The History Of Economic And Legal Environment Business Essay


After learning all of these titles, we should be able to understand the importance of studying business and the elements of the business environment and know how economics affects business, the types of business ownership and the advantages and disadvantages of each and understand the role of marketing in business. Last, we also demonstrate knowledge of the banking system and the stock exchange market.

Introduction to Business Environment

Businesses provide people with the opportunity to become wealthy. Owning a business if you are willing to be an entrepreneur or working for a business if you have supervisory talents can help you meet this goal. Then, the success of a business is generally dependent on the business environment. It consists of the surrounding factors that either help or hinder the development of businesses. The five elements in the business environment are the economic and legal environment, the technological environment, the competitive environment, the social environment and the global environment. Business owners who are not aware of the environment around them necessarily have less success than those who are aware.

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2.1 Business Environment

There are four types of business environment.

2.1.1The economic and legal environment

People are willing to establish new businesses if they believe that the risk of losing their money isn't too great. Part of the entrepreneurs' risk involves the economic system and how government works with or against businesses. Government can do a lot to lessen the risk of starting businesses and thus increase free enterprise and wealth. For examples, a government can keep taxes and regulations to a minimum. One way for government to actively encourage entrepreneurship is to agree to private ownership of businesses. Besides that, governments can reduce the risks of entrepreneurship by passing laws that allow businesspeople to write contracts that are enforceable in court. For instance, the Uniform Commercial Code (USS) covers things like contract and warranties. Government also can establish a currency that is tradable in world markets. That is, you can purchase and trade goods and services wherever in the world by using that currency.

Then, the government can help minimize corruption in business and in its own ranks. It's hard to do business in many poor countries because the governments are so corrupt. It's very difficult in such countries to get permission to build a factory or open a store without government permit, which is obtained mostly through bribery of public officials. There are many laws in the United States to minimize corruption, and businesses can flourish as a result. However, corrupt and illegal activities at some U.S. companies negatively affect the business community and the economy as a whole.

2.1.2 The technological Environment

Technology means everything from phones and computer, to medical imaging devices, personal digital assistants, and the various software programs that make business processes more effective, efficient, and productive. Technology affects people in all industries. One reason that workers make more money in the United States than in most other countries is that they have access to technology that allows them to be more productive.

Since prehistoric times, humans have felt the need to create tools that make their jobs easier. Few technological changes had a more comprehensive and lasting impact on business than the emergence of information technology such as computers, modems, the internet, cell phones, and so on. The internet is a major force in business today since many Internet firms have failed in recent years.

One of the most important current environmental changes interest to business people is the growth of e-commerce, which is the buying and selling of goods over the Internet. The rise of internet marketing came so fast and furious that it drew hundreds of competitors into the fray. Success will come to those e-commerce businesses that offer quality products at good prices with great service.

2.1.3 The competitive Environment

Competition among business has always existed, but it has never been greater than it is today. Some companies have found a competitive edge by focusing on quality. The point for many companies is zero defects that mean no mistakes in making the product. Companies now have to offer both high-quality products and outstanding service at competitive prices.

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In customer driven organizations, customers required both high quality and high value, and for companies to stay competitive they must offer both. Besides that, big and small businesses depend on their returning customers, and should make sure that put the customers in the number by servicing them well. Then, organizations must listen more closely to determine their wants and needs.

Whereas in employee empowerment, firms must their employees the reasonability, authority, freedom, training and equipment they need to respond quickly to customer requests to produce quality goods and good customer services, which is called empowerment. Empowered employees need to be treated as partners in the firm.

2.1.4 The Social Environment

Demography is the statistical study of the human population with regard to its size, density, and other characteristics. The U.S Population is going through major changes, significantly affecting how people live, where they live, what they buy, and how they spend their time. In addition, the management of diversity is an important concern for business people. Business are concerned about having a diverse workforce for two main reasons that are business can better serve customers with a diverse workforce and a diverse work environment brings about new, fresh ideas and perspectives.

2.1.5 The Global Environment

Two important environment changes in recent years have been the growth of international competition and the increase of free trade among nations. Free trade is the reduction of barriers to trade, such as elimination of tariffs on goods brought into another country. World trade is also called globalization has greatly improved living standards around the world. For example, the number of East Asian people living on less than one dollar a day has declined from 56 percent to less than 16 percent. China and India have become major U.S. competitors.

After that, cooperation among businesses has the potential to create rapidly growing world markets that can generate prosperity beyond most people's expectation. It is extremely important to note that all sizes of businesses compete in the global marketplace. Hence, technology has made this much easier through online selling and international shipping.

As businesses expand to serve global markets, new jobs will be created in both manufacturing and service industries. For example, U.S exports are expected to continue to increase under new trade agreements that will lead to expansion of the job market both in the United States and globally. Global trade means global competition.

2.2 Conclusion

Business environment means the surrounding situation within which business organization has to operate. It is a sum total of cultural, political, economical, social, physical, technological, legal and global forces which move around the business organization. Besides that, business environment has now become extremely complex and the government intervention has become more frequent. This is because it is governed by external factors. In addition, an analysis of the external environment helps the business firm to identify the opportunities in the market. The business firm should make every possible effort to grab the opportunities.


Introduction to business ownership

Business ownership means having the control over a business enterprise and being able to dictate its functioning and operations. There are two types of business ownership which are private sector and public sector. In this section, we would like to discuss about private sector. The private sector is usually composed of organization that are privately owned and not part of the government. These usually include sole trader, partnerships, private limited company, public limited company and franchise. An easier way to think of the private sector is by thinking of organizations that are not owned or operated by the government. For example, retail stores, credit unions, local businesses will operate in the private sector.

One key to success in starting a new business understands how to get the resources you need. When entrepreneurs establish a business, one of the first decisions that should make is they must decide on the form of business ownership such as sole proprietorship, partnership, corporations and franchises.

3.1 Basic Forms of Business Ownership

The four major forms of business ownership are sole proprietorships, partnerships, corporations and franchises. In this section, I would like to discuss two basic forms of ownership, which are sole proprietorships and partnerships.

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3.1.1 Definition of Sole Proprietorships

A business owned by a single is referred to as a sole proprietorship. The owner of a sole proprietorship is called a sole proprietor. A sole proprietor may obtain loans from creditors to help finance the firm's operations, but these loans do not represent ownership. The sole proprietor is obligated to cover any payments resulting from the loans but does not need to share the business profits with creditors.

3.1.2 Definition of Partnership

A partnership is a strategic alliance or relationship between two or more people. The co-owners of the business are called partners. Successful partnerships are often based on trust, equality and mutual understanding and obligations. The co-owners must register the partnership with the state and may need to apply for an occupational license. There are several tips of partnerships which are general partnerships, limited partnerships and master limited partnerships.

3.2 Which business ownership would I prefer?

I most prefer to choose sole proprietorship if I begin my businesses. Sole proprietors must be willing to accept full responsibility for the firm's performance. The pressure of this responsibility can be much greater than any employee's responsibility. Sole proprietors must also be willing to work flexible hours.

3.2.1 Advantages of a Sole Proprietorship

Easy Organization: Starting a sole proprietorship is relatively easy. The legal requirements are minimal. A sole proprietorship need not establish a break up legal entity. Besides that, the owner must register the firm with the state, which can normally be done by mail. The owner may also need to apply for an industrial license to accomplish particular types of business. The specific license requirements vary with the state and even city where the business is located.

Being own boss: Working for others simply does not have the same excitement as working for yourself. At least, that's the way sole proprietors feel. After that, the sole proprietor does not have to share the firm's earnings with other owners. Thus, the rewards of establishing a successful firm come back to the owner.

No special legal restrictions: The proprietorship is the least regulated form of business ownership. In a time when government desires for information seem never ending, this feature has much benefit. All the profits of a sole proprietorship are taxed as the personal income of the owner, and the owner pays the normal income tax on that money.

Easy to discontinue: If an entrepreneur decides to discontinue operation, he or she can stop the business quickly even though he or she will still be personally responsible for any outstanding debts and obligations that the business cannot pay. In addition, entrepreneurs considering the sole proprietorship as a form of ownership also must be aware of its disadvantages.

Total Decision-Making Authority: Because the sole proprietor is in total control of operations, he or she can respond quickly to changes, which is an asset in a rapidly shifting market. The freedom to set the company's course of action is a major motivational force. For those who thrive on the enjoyment of seeking new opportunities in business, the freedom of fast, flexible decision making is vital. Many sole proprietors increase on the feeling of control they have over their personal financial futures and the recognition they earn as the owners of their businesses.

3.3 Disadvantages of partnership

Anytime two people must agree, there is the possibility of conflict and tension. Partnerships have caused splits among families, friends, and marriages. Let's explore the disadvantages of partnerships.

3.3.1 Unlimited liability

At least one member of every partnership must be a general partner. Each general partner is likely for the debts of the firm, no matter who was responsible for causing those debts. In addition, general partners' liability is joint and several, which means that creditors can hold all partners equally responsible for the partnership's debts or they can collect the entire debt from just one partner.

3.3.2 Division of profits

Sharing risk means sharing profits, and that can cause conflicts. There is no set system for dividing profits in a partnership, so profits are not always divided evenly. For example, two people form a partnership in which one puts in more money and the other puts in more hours working the business. Each may feel justified in asking for bigger share of the profits.

3.3.3 Mutual Distrust between partners

The mutual disbelieve among partners is the main cause for the dissolution of partnership concerns. It is hard to maintain harmony among partners when they are in working because they may have dissimilar opinions and may not agree on certain matters. Lack of self-belief in each other can be cause for quarrels and it may lead to the dissolution of the firm.

3.3.4 Lack of continuity

If one partner dies, complications happen. Partnership interest is often nontransferable through inheritance because the remaining partner(s) may not want to be continuing with the person in the partnership who inherits the decreased partner's interest. Partners can make provisions in the partnership agreement to avoid dissolution due to death if all parties agree to accept as partners those who inherit the deceased's interest.

3.3.5 Potential for personality and authority conflicts

Being in a partnership is much like being in a marriage. So that, make sure partners' work habits, goals, ethics, and general business philosophy are compatible is an important step in avoiding a nasty business divorce. Engaging in serious discussions with potential partners before launching a business together is a valuable and helpful exercise. No matter how compatible partners are, friction among them is inevitable. They key is to have a mechanism such as a partnership agreement and open lines of communication for managing conflict.

3.4 Conclusion

In conclusion, there are four basic forms of business ownership: sole proprietorship, partnership, corporation and franchises. Sole proprietorship is a business owned by a single owner. Partnership is a business that is co-owned by two or more people. In a general partnership, all partners have unlimited liability. That is the partners are personally liable for all obligations of the firm. Besides that, become a single owner in a sole proprietorship, there have many advantages such as easy organization, lower taxes, easy discontinue and others. One most characteristics as become single owner is all earnings go to the sole proprietor. He or she does not have to share the firm's earning with other owners. Thus, the rewards of establishing a successful firm come back to the owner.


From this whole assignment, we had discussed about introduction to business. There are four types of business environment which are the economic and legal environment, the technological environment, the competitive environment, the social environment and the global business environment. Business grows and prospers in a healthy environment. The results are job growth and the wealth that makes it possible to have both a high standard of living and a high quality of life. Business ownership, on the other hand, I would like to discuss basic forms that are sole proprietorship and partnership. And I most prefer sole proprietorship when I start my own business.