Introduction To Business Environments PDF

INTRODUCTION TO BUSINESS ENVIRONMENTS Lesson 02 Radhini Karavita  SESSION OUTLINE Defining business environments Classifying and identifying different types of business environments Understanding different approaches to environmental analysis An...

INTRODUCTION TO BUSINESS ENVIRONMENTS Lesson 02 Radhini Karavita  SESSION OUTLINE Defining business environments Classifying and identifying different types of business environments Understanding different approaches to environmental analysis Analyse the different factors from the external environment that influence business operations and decision-making. Radhini Karavita WHAT ARE BUSINESS ENVIRONMENTS? Business Environments are all forces internal and external to the organization that potentially effect the organization's performance. Radhini Karavita CLASSIFICATION OF BUSINESS ENVIRONMENTS Internal Business Environments Micro External Macro Radhini Karavita INTERNAL ENVIRONMENT The internal business environment comprises of factors within the company which impact the organisation. Owners Board of directors Employees Financial Resources Radhini Karavita EXTERNAL ENVIRONMENT An external business environment is a group of factors or conditions that are outside the organization but affect it in smaller or greater extent. Customers Suppliers Government Competitors Radhini Karavita EXTERNAL ENVIRONMENT - MICRO External environment of an organization which directly affects its ability to reach business goals. Customers Suppliers Competitors Radhini Karavita EXTERNAL ENVIRONMENT - MACRO General environmental factors that a business typically has no control over. The success of the company depends on its ability to adapt. Political Socio-cultural Economical Technological Radhini Karavita Overall Environmental Analysis Radhini Karavita SWOT ANALYSIS S W This analysis is Strengths Weaknesses used to evaluate both internal and Opportunities Threats external business environments. O T Radhini Karavita STRENGTHS Characteristics of the business or a team that give it an advantage over others in the industry. Well-known brand name Lower costs Superior management talent and employees Better marketing skills Radhini Karavita WEAKNESSES Characteristics that place the firm at a disadvantage relative to others Limited financial resources Limited distribution Higher costs Out-of-date products / technology Weak market image Poor marketing skills Radhini Karavita OPPORTUNITIES Chances to make greater profits in the environment - External attractive factors that represent the reason for an organization to exist & develop. Rapid market growth Changing customer needs/tastes New technologies Economic boom Radhini Karavita THREATS External factors that’s beyond an organization’s control, which could place the organization’s mission or operation at risk. Entry of foreign competitors Rival firms Increased government regulation Economic downturn Radhini Karavita Micro Environmental Analysis Radhini Karavita PORTER’S FIVE FORCE ANALYSIS Threat of Bargaining This analysis is Substitutes Power of Suppliers used to evaluate Competitive the micro external Rivalry environment of a Bargaining business. Threat of Power of New Entry Customers Radhini Karavita THREAT OF SUBSTITUTES Threat of substitute products refers to the ease with which your customers can switch to a competitor's product. The threat of substitutes is high when: There are many substitute products available Customer can easily find the product or service that you’re offering at the same or less price Quality of the competitors’ product is better Radhini Karavita THREAT OF NEW ENTRY A new entry of a competitor into your market also weakens your power. Threat of new entry depends upon entry and exit barriers. Threat of new entry is high when: Capital requirements to start the business are less Few economies of scale are in place A diverse range of choices within the market Radhini Karavita BARGAINING POWER OF BUYERS Bargaining Power of Buyers refers to the influence buyers have to lower your product's price and the ability to collaborate for bulk orders. Buyers have more bargaining power when: Few buyers chasing too many goods Buyer purchases in bulk quantities Product is not differentiated Buyer’s cost of switching to a competitors’ product is low Radhini Karavita BARGAINING POWER OF SUPPLIERS Bargaining Power of Suppliers refers to the strength of a seller's position and their ability to raise the price of supplies. Suppliers are more powerful when: Suppliers are concentrated and well organized A few substitutes available to supplies The product is most effective or unique Switching cost, from one suppliers to another, is high Radhini Karavita COMPETITIVE RIVALRY Competitive rivalry refers to the intensity of competition among existing competitors in the market. The intensity of rivalry depends on the number of competitors and their capabilities. Competitive rivalry is high when: Customers have low switching costs Industry is growing Exit barriers are high and rivals stay and compete The market leader is unclear Radhini Karavita Macro Environmental Analysis Radhini Karavita POLITICAL ENVIRONMENT; These factors determine the extent to which a government may influence the economy or a certain industry. Tax policies Fiscal and monetary policies Trade tariffs Radhini Karavita ECONOMICAL ENVIRONMENT; These factors are determinants of an economies performance that directly impacts a company and have resonating long term effects. Inflation rates Interest rates Unemployment Exchange rates Radhini Karavita SOCIO - CULTURAL ENVIRONMENT; These factors scrutinize the social environment of the market, and gauge related determinants. Demographics Population Change in thinking patterns Cultural trends and behaviors Radhini Karavita TECHNOLOGICAL ENVIRONMENT; These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. Automation AI and big data Blockchain Radhini Karavita ECOLOGICAL ENVIRONMENT; These factors include all those that influence or are determined by the surrounding environment. Farming Agriculture Eco-lodging Radhini Karavita LEGAL ENVIRONMENT; These factors have both external and internal sides. There are certain laws that affect the business environment in a certain country while there are certain policies that companies maintain for themselves. Radhini Karavita  ANY QUESTIONS? NEXT SESSION: TYPES OF ORGANIZATIONAL STRUCTURES Radhini Karavita