What is a business

environment??
An environment can be defined as
anything which surrounds a
system.

Therefore, the business

environment is anything which
surrounds the business
organisation.
 Effects!!

It affects the decisions, strategies,

processes and performance of the
business.
 External Environment
The external environment includes
all elements existing outside the
boundary of a particular business that
have potential to affect the business.
 Types of external
environments:
 Two major divisions have been
made in the external environment:

1. General/mega Environment
2. Task Environment
1. General/mega Environment

 Socio-cultural
 Technology
 The Economic Dimensions
 Legal and Political
 International Factor
 Socio-cultural
 Includes the attitudes, values, norms,
beliefs, behaviors, and associated
demographic trends that are
characteristic of a given geographic
area.
a. The socio-cultural element is of
particular importance to multinational
corporations.
b. Socio-cultural trends can result in
important shifts in demand for
products.
 Technology
 Includes scientific and technological
advancements in a specific industry as
well as in society at large. E.g.
Computer industry, etc.
 Technological advances can change the
rule of the game; thus every business
must be ready to respond.
 The Economic Dimensions
The economic element encompasses the systems
of producing, distributing, and consuming
wealth.
a. In a capitalist economy, economic activity is
governed by market forces and the means of
production are privately owned by individuals,
either directly or through corporations.
b. In a socialist economy, the means of
production are owned by the state and
economic activity is coordinated by state plan.
c. In practice, countries tend to have hybrid
economies, incorporating elements of
capitalism and socialism.
 Legal and Political
 The legal-political element includes the legal
and governmental systems within which a
business must function.
 a. Business must operate within the general
legal framework of the countries in which
they do business.
 b. Businesses are subject to an increase in
lawsuits filed by customers or employees.
 c. The political issues which affect businesses
include those which influence the extent of
government regulation.
 International Factor
International factors far beyond the direct
influence of a particular business can have
profound effects on its ability to operate
successfully.
a. Fluctuations of the dollar against foreign
currencies influence the ability of an business
to compete in international markets.
b. Free-trade agreement, such as the NAFTA,
GATT can affect a business either positively
or negatively.
 2. Task Environment

 Customers
 Competitors
 Suppliers
 Labor Market
 Customers
 Those people & organizations in the
environment who acquire goods or services
from the business are customers.

 As recipients of the business’ output,

customers are important because they
determine the business’ success.
 Competitors

 Other firms in the same industry or type

of business that provide goods & services
to the same set of customers.

 In today’s environment most competitors

are cooperating to achieve common
goals.
 Suppliers
 The people & organizations who provide
the raw material the business uses to
produce its output.

 The relationship among them must of

cooperative in nature in order to save
money, maintaining quality, and speeding
products to market.
 Labor Market

 The people available for hire by the

business.

 Every business needs a supply of

trained, qualified, and dedicated
personnel.
 Internal Environment

 It includes the elements within the

businesss boundaries. It composed of
current employees, management, and
corporate culture.
 Employees
 Sometimes referred as “internal
customers” of the business.
 Employees create a great difference.
 Customer services, cost
minimization (economies of scale)
 Skill full employees vs. un-skill full.
 Management
The process of coordinating and
integrating work activities so that
they are
completed efficiently and
effectively with and through other
people.
 Why management is
important??
Every product we use, every
service we receive, and every
action we take is provided or
affected by organizations.
These organizations require
managers.
 Corporate Culture
Just as individuals have a
personality, so, too, do a
business. We refer to a
business’ personality as its
culture.