Business Environment Overview

Business Environment

• Environment encompasses external institutions influencing organizational performance.
• Environmental uncertainty varies across environments, defined by change and complexity. Degree of change refers to frequency of components' alteration. Complexity refers to the number of components and the understanding of them by the organization.

General Environment

• General environment impacts all organizations, including political, economic, socio-cultural, technological, environmental, and legal factors.
• Economic factors include interest rates, inflation, unemployment, and economic growth.
• Technological factors encompass existing infrastructure, technological advancements, and innovations impacting goods/service production and distribution.
• Political and legal factors refer to political conditions, government regulations, and legal changes.
• Socio-cultural factors include customs, values, traditions, lifestyles, beliefs, and behavior patterns.
• Demographic factors involve characteristics of the population (age, gender, ethnicity, race, sexual orientation, social class).
• Environmental factors include pollution effects, sustainable energy use, and climate change.
• International factors reflect an organization's involvement or impact from global business practices.
• An international PESTEL analysis focuses on political stability, patent policy, growth rates, cultural attitudes, technology, environmental factors, and legal frameworks.

Competitive Environment

• Competitive environment influences how an organization acquires inputs and sells outputs, stemming from suppliers, distributors, customers, and competitors.
• Suppliers provide needed input resources.
• Distributors facilitate sales to customers.
• Customers purchase the produced goods/services.
• Competitors offer similar goods/services.

Porter's Five Forces

• Analyzing industry attractiveness using Porter's Five Forces. Higher rivalry lowers industry attractiveness and profitability.
• Rivalry among competitors: factors include number of competitors, demand growth, product differentiation, and exit barriers. Stagnant/decreasing demand increases rivalry.
• Threat of new entrants: Industry attractiveness diminishes with lower entry barriers (capital investment, economies of scale, licenses, customer loyalty).
• Bargaining power of suppliers: Higher supplier power reduces industry profits, depending on supplier count, customer purchase frequency, supplier expansion potential, and switching costs for customers.
• Bargaining power of buyers: Higher buyer power reduces industry profits.
• Threat of substitutes: Similar products/services from other industries posing a threat.

Organizational Culture

• Organizational culture is shared values, principles, traditions, and behaviors distinguishing an organization.
• Strong cultures connect behaviors to widely shared values and strongly identified employee culture.
• Weak cultures have limited top management values, lacking employee identification and possibly conveying contradictory messages.
• Culture levels include visible artifacts (observed behavior, dress, symbols, ceremonies, office design); invisible values/beliefs (interpreted from stories and language); and underlying assumptions/deep beliefs (guiding subconscious behavior, role modeling, legends).
• Cultural dimensions include adaptability, attention to detail, outcome orientation, people orientation, team orientation, and integrity.
• Establishing culture involves founder vision, transmission through stories/symbols/language, and maintenance via employee selection/socialization. Top management greatly influences culture.

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 include stockholders, employees, managers, senior executives, and board members.
• Stakeholders' claims vary. Stockholders seek return on investment; managers prioritize stakeholder benefit and resource efficiency; employees seek rewards; suppliers seek fair/prompt payment; distributors seek quality/agreed prices; customers are essential for business survival; and communities provide operational infrastructure.

This quiz explores the various components of the business environment that affect organizational performance. It covers the general environment, including political, economic, socio-cultural, technological, environmental, and legal factors, as well as the dimensions of environmental uncertainty. Test your understanding of how these external influences shape businesses today.