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Dimensions of Business Environment

The word 'business environment' refers to external influences, circumstances, and institutions that are beyond a company's control and have an impact on how it operates. Customers, rivals, suppliers, the government, and social, political, legal, and technological considerations are among them.

What are the Business Environment’s Dimensions?

The business environment is made up of the company’s internal and external environments. All of the components in this environment, including firms, organisations, institutions, and forces, have a direct or indirect impact on the company. There are various aspects to the business environment. These characteristics should be thoroughly examined in order to make informed decisions and take appropriate steps toward the organization’s ambitions and objectives.

Changes in the external environment have an impact on the business as well. As a result, proper research and comprehension of these factors are required to avoid major hazards to the organisation and turn them into opportunities. The business environment is made up of five components. Economic environment, technological environment, social environment, political environment, and legal environment are the five environments mentioned.

Economic Environment

The economic environment encompasses all economic aspects that are mostly beyond the organization’s control. 

These are developments in the economy that might be beneficial or detrimental to a firm. These elements might be micro or macro in nature and come in a variety of forms. These elements may have a varied impact on each organisation.

These modifications can be seen at a micro level as follows:

1.The product or service is in high demand.

2.The goods or service is delivered.

3.Changes in local or state government policy

the size of the market

These changes are at a macro level:

1.The rate of inflation

2.Rates of interest

3.Number  of people unemployed

4.Tax Rate

5.Policies of the federal government

6.Changes in the banking industry

7.Changes in fiscal or monetary policy

The Technological Environment

In general, technology refers to the application of scientific knowledge. This is critical for a corporate organisation since it can be used for operations or for other purposes such as advertising, promotion, and recording. Many organisations, such as the telecom industry, rely primarily on technology. These companies must keep themselves up to date with technological advancements on a regular basis. This continuous improvement not only allows them to stay current and efficient, but also allows them to develop ground-breaking tactics for their market operations.

Many times, technological advancements can assist a company in keeping its manufacturing costs low, bringing in better products or services, and thus keeping customers interested in that product or service.

The Social Environment

Beliefs, behaviours, values, traditions, customs, and trends are all part of the social environment. Business does not operate in a vacuum; it must repay the societal favours it has received in the form of resources, manpower, and so on. Every society has its own social environment, which may or may not be compatible with the social environments of other societies. 

For example-:Our attitude toward a product, as well as our like and disliking of it, is influenced by the society we live in. People in India, for example, may love spicy food, and restaurants providing spicy food may be preferred in India, yet the same restaurant may not be preferred by Americans

The Political Environment 

Political business is critical to the organization’s operation. The workings of politics, governance, and policies are referred to as the political environment. It is highly dependent on the government’s operations and procedures. Many factors influence company operations, including the government’s stability, the country’s peace, and the government’s support for businesses.

For example-:Political stability: When the government is unstable, there will be disturbances and it will be unable to work properly. With each change in government party, there will be changes in government policies. Peace in the country is also necessary for business to run well.

The Legal situation

The legal environment refers to the laws, rules, and regulations enacted by the government for corporate enterprises. Every firm should be familiar with these regulations because breaking them can result in hefty fines, penalties, and punishments, as well as significant financial losses and possibly the collapse of the company.

By following the acts and rules and operating morally, the legal environment assists businesses in operating ethically and serving society. The government has enacted a number of laws that must be observed by enterprises.

For instance, the Companies Act of 2013, and the Consumer Protection Act of 1986.

2002 Competition Act

The 1948 Minimum Wage Act

Thus, the dimensions of the business environment are the areas that are present in the environment where a business operates and can directly or indirectly effect the firm. It may be in the organization’s benefit at times, but careful analysis is still required to keep the business going.


As we conclude from the above that the factors that define the country’s business scenario are known as the Dimensions of Business Environment. Five important aspects of the business environment encourage critical decision-making in order to improve a company’s operations. The social environment, political environment, economic environment, technological environment, and legal environment are the characteristics of the business environment that influence the firm’s performance.


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