The Internal and External Business Environment

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A business cannot function in a shell. In order to exist and function effectively, a business has to act and react to what happens in the external environment. “The aggregates of all conditions, events, and influences that surround and affect it” says Keith Davis (Saleem Shaikh, Business Environment, 2010) The external environment of a business refers to all those factor that directly influence the working of a business. These factors are not in control of businesses, but it is extremely important for a business because they shape the kind of business activity one can have. The factors which influence the external environment of a business are: Political factors – This means how the changes in the government policies, political systems and the approach and philosophy of the political party in existence influences the working of a business enterprise. Economic factors – This means how a business is affected by the economy in terms of government spending, interest rates, taxation, exchange rates, global economic factors, infrastructure development, capital formation, etc. Social factors – Every business organization operates in according to the norms of the society and to satisfy their needs. This means how the culture, values, beliefs, tastes, preferences and behavior of the consumers, households and communities affects the working of a business. Technological factors – Technology is considered to be one of the most important factors which affect the business environment. It means how the rapid change and innovation in technologies affect the production process and help businesses to produce innovative products. Ecological factors – Ecology is the study of environment which includes plants, animals, water, air, sunlight etc. These factors affect the working of a business organization considerably in a way that government has taken some legislative measures for the protection and control of pollution in the environment like The Water Act, 1974, The Air Act, 1981, The Environment Protection Act, 1986. Legal factors – The legal environment plays a very important role in business. Every aspect of business is regulated by the law of the country. These include the laws related to industrial licensing, factory administration, payment of wages, company laws, import and export laws etc. Figure 1: External environment with factors.

In order to stay and survive successfully in the market for long term a business has to take in consideration all the above mentioned factors and change accordingly. These factors have affected the performance and long term sustainability of Mahindra and Mahindra to a large extent.

Mahindra and Mahindra

Mahindra & Mahindra Limited is part of Mahindra Group which is based in Mumbai. The company was started in 1945 in Ludhiana as Mahindra & Mohammed by the brothers K.C. Mahindra and J.C. Mahindra along with Malik Ghulam Mohammed.It was changed to Mahindra & Mahindra in 1948 and is currently headed by Anand Mahindra. It is now a US $7.1 billion Indian multinational. Mahindra is the only Indian company which manufactures top tractor brands in the world. Today it has its presence in almost every segment of the automobile industry,

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