The Business Environment

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The larger environment in which a business has to operate including, political, social, economic and tecnological and environmental factors.

The Business Environment

Environmental scanning

Subtopic

Opportunities and Threats

Environmental threats: The unfavourable conditions or trends in the market that can, in the absence of deliberate effort by management lead to the failure of a business, its product or its services.

Environmental opportunities: A favourable condition or trend in the market that can be exploited to the businesses advantage by deliberate management efforts.

Macro-Environment

Internationa environment: Business that operate internationally find themselves in a far more complex global business environment as countries have their own peculiar environmental factors. companies need to thing and shape their organisations withing the framework of increasing global interconnectedness and interdependency.

The Physical Environment Includes the populations and health patters of the workforce but also physical realities under which an organisation has to operate. These include the availability of resources such as; food, water, energy, climate, biodiversity, the cost of energy, pollution, environmentalism and scarce resources.

Social Environment: Demographic changes in a country influence patterns of spending, employment, purchasing power and demands on organisations. Urbanisation has lead to the growth of metropolitan areas, influencing, housing transport, food prices, electricity costs and higher costs of living and operational costs for companies but has also supplied labour. Higher levels of education have resulted in a more skilled labour force but and result in increasing demand for books and institutions of higher learning, this results in a more sophisticated consumer with more definite demands. The changing role of women has resulted in households with two sources of income and thus more purchasing power, more economic activity and more women in positions of leadership and power. Consummerism has resulted in a discerning consumer who demands; the right to safety, the right to he informed, the right to freedom of choice and the right to be heard. Business thus have to be socially responsible and ethical in the production, marketing and distribution orf their products or servisces. HIV and Aids have had huge impacts on business as it has resulted in the reduction of life expectancy and the erosion of a possible workforce, it also has affected productivity and increased and organisation's health expenditures.

Economic /Governmental environment : countries growth in GDP or changes in inflation,legislation, taxation, import control, health regulations, import tariffs, forgeign competition, monatary policy and fiscal policy all affect the organisation. government competes with private enterprise for labour, material and capital,

Technological environment: changes and innovations in technology result in ne w machinenary, methods, products,services, and approaches to management which bring about changes in the environment. Organisations need to keep up today with new technological trends to stay competitive.

Concerned with patterns and trends in the wider environment that affect how organisations operate. These trends are driven by micro variables such as: the economic situation, governmental pilicies, the global markets. interest rates , inequality, international relations etc.

Market Environment

The Market environment concerns external factors influencing the business such as the; market, suppliers, intermediaries (between manufacturers and consumers), competitors and purchasing power.

Micro-environment

The internal structures of the organisation. Including the company's; vision, mission & objectives of the business. Its management of tangible and intangible resources aswell

Composition

Characteristics: Environmental factors are interelated, thus change in one factor may create change in the micro environment. Increasing instability is consequence of this as well as environmentaal uncertainty and the complexity of the environment.

Macro-environment (external) technological, economic, social, physical, institutional and international factors.

Market environment: external to business. Consists of consumers, competitors, intermediaries, suppliers.

Micro-environment : consists of the busness itself and is controlled by management.

Organisation and Environmental Change

Change results in new threats and opportunities.

Environmental variables like technology , labour laws, changing social values alter the conditions under which a business operates.

Rate of change has greater effect on environment and cannot be measured and causes insecurity.

Change is any shift or alteration to the status quo.