Business Environment Overview

Business Environment

• Environment encompasses external institutions impacting organizational performance.
• Environmental uncertainty: a mix of change rate (how fast things alter) and complexity (how many components exist and how well they're understood).
• General environment: broad factors affecting all organizations (political, economic, socio-cultural, technological, environmental, legal).
• Competitive environment: industry-specific forces like customers, suppliers, and competitors.

Major Forces in the General Environment

• Economic: Interest rates, inflation, unemployment, economic growth.
• Technological: Infrastructure, innovation, technology advancements in production/distribution.
• Political and Legal: Political stability, government regulations, legal changes.
• Socio-cultural: Customs, values, traditions, lifestyles, beliefs.
• Demographic: Population characteristics (age, gender, ethnicity, etc.).
• Environmental: Pollution, sustainable practices, climate change.
• International: Global involvement and influence.

International PESTEL Analysis

• Political: Government policies, political stability, intellectual property rights.
• Economic: Growth, wealth distribution, currency stability, exchange rates.
• Socio-cultural: National cultures, attitudes towards foreign companies.
• Technological: Telecom, power supply, import/export infrastructure.
• Environmental: Natural resources, environmental conditions, climate change impacts.
• Legal: Tariffs, trade agreements, employment laws, taxes.

Competitive Environment

• Competitive environment comprises forces from suppliers, distributors, customers, and competitors.
• Suppliers provide inputs; distributors aid in sales to customers; customers buy products/services; competitors offer similar offerings.

Porter's Five Forces Model

• Analyzes industry attractiveness.
• Rivalry Among Competitors: Higher rivalry, lower industry profits. Factors include: number of competitors, demand growth, product differentiation, barriers to exit.
• Threat of New Entrants: Lower barriers to entry, lower industry profits. Factors include barriers like capital investment, economies of scale, licensing, customer loyalty.
• Bargaining Power of Suppliers: Higher supplier power, lower industry profits. Factors include number of suppliers, customer purchasing patterns, supplier expansion capacity, switching costs.
• Bargaining Power of Buyers: Higher buyer power, lower industry profits.
• Threat of Substitute Products or Services: Products from other industries filling the same need.

Organizational Culture

• Internal environment: Elements within the organization impacting operations (people, culture, structure, technology).
• Organizational culture: Shared values, principles, traditions shaping member behavior and distinguishing it from other organizations.
• Strong Culture: Consistent behavior based on widespread values, easily identified with.
• Weak Culture: Values mostly confined to leadership, limited employee identification, potentially contradictory messages.

Levels of Organizational Culture

• Visible Artifacts: Observable aspects; dress, behaviors, symbols, ceremonies, office layout.
• Invisible: Underlying values, beliefs, and assumptions; stories, language, symbols, role modelling, legends.

Dimensions of Organizational Culture

• Adaptability, attention to detail, outcome orientation, people orientation, team orientation, integrity.

How Organizational Culture is Established

• Founders' vision.
• Culture transmission via stories, symbols, and language.
• Maintenance through selection, socialization.
  • Top management actions heavily influence culture.

Stakeholders

• Stakeholders: Individuals or groups with interest or stake in a company and its actions.

• External Stakeholders: Customers, suppliers, creditors, governments, unions, communities, general public.

• Internal Stakeholders: Stockholders, employees, managers, executives, board members.

• Stakeholder Claims: Stockholders seek maximal returns; managers balance stakeholder interests; employees expect rewards; suppliers expect fair compensation; distributors expect quality products; customers need attracting. Communities provide infrastructure.

Explore the dynamics of the business environment and its impact on organizational performance. This quiz covers major forces in both the general and competitive environments including economic, technological, political, socio-cultural, and demographic factors. Test your understanding of how these elements influence business operations.