Business Environment Quiz

The Firm and its Environment

• The business environment comprises external and internal forces
• External forces are outside the organization, impacting performance positively or negatively.
• Internal forces are within the organization, influencing performance.

Environmental Forces - External

• General:

• Economic factors (inflation, exchange rates, recessions, supply and demand)

• Sociocultural factors (consumer demographics, culture, lifestyle)

• Political and legal factors (government policy, legislative changes, tax laws, employment laws)

• Technological factors (changes in technology, use in sectors, research)

• Demographic factors (population trends, age distribution, etc.)

• World and ecological situations

• Specific:

• Stakeholders (customers, pressure groups, investors, employees)

Environmental Forces - Internal

• Resources
• Research and Development
• Production
• Procurement of Supplies
• Products and Services

Environmental Scanning

• A process to gather, analyze, and distribute data on an organization's environment for strategic or tactical purposes.

Components of Environmental Scanning

• Considering future business scenarios
• Benchmarking (comparing products to industry leaders for improvement)
• Developing a competitive mindset
• Business prediction or forecasting

Local and International Business Environment of the Firm

• Local Businesses:

• Businesses conducting economic transactions within a single country's borders.

• Examples include grocery stores, law firms, manufacturing companies, and banks operating regionally.

• International Businesses:

• Businesses operating beyond a single country, handling economic transactions globally.

• Examples include foreign direct investment (FDI), international franchising, licensing intellectual property, and international joint ventures.

Differences Between Domestic and International Businesses

• Domestic Business:

• Limited market scope (one country)

• Local customers

• Typically smaller market size

• Local laws and regulations govern operations

• Familiar with local culture and customs

• Fewer risks and trade barriers

• Less competition (typically local businesses)

• Lower operational costs

• Simpler business environment

• Less exposure to global economic risks

• Easier access to local resources and suppliers

• International Business:

• Global market scope (multiple countries)

• Diverse customer base

• Larger market size

• Multiple laws/regulations across countries

• Adaptation to diverse cultures necessary

• Higher risks and trade barriers

• More competition (from global competitors)

• Higher operational costs

• More complex business environment

• Exposure to global economic risks

• Access to global resources and suppliers

Global Trends

• General developments or changes impacting multiple countries.

• Examples:

• Artificial intelligence (AI): AI solutions boost customer service efficiency and reduce spending. Training generative AI simplifies advertising and marketing.

• E-commerce: The pandemic accelerated e-commerce, altering consumer behaviour and creating new distribution models. Continued modest growth is apparent post-pandemic.

• Remote/Hybrid Work: Employees value remote work for financial advantages, and companies are implementing remote work monitoring technology.

• Social media: Increasing social media users represent business opportunity for growth. Social media presence is critical for present-day businesses.

Effects of Globalization to Management Principles

• Globalization: Interconnectedness of world economies and cultures.
• Effects on Management:
• Greater need for cross-cultural communication skills.
• Increased competition.
• Rise of outsourcing/offshoring practices to reduce costs.
• Need for effective, consistent communication.
• Increased access to new markets.
• Greater flexibility sourcing materials/labor.
• Learning from other cultures and adapting.
• More opportunities for innovation

PESTLE Analysis

• A tool for analyzing external factors influencing a company.

• Components:

• Political: Government policy and legislative changes (tax laws, employment laws)

• Economic: Inflation, exchange rates, recessions, supply and demand.

• Sociocultural: Consumer demographics, culture, and lifestyle.

• Technological: Changes in technology, use in industries/research.

• Legal: Consumer law, copyright law, health and safety law.

• Environmental: Climate, pollution, weather, environmental laws.

• Purpose of PESTLE Analysis:

• Help companies understand external factors for making better business decisions

• Allows for changes in the company's services, organization and new product development.

Written Activity #1

• Students should identify local or international companies and analyze their PESTLE factors.

• Cite 2 specific articles or news from reputable sources per factor.

• Output requirements:

• Printed in double-spaced format (12pt font)

• Followed APA7 style citations