External Environment | Business Environment
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Transcript of External Environment | Business Environment
External Environment
Shubham Ghimire
Business Environment
According to Stephen P. Robbins & Mary Coulter, “Environment refers to institutions and forces that affect organizational performance.
Types of Environment
Internal Environment
External Environment
External Environment Business environment may be defined as all
those conditions and forces which are external to the business and are beyond the individual business unit, but it operates within it.
External environment refers to the environment that has an indirect influence on the business.
The factors are uncontrollable by the business.
Types Of External Environment
Micro Environment• The micro environment is
also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm.
• The micro environmental factors are more intimately linked with the company than the macro factors.
Macro Environment• Macro environment is
also known as General environment and remote environment.
• Macro factors are generally more uncontrollable than micro environment factor.
• When the macro factors become uncontrollable , the success of company depends upon its adaptability to the environment.
Micro Environment FactorsCustomers
Employees
Suppliers
Shareholders
Media
Competitors
Customers
The major task of a business is to create and sustain customers. A business exists only because of its customers.
Employees
Employing staff with relevant skills and experience is essential. This process begins at recruitment stage and continues throughout an employee's employment via ongoing training and promotion opportunities.
Suppliers
An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company.
Shareholders
As organisations require investment to grow, they may decide to raise money by floating on the stock market i.e. move from private to public ownership.
Media
Positive media attention can “make” an organisation (or its products) and negative media attention can “break” an organisation. Organisations need to mange the media so that the media help promote the positive things about the organisation and reduce the impact of a negative event on their reputation.
Competitors
Competition is a basic feature of an open market economy. No business organization can ignore its competitors and their business stratergy.
Macro Environment FactorsPolitical
Economic
Social
Technological
Legal
Environmental
Ethical
Political
How changes in government policy might affect the business e.g. a decision to subsidies building new houses in an area could be good for a local brick works.
Economic
How the economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates and European and global economic factors.
Social
How consumers, households and communities behave and their beliefs. For instance, changes in attitude towards health, or a greater number of pensioners in a population.
Technological
How the rapid pace of change in production processes and product innovation affect a business.
Legal
The way in which legislation in society affects the business. E.g. changes in employment laws on working hours.
Environmental
Growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.
Ethical
What is regarded as morally right or wrong for a business to do. For instance should it trade with countries which have a poor record on human rights.