Dimensions of business environment

The business environment has five dimensions:

• Economic: interest rates, inflation, people's disposable income, the stock market, and the value of the rupee. Low interest rates, for example, help car makers, because people borrow to buy cars.
• Social: customs and traditions (festivals like Diwali raise the sale of sweets and gifts), values (freedom, social justice), trends (the fitness craze raised demand for health foods and gyms), and society's expectations from business.
• Technological: new products and new methods (online booking, robotics, biotechnology). They create opportunities, but make old products obsolete: computers replaced typewriters.
• Political: stability and peace in the country, and the government's attitude to business. A stable government gives business confidence.
• Legal: laws passed by Parliament (the Companies Act, 2013; the Consumer Protection Act; the Competition Act, 2002), government orders, and court judgments. For example, cigarette packets must carry a health warning, and baby food advertisements must say that mother's milk is best.

Every firm sits inside these five forces, and a change in any one can help or hurt it.