Importance of business environment

Importance of business environment can be assessed by the fact that a business cannot be run properly without a proper setup for its support. When an investor decides to start a business in a country or region he/she first analyzes the prevalent conditions with respect to the businesses. If these conditions are congenial to it he/she would waste no time to start the business. Otherwise he/she explores other countries or regions to set up new business there.

Size doesn’t matter

The importance of business environment cannot be overlooked either one has to start a big business or smaller one. Establishing any size of the business one has to see whether one’s business would earn profit or not. All the other considerations are of the secondary importance. For example if in a country raw material is so cheap but the wages are quite high it means lower cost of one factor of production would be offset by the other.

New trend of off-location business

The importance of business environment can also be judged by the widely growing off-location global industry of information technology. In South Asian and African countries wage rates in IT industry are so cheap. But their business environment is not so much congenial. Therefore, global IT giants hire the manpower from there and make them work from their home. This is called off-location IT business. In this way physical uncertainties can be warded off by hiring the off-location IT professionals.

Cheap cost of production

Similarly in many countries wage rates and raw materials both are so costly. But the political, social and economical conditions for the business are so supportive. In this way businesses hire selective number of professionals from cheap countries, buy the raw material from there and even produce the goods and services there. But they import their own production from that country and sell in markets of those countries where their prices are high. In this way businesses earn more profit and don’t have to face any kind of the adverse business conditions.

Multinational companies

The concept of multinational companies also reflects the importance of business environment. Such companies install their production units where wages, raw material and other factors of production are so cheap. However, they sell their finished goods where they are in hot demand. As a result they not only earn huge profit but easily expand their sale to a wider scale.

Facility of global markets

After the growth in global markets it is common in every country to produce goods and services as much as it can produce. In this way it can sell its surplus production in international market and buy back those goods and service which cannot be produced in its domestic industry because of the non-availability of the required business infrastructure to produce them. This factor has developed the global business markets at a huge scale.

Thus importance of business environment cannot be neglected at all levels. A businessman, exporter, multinational company or any other concern has to take full care of it while making its business decisions.

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