Business Environment Overview

Business Environment

• Environment encompasses external forces that influence organizational performance.
• Environmental uncertainty is the degree of change and complexity in an organization's surroundings.
• Degree of change reflects how frequently components in the environment fluctuate.
• Complexity describes the number of environmental components and the organization's knowledge about them.

General Environment

• Organizations operate within a general environment and a competitive environment.
• The general environment includes broad forces impacting all organizations: political, economic, socio-cultural, technological, environmental, and legal.
• Economic factors include interest rates, inflation, unemployment, and economic growth.
• Technological factors involve infrastructure, advancements, industrial innovations, and changes in production/distribution methods.
• Political and legal factors encompass political stability, government regulations, and legal changes.
• Socio-cultural factors include values, beliefs, traditions, and lifestyles.
• Demographic factors signify population characteristics (age, gender, ethnicity, etc.).
• Environmental factors relate to production methods' environmental impact, sustainable energy, and climate change.
• International factors assess involvement in and effects from global business.

International PESTEL Analysis

• Political factors include government attitudes toward foreign investment, political stability, and intellectual property policies.
• Economic factors involve growth rates, wealth distribution, currency stability, and exchange rates.
• Socio-cultural factors encompass national cultures, attitudes toward foreign companies, and staff.
• Technological factors cover telecommunications, power supply stability, and import/export transport infrastructure.
• Environmental factors consider natural resources, environmental quality, and climate change.
• Legal factors involve tariff policies, trade agreements, employment protection, and company taxation.

Competitive Environment

• The competitive environment comprises forces affecting input acquisition and output disposal.
• Suppliers provide necessary inputs, receiving payment for them.
• Distributors help sell goods/services to customers.
• Customers are individuals or groups buying the product.
• Competitors offer similar goods/services.

Porter’s Five Forces Model

• Porter's Five Forces analyze industry attractiveness.
• Rivalry among competitors is higher with more, balanced competitors and stagnant/declining demand; low differentiation fuels higher rivalry; high exit barriers amplify rivalry.
• Threat of new entrants is lower when there are higher barriers (capital investment, economies of scale, special licenses).
• Supplier bargaining power is higher with fewer suppliers, irregular customer purchases, supplier expansion potential, and high customer switching costs.
• Buyer bargaining power is higher with greater buyer power to negotiate, lowering industry profits.
• Threat of substitutes arises from products in other industries performing similar functions.

Organizational Culture

• Organizational culture comprises shared values, principles, traditions, and work methods.
• Strong cultures offer a close connection between behaviors and values, shared by employees.
• Weak cultures have limited top-management values, where employees don't identify with it.
• Organizational culture arises from founder vision, is communicated through stories, symbols, language, and reinforced by selection and socialization processes; top managers’ actions significantly impact culture.

Levels of Organizational Culture

• Visible artifacts include dress codes, behaviors, symbols, ceremonies, and office layouts.
• Invisible components include shared values and beliefs, observable through stories, language, and symbols, and underlying assumptions guiding behaviors/decisions (role modeling, legends, nicknames, codes).

Dimensions of Organizational Culture

• Adaptability describes the extent of encouragement for innovation, flexibility, risk-taking, and experimentation.
• Attention to detail signifies the expectation of precision, analysis, and focus on details.
• Outcome orientation stresses results over methods.
• People orientation emphasizes the effect on organizational/external people.
• Team orientation encourages collaboration around teams instead of individuals.
• Integrity highlights honesty and ethical principles.

Stakeholders

• Stakeholders are individuals or groups with interests in a company.
• External stakeholders include customers, suppliers, creditors, governments, unions, communities, and the general public.
• Internal stakeholders encompass stockholders, employees, managers, executives, and board members.
• Stockholders seek maximum return on their investments.
• Managers decide on stakeholder-beneficial goals and resource allocation.
• Employees expect rewards based on performance.
• Suppliers expect fair/timely payment.
• Distributors expect quality products at agreed prices.
• Customers are crucial to a company's survival.
• Communities provide operational infrastructure.

Explore the fundamental aspects of the business environment and its impact on organizational performance. This quiz covers both general and competitive environments, as well as the external forces that influence business operations. Understand the factors of uncertainty, change, and complexity in today's organizational landscape.