What is the justification of studying the environment of business? What are the benefits of business to the society and liability of business to the society?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The major justification for studying the environment of business (the business environment) is that this environment can help or hurt businesses.  Governments typically want businesses to thrive.  Therefore, they would prefer to help create a good business environment.  In order to help create a good business environment, a government would need to know what such an environment looked like.  What level of taxation would be best?  What amount and types of regulation are ideal?  These are things that governments need to know.  Businesses also need to know these things so that they can make decisions about where to do business.  If a business has a choice as to where to locate, knowing about the business environment might help them make that decision.  For these reasons, studying the business environment is justified.

Governments tend to want business because business can be of great help to their societies.  Businesses are necessary for strong economic growth.  Historically, command economies have had a hard time bringing about economic growth.  For that, private enterprise is needed.  Businesses bring jobs.  They help the economy grow.  They provide people with the goods and services that they want and need.  They provide income that can be taxed, allowing governments to have money to pay for various programs.  All of these things are important ways in which businesses benefit society.

But businesses can also be a liability for society in some ways.  If a government does not regulate businesses, they can harm society.  For example, businesses might pollute the environment, spreading diseases and other health problems.  Businesses might treat their workers poorly, leaving workers in poverty or causing them to suffer injuries on the job.  Businesses might corrupt government by bribing government officials.  If one business comes to dominate an area, it might essentially control the government.  When businesses have too much power, one can argue, they are a liability as well as a benefit to society.

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