This chapter introduces students to the fundamental concept of how businesses operate within a wider environment influenced by economic, social, technological, and legal factors. It helps students appreciate that businesses do not function in isolation; instead, they must constantly respond to external forces that shape their decisions and long-term success. Students learn how dynamic markets and competition affect strategy, planning, and the overall direction of a firm.
The chapter also explores the objectives and motives behind businesses, examining why firms exist, what they aim to achieve, and how ownership structures influence decision-making. By understanding different business forms and their varying aims, students gain insight into how stakeholders—such as customers, employees, and governments—impact business priorities.
Lastly, the chapter develops an understanding of how the economic environment—interest rates, inflation, exchange rates, and unemployment—plays a critical role in business performance. Students learn how to analyze the impact of these factors on profits, growth, costs, and competitiveness. This forms a foundation for strategic thinking that will be built upon in later chapters.
