What Is the Physical Environment of a Business? - Definition, Components & Examples

What Is the Physical Environment of a Business? - Definition, Components & Examples
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  • 0:01 Physical Environment Defined
  • 0:37 Natural vs. Man-Made…
  • 4:25 Lesson Summary
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Lesson Transcript
Instructor: Rodney Michael

Rodney has taught university accounting classes and has a doctorate in accounting.

A business exists, just like you and I, in a world that is filled with countless things that form its physical environment. In this lesson, you will learn about the nature of those items, and we will look at their importance to the business.

Physical Environment Defined

Are you sitting in a chair? If so, spin around a couple of times. No really, go ahead and do it. What did you see? Are you in a room? Is there carpeting on the floor? Is there anything hanging on the walls? Can you see anything through the window? Is it sunny outside or raining? Are there any clouds in the sky? How is the temperature? Congratulations, you just looked at your physical environment. Now, let's see if we can clarify that definition. The physical environment refers to the tangible, or material, objects and conditions that surround a business.

Natural Vs. Man-Made Environments

That gets us started, but let's expand it a bit. Think about what you saw on your 'chair-spin' adventure. Some of the things were part of nature, such as the sky and clouds. Other things were man-made, like the building and sidewalks. An important thing to remember is that both the natural and man-made variables are part of the physical environment. Any successful business must consider both in its planning processes. Let's look at some specific examples.

Natural Components

In a very broad sense, the major components of the natural features are the atmosphere, land, water, weather and vegetation. Let's take a closer look at each of them.


Think about how many times you have seen a news article about the harmful effects of greenhouse gases, global warming, air pollution, and declining ozone replenishment. Why is this important to a business? A recent headline talked about a plan of the Chinese government to reduce air pollution by limiting the burning of coal. If you were the manager of a plant that burned coal for energy, wouldn't it be nice if you had a backup plan in place? Long-range strategic planning should include this type of thinking.


The topography of a country or region can vary drastically, ranging from flat farmland to mountains, deserts and coastal wetlands. Each of these will influence such factors as population density, shipping facilities and the distance to a specified market. The location of a business will influence its exposure to weather patterns, utility costs and even how many hours of daylight will be available at any time of the year. Winter days are cold and short here in the North!


Some businesses, such as nuclear power plants, use a lot of water in their production activities. Where are they going to get it? How expensive will it be to comply with any pollution control requirements? Other firms need to be located near deep-water harbors and shipping facilities. All of these would be critical considerations when a plant location is selected.


When I think about the negative effects of weather, I think about hurricanes and blizzards. Throw in a few tornadoes and a storm induced flooding or two, and I think we have it covered. The point is that any business needs to be aware of, and plan for, any likely weather event. Think about how you would plan for the weather if you ran a plant in the hurricane zone on the Gulf coast.

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