Explain FIVE Environments in which a business may operate. – NABTEB QUESTION

EXPLANATIONS.

(i) Legal environment: This constitutes all the laws, decrees or edicts made by the government to regulate commercial operations. A business is required to operate within the laws of the country or face closure

(ii) Political environment: This refers to the system of government existing and the administrative subdivisions of the country which affect commercial operations. A business is bound to adapt to changing political situations. Political instability adversely affects commercial operations

(iii) Economic environment: This includes the general economic conditions which affects commercial decisions such as economic growth or boom or recession, inflation, depression, and change in market trends exert a great impact on commercial organizations. It includes the government fiscal and monetary policies with which government uses to stimulate commercial activities. Commercial institutions watch closely details of these government fiscal and monetary policies and economic forces that affect their operations

(iv) Social/cultural/religious/ethical environment: This is defined as the social institutions, family, religious, languages, customs, beliefs, and value system prevalent in society. This may affect commercial operations in terms of the type of products and persons available for employment.

(v) Technological environment: This describes the current state of scientific knowledge, production process, machines and supportive systems that enable a nation to carry on its daily life. Advancement in technology such as electronic communication and computerization have affected the way commercial activities are carried out. Any business that does not adapt to such changes in technology will find itself obsolete

(vi) Physical/ecological/geographical environment: This includes the climate conditions e.g. desert encroachment, drought, river pollution, depletion of forest and mineral resources. The physical condition in which a commercial institution must be involved in any ecological development and control of all forms of pollution and natural hazards e.g. air, water, noise, flood etc.

(vii) Demographic environment: This deals with commercial environment which affects the population of the state, district or area within which the business operates. The composition of the population, age, sex distribution which determines the market for the business product and the supply of labor

(viii) Pressure groups environment: The activities of interest and pressure groups, mass media, other institutions and social groups have a lot of influence in the business activities of a country.

(ix) Infrastructure environment: Infrastructural facilities such as electricity, roads, railways, air and seaports play crucial roles to the success or failure of the business firm.