Business environment may be defined as all those conditions and forces external to a business unit under which it pirates. These forces include customers, creditors, competitors, suppliers, government, socio-cultural organizations, political parties, international organization, etc. Some of these forces may have direct influence over the business firm while others may operate indirectly.

Business is an open system which has continuous interface with the external environment. Some of the forces in the environment which have considerable influence on the business policies and practices are as follows:

(i)    Frequent changes in Government economic policies, e.g., licensing policy, monetary policy, taxation policy, etc.

(ii)    Rapid technological changes as in computer industry- introduction of new models.

(iii)    Political uncertainty, e.g., unstable government, changes in leadership of the ruling party, etc.

(iv)    Social changes, e.g., demand for reservation in jobs for minorities and women.

(v)    Changes in fashion and tastes of consumers, e.g., preference for khadi garments in place of synthetic garments, dislike of oils containing unsaturated fats.

(vi)    Labour unrest leading to industrial conflicts-demand for greater economic benefits, militancy in union activities, etc.

(vii)    Increases competition in the market with the entry of multinational brands in the country.

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