Question
Entrepreneurship does not emerge and grow spontaneously, rather it is dependent upon several environmental factors. Explain them.

Answer

Entrepreneurship does not emerge and grow spontaneously, rather it is dependent upon several micro and macro factors, which are external to the business.Business external environment.
S.No.
Micro environment
Macro environment
1.
Suppliers.
Political.
2.
Customers.
Economic.
3.
Intermediaries.
Social.
4.
Competitors.
Technological.
5.
General public.
Ecological.
6.
 
Legal.
  1. Micro environment: It consists of factors, which affect the working of an individual firm. These are the individuals, groups or agencies with whom a particular business organisation comes into direct and frequent contact in the course of its functioning. Various components of micro environment are as follows:
  1. Suppliers: It refers to people and groups who supply raw materials and components to the enterprise. Inventory carrying costs, uninterrupted production, supply, etc are affected by the suppliers.
  2. Customers: Business should understand and meet the needs and expectations of thecustomers.
  3. Intermediaries: Wholesalers, retailers, marketing agencies, transportation firms and warehouses, financial and insurance institutions affect business enterprises in a big way.
  4. Competitors: They affect a business and the firm ought to carve out a niche for themselves.
  5. General public: A firm may encounter certain public in its environment. It may be media public, local public, etc.
  1. Macro environment: These forces affect the market as a whole, are less controllable and the success of an enterprise depends on its ability to adapt to them. They are also known by the acronym, PESTEL.
  1. Political: It includes political stability, taxation policy, foreign trade regulations, etc.
  2. Economic: It includes interest rates, inflation, business cycles, unemployment, disposable income, energy availability and cost.
  3. Social: It includes income distribution, lifestyle changes, population demographics, education levels, etc.
  4. Technological: Speed of technology transfer, focus on technology, spending of government and new discoveries, all comprises technological environment.
  5. Ecological: The way business produces its goods and services by minimum harm to environment.
  6. Legal: Laws, taxation, legislations and guidelines issued by government, environment protection laws, all comprises legal environment.

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