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In: Finance

Explain the complex and dynamic nature of different types of Business Environment. Furthermore, by keeping view...

Explain the complex and dynamic nature of different types of Business Environment. Furthermore, by
keeping view Competitive Analysis, differentiate the Present and Potential Competitors with the help
of the examples.

overall busines not a specific Field

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Expert Solution

Business environment:
Business environment refers to all the external forces such as economic,social,political,technological or legal that effect the performance of a business organisation. In other words ,everything that is outside the purview of an organisation but effects its performance composes business environment.
Following are the features of business environment:
(i)Interrelated : Different forces acting in a business environment are closely related to each other. For example , an increase in the income of the consumers increases the demand for consumer durables such as television, refrigerator, etc.
(ii)Ever changing: Business environment is dynamic and ever changing in nature. For example, consumer tastes and preferences, technology, government rules and policies keep changing continuously.
(iii)Complex: Business environment is the aggregate of different interrelated and dynamic forces. Thus, it becomes difficult and complex to understand. For example ,all political ,social ,economic ,technological and legal matters affect the performance of an organisation simultaneously.While,it may be easy to understand the individual affects of these forces, their cumulative effect is quite difficult to understand.

Types of Business Environment
Environment includes such factors as socio-economic, technological, supplier, competitor and the government. There are two more factors, which exercise considerable influence on business. They are physical or natural environment and global environment.

Technological Environment
Technology is understood as the systematic application of scientific or other organized knowledge to practical tasks. Technology changes fast and to keep pace with it, businessmen should be ever alert to adopt changed technology in their businesses.

Economic Environment
There is close relationship between business and its economic environment.
Business obtains all its needed inputs from the economic environment and it absorbs the output of business units.

Political Environment
It refers to the influence exerted by the three political institutions viz., legislature executive and the judiciary in shaping, directing, developing and controlling business activities. A stable and dynamic political environment is indispensable for business growth.

Natural Environment
Business, an economic pursuit of man, continues to be dictated by nature. To what extend business depends on nature and what is the relationship between the two constitutes an interesting study.

Global or international Environment
Thanks to liberalization, Indian companies are forces to view business issues from a global perspective. Business responses and managerial practices must be fine-tuned to survive in the global environment.

Social and culture Environment
It refers to people's attitude to work and wealth; role of family, marriage,
religion and education; ethical issues and social responsiveness of business.


Differentiation allows you to provide superior value to customers at an affordable price, creating a win-win scenario that can boost the overall profitability and viability of your business. Our research indicates there are six primary ways to differentiate, including product, service, channels of distribution, relationships, reputation/image, and price.
However, not all differentiation strategies are equally effective, and some methods may be more important to invest in than others in order to stand out from the competition.

Factors to Consider for Differentiation
A difference is worth establishing when it meets at least one of the following criteria:
•   Valuable: the perceived benefit exceeds the cost
•   Important: delivers a benefit critical to success
•   Distinctive: unique or offered in a distinctive way
•   Superior: better technology, faster
•   Emotional: ties to a core emotion — love, hate, desire
•   Communicates: understood and visible
•   Preemptive: cannot be easily copied
•   Affordable: customers can pay the higher price
•   Profitable: contribution (margin times volume) exceeds cost of difference
Direct competitors are competitors who are directly vying for your customers. If you’re a residential painter, your direct competitors are other residential painters in your service area. If you have an online course about confidence, they’re the other ones who have courses about confidence. When most new business owners think about their competition, direct competitors are what come to mind.
Potential competitors are those competitors who do the same thing that you and target the same kinds of customers but aren’t selling in your market area and aren’t likely to do so. They could be your competition if they decided to enter, but either don’t have the infrastructure or have chosen to ignore your area. An example of a potential competitor would be a residential painting company in another city.


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