Define business system and business environment.

A business system is an organized or complex or whole, combination of things or parts forming a complex or unitary whole. A business system is an established arrangement of components which leads to the attainment of particular objective according to plan.

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A business enterprise is a system consisting of various sub-systems which operate in a balanced, coordinated and integrated manner to make the whole as a business system. When we apply systems approach, (studying the complex phenomenon by dividing it into its various components of activities comprising it, called sub-systems) we are able to identify the following sub-system of a business firm.

  • Finance system to look after finance function.
  • Production system to look after production function.
  • Marketing system in charge of marketing function.
  • Personnel system involves the development, utilization and management of human resources.

Every sub-system has its own system e.g. production sub-system comprises of people, machines, flow of products, flow of information etc. marketing sub-system comprises of the product, price production and distribution.


Following are the basic ingredients of any system:

  • Plans, its objective and methods.
  • Inputs, irrespective of information energy materials
  • Process, conversion of input into output
  • Outputs in respect of information energy materials

On this basis of a business system may be presented as follows:

Inputs: consists of human and non-human resources like money, material, equipment and information.

Processing: Consists of production, finance, personnel, marketing, processing of information and


Output: Consists of goods and services, compensation to owners and employees, meeting societies expenditure

Feed back: Consists of (i) If result not acceptable adjust resources – like better machinery and better management.

Above all parts or components must be closely coordinated and properly integrated, so that the entire system is a unified whole and it can accomplish common objectives as per plan.

Managers are needed to convert the disorganized resources of men, machines, materials, money, time and space into a useful and effective enterprise. These resources are integrated into a total system for accomplishment of contain goods. Business enterprise as a system, is itself a part of an industry which in turn is a part of the entire economic system.

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