External Environment | Business Environment
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The document discusses the external environment that affects businesses. It defines the external environment as factors outside a business's direct control that can indirectly influence it. The external environment is divided into the micro and macro environment. The micro environment includes factors close to the business like customers, employees, suppliers, shareholders, media, and competitors that directly impact operations. The macro environment comprises broader forces like political, economic, social, technological, legal, environmental, and ethical factors influencing the context for a business. Both the micro and macro environments are important for a business to understand to adapt to its surroundings.
External Environment | Business Environment
- 2. Business Environment According to Stephen P. Robbins & Mary Coulter, “Environment refers to institutions and forces that affect organizational performance.
- 4. External Environment Business environment may be defined as all those conditions and forces which are external to the business and are beyond the individual business unit, but it operates within it. External environment refers to the environment that has an indirect influence on the business. The factors are uncontrollable by the business.
- 5. Types Of External Environment Micro Environment • The micro environment is also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm. • The micro environmental factors are more intimately linked with the company than the macro factors. Macro Environment • Macro environment is also known as General environment and remote environment. • Macro factors are generally more uncontrollable than micro environment factor. • When the macro factors become uncontrollable , the success of company depends upon its adaptability to the environment.
- 7. Customers The major task of a business is to create and sustain customers. A business exists only because of its customers.
- 8. Employees Employing staff with relevant skills and experience is essential. This process begins at recruitment stage and continues throughout an employee's employment via ongoing training and promotion opportunities.
- 9. Suppliers An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company.
- 10. Shareholders As organisations require investment to grow, they may decide to raise money by floating on the stock market i.e. move from private to public ownership.
- 11. Media Positive media attention can “make” an organisation (or its products) and negative media attention can “break” an organisation. Organisations need to mange the media so that the media help promote the positive things about the organisation and reduce the impact of a negative event on their reputation.
- 12. Competitors Competition is a basic feature of an open market economy. No business organization can ignore its competitors and their business stratergy.
- 14. Political How changes in government policy might affect the business e.g. a decision to subsidies building new houses in an area could be good for a local brick works.
- 15. Economic How the economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates and European and global economic factors.
- 16. Social How consumers, households and communities behave and their beliefs. For instance, changes in attitude towards health, or a greater number of pensioners in a population.
- 17. Technological How the rapid pace of change in production processes and product innovation affect a business.
- 18. Legal The way in which legislation in society affects the business. E.g. changes in employment laws on working hours.
- 19. Environmental Growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.
- 20. Ethical What is regarded as morally right or wrong for a business to do. For instance should it trade with countries which have a poor record on human rights.