Dimensions of Business Environment (2024)

Business environment is an essential part of all the things that influence the operations of a business. Business environments are formed by complex interactions of various dimensions that keep changing constantly. So, understanding these dimensions and how they influence the industries is of great importance because it helps businesses to work productively alongside ever changing markets. The dimensions that comprise business environments are the different factors that work in tandem to shape the way business’s function.

Meaning of Business Environment

A business is affected by a number of factors or forces inside and outside the business enterprise. The forces working outside the business enterprise are known as the environment of the business firm. These factors are taken into consideration because they directly affect the performance of the business institution. These forces that consist of the environment are as follows:

  • Economical dimensions
  • Social dimensions
  • Political dimensions
  • Technological dimensions
  • Legal dimensions
  • Environmental dimensions

Dimensions of business environment

The factors that make up the business environment are technological dimension, political dimension, economic dimension, social dimension, legal dimension, and environmental dimension. And they are discussed in detail as follows:

Economic dimension:

The economic factors that can affect management practices and operations of a business make up the economic dimension of the business environment. These can be the inflation rate, resources, stock market indices, the growth rate of the GDP, income of people, interest rates, value of the currency, etc.

Social dimensions

All the factors that are controlled by the society at large are known as the social factors. These include the social customs, rituals, traditions, instillment of values, ethics and importance of one’s ethnicity are all included in the social dimensions of business. These factors may cause the rise or threaten the demand and supply of a certain type of good in the market.

Political dimensions

The political forces that affect a country from within and from outside are also important in relation to the business. The foreign trade of a company determines the rise and fall of the economy. The export and import are very important factors when it comes to international relations of a country. Moreover, the internal political factors also influence the economy as maintenance of peace in a country is carried by the government.

Technological dimensions

Technology is anything that makes life easier. That is how it affects businesses also. With the advent of technology dimensions, businesses have been able to flourish in all directions. The latest technology makes the mass production of goods possible and economical. The daily operations of business that otherwise are so minute and tedious to do are also simplified by technology.

Legal dimensions

The law of a country is what dictates the functioning of every organisation in a country. There are many sections and subsections of the constitution that have to be taken into consideration while running a business. These factors include the many legislations passed by the government. Acts such as the Constitutional Provisions of the Companies Act 2013, The Trade Union Act of 1926 etc. are examples of laws pertaining to the legal dimensions of business.

Environmental dimensions

With the increasing global warming and environmental hazards, the government issues certain guidelines according to which the industries have to function. This is done to minimise the waste that is produced by the industries and the harm these factories cause to the environment. The smoke emission and chemical discharges of industries greatly affect the environment. Thus, the production in these factories is limited so that they may not become contributors in the great degradation of the environment.


Business environment includes all the factors that directly or indirectly affect the working of the enterprise. In order to identify the factor and start working on the resulting effect companies have to put in a lot of thought and effort. The first movers’ advantage in these cases is always sought after by firms. These factors also help in the realisation of future threats that in turn help the companies act accordingly, thereby increasing the performance of the companies.

Dimensions of Business Environment (2024)


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