the accounting information and hence take the necessary actions to stop such a trend (Ramachandran, 2011).
Ramachandran, A. (2011). Gnu Cash 2. 4 Small Business Accounting. Birmingham: Packt Publishing, Limited.
Tullock, G. (1992). Economic hierarchies, organization and the structure of production. Boston, Ma: Kluwer Academic.
Worthington, I., & Britton, C. (2015). The business environment.
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