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Non-economic Environment

The non-economic environment consists of socio -cultural, demographic, natural, physical, technological, political and legal environment that influence and are, influenced by the economic environment. A large number of variables affect the non-economic environment.

(i) Political-legal environment:

It refers to the legislative, executive and judicial environment of ht environment of the country that shapes and controls its business activities. The legislature describes the course of action to be followed by firms, the executive implements the decisions taken by the legislature (parliament) and the judiciary ensures that legislature and executive function in the interest of the society. A stable political environment is conducive to business growth.

(ii)Socio -cultural environment;

It represents the values, culture, beliefs, norms and ethics of the society in which business enterprises operate. People are important to business organizations both as human resource and customers. Their buying habits, buying capacities, tasted, preferences and education affect business enterprises. Business firms change their production and marketing plans according to consumers’ demand. the social environment consists to he social values; concern for social problems like protection of  environment against pollution removal of unemployment, health care for the aged and old etc.; consumerism, that ism indulging in fair trade practices for satisfaction of human wants.

The cultural environment represents values and beliefs of the society. These beliefs mould the attitudes of people and help business enterprises determine their need perception.

The socio- cultural environment helps business firms support the social and cultural values of society by encouraging fine arts projects, sports, communication media, making donations to educational, religious and charitable institutions, opening counseling centers, vocational and technical training centers etc.

(iii) Technical environment:

Technology refers to application of scientific and organized knowledge to organizational tasks. It included inventions and innovations regarding techniques of production. Technology today is changing at a fast pace and technical environment is dramatically affecting the business environment. The technological advances have introduced products like air condition, robots, telecommunication facilities, medicines, equipments etc. Business firms adapt to the fast changing technical environment. Though technological changes can produce harmful effects also for business enterprises, the firms try to reduce these effects and use the technological changes in the best interests of firms and society. Not adopting technological changes is not possible; the technical threats have to be converted into opportunities and gainfully employed in the business operation.

(iv) Demographic environment:

It consists of people or population in its varied forms, such as gender, age, income, growth rate, language, religion, etc. Increase in population will increase the demand for business products. Increasing population also provides labour at low wage rate

A largely populated country can adopt labour- intensive technology to keep its labour force employed. The age composition helps firms produce goods to meet the needs of that group. Production is also affected by gender composition. More females will promote business enterprises to produce goods used by females.

Labour mobility (from rural to urban areas and vice versa), their educational level, nationality, religion, etc. also affect policies of the organizations.

(v) Natural environment:

The natural environment consist of the renewable an non- renewable resources used by the firm in their production processes’ The renewable resources are air, water and solar energy which can be replenished and non-renewable resources are oil, coal, wood etc. which cannot be replenished.

Though air, water and solar energy can be replenishes, firms are bearing these resources by dumping industrialization is affecting the natural environment by disposing off chemical wastes in land, air and water. It also agents the food supply which can be harmful on consumption. “The environment damage to water, earth and air caused by industrial activity of mankind is harmful for future generation.”

Business enterprises should use these resources wisely and adopt methods to restrict environmental pollution. Legislative measures are also enforced by the renewable resources have to be used properly so that their rate of consumption does not exceed the rate of replenishment.

(vi) International environment:

It represents the global environment characterized by a “borderless world”. The Indian economy entered the global world in 1991 when it  announced its liberalization policies. There have been significant economic and political changes and increasing role for the private sector to play since then.

The global business environment is significantly influenced by the principles and agreements of World Trade Organization (WTO). WTO monitors and regulates the business transacted in the international environment, that is, the borderless trade. It has created significant impact in the following areas:

1. Liberalization of imports
2. Opportunities for Indian firms to enter into foreign markets through exports and investments.
3. Seek foreign equity participation and foreign logy in Indian firms to expand business and improve competitiveness.
4. Facilitate global saucing by Indian firms.
5. Benefit from global sourcing by foreign firms.
6. Improve the efficiency and dynamism of the firms to survive to the global competition. Inefficient firms have to leave the market.

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