LESSON 2: Environmemt

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Environmental Scanning

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

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Environmental Scanning

Looking for and sorting out data about the environment

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Business Environment

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

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External Business Environment

Factors or elements outside the organization

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Internal Business Environment

Factors or elements within the organization

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Inflation

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

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Interest Rates

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

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Changing Options

Consumers' change in preference of goods and services offered

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People's Spending Habits

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

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Economic Situations

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

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Environmental Scanning

Looking for and sorting out data in the environment

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Political, Economic, Social, Technological, Environmental, Legal

General components of an external business environment

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Political

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

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Economic

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

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Social (Socio-cultural)

Shared belief and attitudes of the population (General Component)

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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)

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Legal

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

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

Specific components of an external business environment

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Stakeholders

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

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Customers

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

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Suppliers

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

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Pressure Groups

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

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Investors/Owners

Provide the company financial support (Specific Component)

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Employees

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

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

Components of the internal business environment

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

Components of environmental scanning

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Strengths, weaknesses, opportunities, threats

SWOT meaning

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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

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Cultural Intelligence

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

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Edward T. Hall

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

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Monochronic Cultures

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

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Polychronic Cultures

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

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Geert Hofstede

Developed the 5 cultural dimensions

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

5 cultural dimensions

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Power Distance

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

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Uncertainty Avoidance

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

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Individualism-collectivism

Degree to which a society emphasized individual accomplishments versus collective accomplishments

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Masculinity-femininity

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

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Time Orientation

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

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Culture

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

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Politico-legal Environment

Laws and political climate of different countries

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Gross National Product

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

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Gross Domestic Product

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

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Currency Exchange Product/Rates

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

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Organization

Collection of people working together to achieve a common purpose

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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

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Organizational Culture

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

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Simple, Functional, Divisional, Profit, Nonprofit

Traditional Business Organizations

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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

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Functional Business Organizations

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

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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

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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

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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

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Open/flexible Business Organizations

Formed to meet today's changing work environment

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

Open/flexible Business Organizations

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Team Structures

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

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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)

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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

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Boundaryless Business Organizations

Its design eliminates vertical, horizontal, or external boundaries

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Virtual Business Organization

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

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