External environment of Organization
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Transcript of External environment of Organization
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INTRODUCTION TO BUSINESSENVIRONMENT
External EnvironmentReporters : Eugene Aldrich PaguiriganJohn SorianoAlfreda Abis
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WHAT IS BUSINESS ENVIRONMENT? Environment of any organization is “the aggregate of all
conditions, events and influences that surround and affect it”.
The combination of internal and external factors that influence a company’s or business operating situation.
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TYPES OF ENVIRONMENT?
Internal Environment
External Environment
Micro Environment
Macro Environment
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EXTERNAL ENVIRONMENT Factors outside the organization which provide
opportunities or pose threats to the organization
Factors that can impact the ability of a business or investment to achieve its strategic goals and objectives.
Uncontrollable factors
Classified into two categories Micro Macro
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Micro Environment Refers to the environment which is in direct contact with
the business organization and can affect the routine activities of business straight away.
Types of Factors Suppliers Customers Marketing Intermediaries Competitors Publics Financial Intermediaries
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Micro Environment SUPPLIERS
Suppliers are the persons who supply raw material to company.
CUSTOMERS Customers are the persons who buy goods
from company.
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Micro Environment MARKETING INTERMEDIARIES
Market intermediaries are those person who helps company to sell its products.
COMPETITORS Competitors are those who also sell
same product as the company or business.
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Micro Environment PUBLIC
Group of people who can buy or who can show their interest to buy the products of company. FINANCIAL INTERMEDIARIES
Are those institutions who provide loan, credit and advance to company.
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Macro Environment Refers to the external factors which affects company and
its business and there is no control of company on these factors.
Types of Factors Economic Non-Economic
Political Demographic Socio-Cultural Technological Natural
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Macro Environment ECONOMIC
The economic environment constitutes of economic conditions, economic policies, and the economic system that is important to external factors of business.
Economic environment refers to the nature and direction of the economy within which business organisation are to operate.
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Macro Environment NON-ECONOMIC
Political and Legal Forces Refers to the political, government and
legal environment. It has close relationship with the economic system and economic policy.
This refers to set of laws, regulations, which influence the business organizations and their operations
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Macro Environment NON-ECONOMIC
Demographic Forces Demography refers to study of the
population. Demographic factors are as below: Size of population Growth rate Family size Educational level Age composition Sex composition
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Macro Environment NON-ECONOMIC
Socio-Cultural Forces Socio-cultural environment is an important
factor that should be analysed while formulating company business strategies. These includes people’s attitude to work and wealth, ethical issues, role of family, marriage, religion and education and the social responsibilities of business
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Macro Environment NON-ECONOMIC
Technological Forces Technological forces or factors could be said
to be the most pervasive in the environment. Technology refers to the application of knowledge base which science provides. It is a well established fact that information and communication technology has revolutionized business operations
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Macro Environment NON-ECONOMIC
Natural Forces The natural environment includes
geographical and ecological factors that influence the business operations. These factors include the availability of natural resources, weather and climatic condition, location aspect, topographical factors, etc
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BRIEF COMPARISON (MICRO – MACRO)BASIS FOR
COMPARISON MICRO (INTERNAL) ENVIRONMENT MACRO (EXTERNAL) ENVIRONMENT
Meaning Micro environment is defined as the nearby environment, under which the firm operates.
Macro environment refers to the general environment, that can affect the working of all
business enterprises.
Alternatively known as Internal Environment External Environment
Elements COSMIC, i.e. Competitors, Organization itself, Suppliers, Market, Intermediaries and Customers.
PESTLE, i.e. Population & Demographic, Economic, Socio-Cultural, Technological, Legal & Political and
Environmental.
Nature of elements Specific General
Are these factors controllable? Yes No
Influence Directly and Regularly Indirectly and Distantly
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Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization’s performance. The analysis entails assessing the level of threat or opportunity the factors might present
What is Environmental Analysis?
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DEFINITION AND CONCEPT It a process of conducting
research on the business environment within which an organization operates and on the organization itself, in order to formulate strategy.
STRATEGIC ANALYTICAL TOOLS
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PEST AnalysisPESTLE AnalysisSTEEP AnalysisSTEEPLE Analysis
Examples of Analytical Method used in Strategic Analysis
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This is a framework used to analyze the external environmental analysis. The process entails learning about various external factors which affect the organization.
PESTLE Analysis
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POLITICALThese include
government regulation such as employment laws, environmental organizations and tax policy. Other political factors are trade restrictions and political stability
PESTLE Analysis
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ECONOMIC These affect the cost
of capital and purchasing power of an organization. Economic factors include economic growth, interest rates, inflation and currency exchange rates
PESTLE Analysis
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SOCIAL These impact on
customer’s need and the potential market size for an organization’s goods and services. Social factors include population growth, age demographics and attitude towards health.
PESTLE Analysis
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TECHNOLOGICAL These influence barriers to
entry, make or buy decisions and investment in innovation, such as automation, investment incentives and the rate of technological change.
PESTLE Analysis
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LEGAL This factor has both
external and internal sides. There are certain laws that affect the business/organization environment in a certain country while there are certain policies that companies maintain for themselves.
PESTLE Analysis
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ENVIRONMENTAL this factor includes all
those that influence or are determined by more the surrounding environment.
PESTLE Analysis
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END OF PRESENTATION
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