The Business Environment
The Business Environment
“What is meant by the Business environment? Explain the evolving role and function of stakeholders in the micro environment of the business”
A business is an organisation which uses factors of production (inputs such as land, labour, capital and enterprise) and transforms them into finished products & services (outputs). A lot of businesses have objectives to increase market share and profit maximize whilst some operate just to survive or serve a different purpose or objective such as with a charity.
The business environment is the environment which surrounds the organisation. It can be split up into micro (internal) which are factors which directly influence the business on a daily basis such as suppliers, customers and employees. The other side is macro (external) which includes the continuously changing economic environment of the business, such as political, social and competition climate.
“The environment is usually thought of as the world ‘out there’, the external context, comprised of wider social, cultural, economic, political, legal, technological and other system in which the businesses operate” – The Business Environment, Paul Wetherly & Dorron Otter.
Businesses and organisations are usually divided up into departments which have their own role, set of objectives and strategy within the day to day running of the company. For example you have a human resource department (HR) which looks at hiring and firing of employees, arranging training and managing the relationships between the other departments.
These departments run separate of one another but sometimes need to communicate with each other, for example the HR department may need to pay for training or alter salaries which will have to be passed over to the finance department. This interaction between departments creates an ‘Internal’ environment.
The internal environment can depend on the corporate culture within the business. A business may have a communal type of culture where the business aims to encourage sociability within the business, the discussion between different groups of workers (departments) to help solve problems and tasks. It aims to bring across a ‘family’ type culture in which the departments are free to talk to one another. (Flatter, less hierarchical structure). According to Maslow’s Hierarchy of needs this should meet social needs and should lead to motivated staff, this should make the internal environment a friendly and pleasant one – workers aren’t afraid to talk, share ideas and this will help to improve the business’s decision makings.
“Interest in organisation culture has grown as academics and managers have come to believe that it influences behaviour. Several claim that a strong and distinct culture helps to integrate individuals into the team or organisation “ – Management – An introduction (Fourth Edition) – David Boddy.
The type of internal environment you have within your business can and will influence the daily running of your business through decision making. Employees may find that there isn’t a health environment between departments with breakdowns of communication (may be caused by a narrow span of control, lots of levels and procedures to talk to managers before other departments etc) and this will create bad decision making within the business.
For example a worker in the marketing department may have a great idea for a new product but will need to communicate with the development section in the production department to see if the product can be made (investment in new machinery etc) – if this communication doesn’t take place then you may end up spending £6 Million on market research and product research when you can’t even make the product. This will create an opportunity cost where the money could have been better spent elsewhere.
The business may wish to conduct a SWOT analysis of the business to see its strengths which may include a strong brand name, weaknesses such as poor products or after service, opportunities to expand (or financial opportunities from retained profit), Threats such as competitors entering the market. This can help analyse the internal environment of the business and help with the best course of action to take.
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http://www.rhys.eu/blog/wp-content/uploads/2009/06/environment.pdf
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