Understanding Business Environment

Study Notes

Business Environment

Comprised of two main categories: external and internal influences.
External influences include government policies, technological advancements, economic conditions, and social attitudes, which businesses have little control over.
Internal influences involve factors like products, location, resources, management, and business culture that businesses can control to some extent.

External Influences

Economic Factors:
- Economic fluctuations impact business performance; macroeconomic and microeconomic factors aim for economic stabilization.
- Fiscal policy relates to government budgets, while monetary policy involves interest rates and financial stability.
- Prices and incomes, including wages, affect overall economic health.
- External policies like exchange rates and trade protections are crucial for businesses.
Boom Characteristics:
- Increased employment levels and potential inflation.
- Rising wages and consumer spending.
Recession Characteristics:
- Low wages and business capacity; minimal sales and profit levels.
- Decreased consumer spending and high unemployment; stable or falling inflation.
Financial Factors:
- Deregulation aims to boost industry efficiency and competition.
- Interest rates affect businesses' debt management and financial planning.
- Globalization offers international financing, enhancing competitiveness.
Geographical Factors:
- Demographic studies cover population metrics such as size, age, income, and cultural background.
- Population pyramids indicate trends like an aging population, impacting job skills and service demand.
- Globalization links population changes with economic growth.
Social Factors:
- Businesses must adapt to shifts in tastes, fashion, and cultural attitudes, including environmental concerns.
- Inadequate responses to societal changes may harm profitability and growth.
Legal Factors:
- Regulatory frameworks encompass competition laws, consumer protection, and environmental policies.
- Legislation on health and safety, taxation, and industrial relations influences business operations.
Political Factors:
- Government actions can create uncertainty through new taxes and elections.
- Laws on taxation (e.g., GST) and labour market reforms set business environments.
Institutional Influences:
- Involves federal, state, and local governments, along with regulatory bodies like the EPA and ASIC.
- These institutions monitor business practices and ensure compliance.
Technological Factors:
- Rapid technological changes enhance communication and expand marketplaces (e.g., internet, mobile).
- Technological advances improve efficiency and product quality.
- Evolving financial and consumer markets require businesses to adapt continuously.

Competitive Situation Influences

Chalenges from the number of competitors and ease of market entry impact business strategy.
Understanding local and foreign competition, alongside marketing strategies, is pivotal.

Internal Influences

Product Influence: Type of goods and size of the business shape operational strategies.
Location Influence:
- Key factors for site selection include visibility, cost, proximity to supplies and customers, and access to support services.
- Strategic location decisions can justify higher operational costs.
Management Influences:
- Traditional structures are hierarchical with autocratic styles, while contemporary structures are flatter and more adaptable.
- Empowered management fosters quicker decision-making and greater employee responsibility.

Business Culture Influence

Corporate culture embodies the values, beliefs, and expectations within a business.
Strong cultures create positive work environments, bolstering employee engagement.
Key elements of culture include values (e.g., honesty), symbols, rituals, and managerial roles.

Stakeholders

Stakeholders represent any individual or group impacted by business activities, crucial for evaluating how decisions affect various interests.

Description

This quiz explores the concepts of internal and external business environments, highlighting factors such as government policy, economic conditions, and social attitudes. Learn how these elements influence business operations and decision-making processes.