LESSON 2: Environmemt

Environmental Forces & Scanning, Local and International Business Environment of the Firm, Forms of Business Organizations

Environmental Scanning

Looking for and sorting out data about the environment

Business Environment

Factors/elements that may have a positive or negative effect on the performance of the organization

External Business Environment

Factors or elements outside the organization

Internal Business Environment

Factors or elements within the organization

Inflation

Period of above normal general price increases, as reflected in the consumer and wholesale price indexes

Interest Rates

Total amount that a borrower must pay annually to the lender and above the total amount borrowed

Changing Options

Consumers' change in preference of goods and services offered

People's Spending Habits

Consumers' changing ways of spending their money on goods and services

Economic Situations

Inflation rates of interest, people's spending habits, changing options, etc.

Environmental Scanning

Looking for and sorting out data in the environment

Political, Economic, Social, Technological, Environmental, Legal

General components of an external business environment

Political

How and to what degree a government intervenes in the economy (General Component)

Economic

Impact on how an organization does business and how profitable they are (General Component)

Social (Socio-cultural)

Shared belief and attitudes of the population (General Component)

Technological

Affect marketing and the management in 3 distinct new ways: producing goods and services, distributing goods and services, and communicating with target markets (General Component)

Legal

Companies need to know what is and what is not legal to trade successfully (General Component)

Stakeholders, customers, pressure groups, investors/owners, employees

Specific components of an external business environment

Stakeholders

Likely to be impacted by the activities of the organization (Specific Component)

Customers

Purchase the products and services of the organization (Specific Component)

Suppliers

Ensure the continuous flow of the essential and reasonably price inputs (financial and labor supply) or materials needed (Specific Component)

Pressure Groups

Special-interests groups that try to exert influence on the organization's decisions or actions (Specific Component)

Investors/Owners

Provide the company financial support (Specific Component)

Employees

Those who work for another or employer in exchange of salaries or wages or other considerations (Specific Component)

Resources, research and development, production, procurement of supplies, products and services

Components of the internal business environment

Developing a competitive mindset, considering future business scenarios, business prediction/forecasting, SWOT analysis, benchmarking

Components of environmental scanning

Strengths, weaknesses, opportunities, threats

SWOT meaning

Benchmarking

Process of measuring or comparing one's own products, services, and practices with those of the recognized industry leaders to identify areas for improvement

Cultural Intelligence

Individual's ability to favorably receive and adjust to an unfamiliar way of doing things

Edward T. Hall

Anthropologist who noted that the way people approach and deal with time varies across cultures

Monochronic Cultures

Cultures wherein people tend to do one thing at a time, emphasize punctuality and sticking to set rules

Polychronic Cultures

Cultures that are more flexible with regards to time, accomplishing many different things at once is also common for these cultures

Geert Hofstede

Developed the 5 cultural dimensions

Power Distance, Uncertainty Avoidance, Individualism-collectivism, Masculinity-femininity, Time Orientation

5 cultural dimensions

Power Distance

Degree to which a society accepts or rejects the unequal distribution of power among people in organizations and the institutions of society

Uncertainty Avoidance

Degree to which a society is uncomfortable with risk, change, and situational uncertainty

Individualism-collectivism

Degree to which a society emphasized individual accomplishments versus collective accomplishments

Masculinity-femininity

Degree to which a society values assertiveness and feeligns of material success versus concern for relationsips

Time Orientation

Degree to which a society emphasizes short-term thinking versus greater concern for the future or long-term thinking

Culture

Rooted in a country's history, religion, traditions, beliefs, and deep-seated values

Politico-legal Environment

Laws and political climate of different countries

Gross National Product

Total domestic and foreign output claimed by the residents of a country

Gross Domestic Product

Total final output of goods and services produced by the country's economy, within the country's territory

Currency Exchange Product/Rates

Rate at which central banks will exchange the country's currency for another

Organization

Collection of people working together to achieve a common purpose

Business Organization

Collection of poeple working together to achieve a common purpose in relation to their organization's mission, vision, goals, and objectives, sharing a common organizational culture

Organizational Culture

Set of beliefs and values shared by organization members which guide them as they work together to achieve their common purpose

Simple, Functional, Divisional, Profit, Nonprofit

Traditional Business Organizations

Simple Business Organizations

Few departments, centralized authority, with a wide span of control, with few formal rules and oregulations; easy to manage because of its simple form

Functional Business Organizations

Group together those with similar or related specialized duties; still allow the CEO to retain authority for strategic decisions

Divisional Business Organizations

Made up of separate business units that are semi-autonomous or semi-independent with a division head responsible for its unit's performance; each division has its own functional organization and general manager

Profit Business Organizations

Maintain their organizational stability through income generation and profit-making activities; immediate revenues or cost factors account for their success or failure

Nonprofit Organizations

Provide service to clients without expecting monetary gains or financial benefits; success or failure is measured by the high or low evaluation scores they obtain

Open/flexible Business Organizations

Formed to meet today's changing work environment

Team Structures, Matrix Business Organizations, Project Business Structure, Boundaryless Business Organizations, Virtual Business Organization

Open/flexible Business Organizations

Team Structures

Organization is made up of work teams (small, but focused); popular in collectivist culture

Matrix Business Organizations

Assign experts or specialist belonging to different functional departments to work together on one or more projects; dual reporting relationships (functional and divisional manager)

Project Business Structure

Flexible design, employees continuously work on projects assigned to them; projects may be short/long term and members disband when the project is completed

Boundaryless Business Organizations

Its design eliminates vertical, horizontal, or external boundaries

Virtual Business Organization

Small group of full-time workers and outside experts who are hired on a temporary basis to work on assigned projects