Business Environment: Internal, Micro, and Macro

• Man exists in an environment, not a vacuum, which provides for physical and spiritual survival.
• The environment is essential for an organization's survival and operations.
• The environment is dynamic and dictates business successes and failures.
• Business thrives in a healthy environment, necessitating understanding the relationship between a business and its environment.
• A business organization relies on its environment for resources and survival.
• Organizational survival depends on exchanging resources within the environment.

Concept of an Environment:

• Internal Environment: Includes plans, policies, human and financial resources, corporate image, plant, machinery, labor management, and relationships.
• Micro Environment: Consists of customers, competitors, suppliers, and society.
• Macro Environment: Encompasses demographic, economic, technological, political, and cultural aspects.
• Environment consists of internal and external factors that affect a business's functioning, generally beyond the control of individual enterprises.
• The business environment poses threats and offers opportunities for market exploitation.
• An organization's environment includes factors impacting operations both positively and negatively.
• The environment is external to the organization or system and not under its control, influencing how the system operates and functions.
• The environment is a constraint for the organization as it cannot control it, but it is important for achieving goals.
• The environment includes humanity's surroundings, affecting individuals and social groupings.
• Environment is a complex of physical, social, cultural, economic, and aesthetic factors.
• It affects individuals, communities, and determines their form, character, relationships, and survival.
• Air and water quality, erosion control, and land use planning are environmental elements.
• An environment comprises conditions and forces influencing an organization, setting limits and providing opportunities.

Types of Business Environment

• The environment impacts the organization by setting limits while also providing opportunities and challenges.
• Both profit and non-profit organizations must recognize forces and elements operating in their environment.
• The business environment includes all internal and external variables influencing company functions, including employees, customers, management, business, regulations, supply, and demand.
• The environment of an organization can be internal or external.

Internal Environment

• Internal environment factors are within the organization's control.
• Employees and resources are part of the controllable factors.
• The internal environment includes an organization's strengths and weaknesses, which must be analyzed to determine the extent to which companies can accommodate opportunities and threats originating from outside.
• Analysis of the internal environment is key, according to Pearce and Robinson.
• It includes resources like skills, knowledge, and capabilities.
• In the Resource-Based View (RBV), owned resources are more important than organizational structure for maintaining a competitive advantage.
• Resources are divided into tangible assets, intangible assets, and organizational capabilities.
• Tangible assets are production facilities, raw materials, and financial resources.
• Intangible assets include reputation, moral personnel, technical knowledge, patents, and trademarks.
• Organizational capability includes the ability to empower assets, human resources, and convert inputs into outputs.

Environmental factors are split into three categories

• Structure: Organizational arrangement in terms of communication effectiveness, authority relationships, and workflow.
• Resources: Physical and non-physical assets like talents, capabilities, and technical skills.
• These can be applied to produce goods and services.
• They are referred to as the financial, physical, human, technological, and organizational resources of the business and are often called the four Ms: Money, Materials, Machine, and Men.
• If resources are unique and valuable, they are a strength. If not, it is a weakness.
• Superior internal environmental factors help an organization achieve distinctive competency.
• Distinctive competency leads to achieving superior efficiency, quality, innovation, and customer responsiveness.
• Distinctive competency arises from complementary resources and capabilities.

External Environment

• External factors are outside the organization's control.
• They are uncontrollable, unpredictable, and powerful.
• Managers and directors have little control over these variables and must devise survival strategies.
• The economic environment, technological environment, social environment, legal/political environment, ethical environment, and ecological environment are important factors.
• Economic Environment: Business and its economic environment are linked.
• The environment gets inputs from and absorbs outputs into the economic environment.
• Economic variables that affect business operations: capital, price level, government fiscal and tax policy, customers, labor, exchange rate, and interest rates.
• Business organizations require capital in terms of machinery, buildings, inventory, and cash.
• Operations depend on the availability of capital items, varying greatly in the environment.
• Labour, the human element, is crucial for effective business operations.
• The availability, quality, and quantity of labour are vital in an economic environment.
• Management must decide on the type of labor to employ based on availability.
• General Price Level: The environment greatly affects organizations.
• Rapidly increasing prices impact both input and output sides.
• Input costs may rise beyond the organization's capability.
• Output prices may become too high, reducing customer demand.
• Government and Fiscal Policy: They affect all parts of the environment.
• High corporate taxes discourage going into business.
• High personal income tax reduces consumer income and propensity to consume.
• High sales taxes increase prices, reducing consumer purchases.
• Managers analyze fiscal and tax policies.
• To adapt organizations to policies, it is crucial to consider customers, and their needs
• Companies must have customers to survive
• Managers should monitor customer attitudes, tastes, desires, preferences, and expectations.
• Companies must identify competitors' actions for survival.
• Identification of activities, products, and strategies is vital in a competitive and dynamic environment.
• Technological environment involves the use of scientific knowledge.
• Businesses must adopt changing technology for success.
• Technology manifests in new products, tools, machines, and services.
• Managers must adopt trends to outperform competitors.
• Social Environment: It includes attitudes, desires, expectations, beliefs, customs, religion, and education.
• The variables influence organizations.
• Organisations must adapt to surive within the social environment
• It requires understanding and adjusting to social demands.
• Managers must answer the demands of environment in which they operate

Political and Legal Environment

• Pertains to the influence of legislative, executive, and judiciary branches in business activities.
• A stable and dynamic political environment is important for business growth.
• Ensure organizational activities do not violate the laws of the land.

Ethical and Demographic Environments

• Ethical Environment: Ethics involves principles of good and bad, moral duty, and obligation.
• An ethical environment includes generally accepted practices and standards.
• Demographic Environment: Demography is the statistical study of human elements, including size, density, age, gender, etc.
• A grasp of demographics is indispensable because the area's population greatly determines the goods to be produced.

Religious and Cultural Influences

• Religious/Cultural Environment: Culture is essential to any organization.
• Culture influences the way people live, including their beliefs, expectations, and values.
• Culture and religion affect how businesses operate and the types of products produced based on customers' religious views.
• Businesses should be aware of different cultures.
• It is important to know that are cultures that forbid alcohol consumption, and businesses cannot thrive in those areas.

Identifying Business Opportunities

• Identifying requires environmental scanning.
• Environmental scanning refers to collecting, scrutinizing and providing information for strategical purposes.
• It is monitoring an organization's internal and external environments.
• It helps detect early signs of opportunities and threats.
• It helps to discover opportunities and threats within the external environment, according to Anugwom (2007).
• Discovery helps management exploit opportunities and minimize threats.
• Opportunities are favorable conditions caused by external environment changes.
• Management must respond to changes to exploit external environment opportunities to offer new products.
• Management decides which opportunities to exploit and what to drop.
• Threats are unfavorable conditions that arise from development in the external environment.
• Threats are likely to negatively affect a business’ operations and efficiency.
• Dynamism requires management to respond to current and anticipated changes.
• Planning helps avoid the affects of harmful, unsatisfactory, or unfavorable influences or conditions.
• Threats are new products by competitors, political unrest, religious riots, and new entrants in the economic and social landscape.

Exploiting Business Opportunities

• Exploiting requires scanning the firm's internal environment first.
• The internal environment has strengths and weaknesses

Strengths

• These are positive attributes, competencies, and competitive advantages.
• They are assets that may be tangible or intangible.
• Management builds on strengths, including advantages, positions, and managers.

Weaknesses

• These are deficiencies, inadequacies, and negative aspects.
• They limit the firm's effectiveness, like an incompetent workforce and obsolete equipment.