The Firm and Its Environment

Flashcards covering the internal and external business environments, SWOT and PESTEL analytical tools, organizational forms, and cultural dimensions of scanning.

Internal environment

Consists of elements that have a direct impact on the business operations, can be directly controlled, and freely modified by the firm.

Employees

An element of the internal environment that has a direct impact on the business operations.

Board of directors

An element of the internal environment directly controlled by the firm that influences operations.

Managers

Key personnel within the internal environment who directly impact business operations.

External environment

Consists of factors that have indirect but significant influence on business operations and cannot be controlled by the firm.

Microenvironment

Also known as the “operating environment,” it includes customers, suppliers, regulatory agencies, and competitors.

Macroenvironment

Also known as the “general environment,” it consists of economic, political, social, legal, and technical factors beyond the firm's control.

Customers

A factor in the microenvironment that has direct relevance to business operations but is uncontrollable to a certain extent.

Suppliers

Entities in the microenvironment that provide resources and have direct relevance to the business.

Regulatory agencies

Organizations within the microenvironment that oversee business operations.

Competitors

Factors in the microenvironment that a business must monitor for a direct impact on operations.

Environmental scanning

The actual monitoring and evaluation of information from the external and internal environment of a business organization.

Strategic analysis

A method used by companies along with environmental scanning to gather information on the external environment.

SWOT analysis

A technique that identifies the Strengths and Weaknesses of a company, as well as the Opportunities and Threats it faces.

Strengths

Company attributes that give a competitive edge over others and are part of the internal environment.

Weaknesses

Attributes of a company that need to be improved or changed, as they may hinder growth and performance.

Opportunities

External factors or events, like new markets or increased purchasing power, that can give a positive impact if properly addressed.

Threats

External factors, trends, or changes over which a company has no control and which may negatively impact the status of the business.

Competitive edge

The advantage a company's strengths provide over its rivals in the business scene.

PESTEL analysis

A framework used to analyze macro-environmental factors: Political, Economic, Social, Technological, Environmental, and Legal.

Political factors

PESTEL component including government policies, leadership, foreign trade policies, and tax policy.

Economic factors

PESTEL component including inflation, interest rates, job growth, unemployment, and disposable income.

Social factors

PESTEL component including demographics, consumer attitudes, buying patterns, and living standards.

Technological factors

PESTEL component affecting marketing through new ways of producing, distributing, and communicating.

Environmental factors

PESTEL component dealing with scarcity of raw materials, pollution targets, and carbon footprints.

Legal factors

PESTEL component including health and safety, equal opportunities, advertising standards, and consumer rights.

Demographics

Social factors related to age, gender, race, family size, and population growth rate.

Organization

A collection of people working together to achieve a common purpose.

Business organization

A collection of people working towards an organization’s mission and goals while sharing a common organizational culture.

Organizational culture

The set of beliefs and values shared by organization members which guide them as they work together.

Simple business organizations

Organizations with few departments, centralized authority, wide span of control, and few formal rules.

Functional business organizations

Organizations that group similar specialized duties and delegate authority to functional managers while the CEO retains strategic control.

Divisional business organizations

Organizations made up of separate semi-autonomous business units with a division head responsible for performance.

Profit business organizations

Organizations designed to achieve stability and goals through income generation and profit-making activities.

Nonprofit organizations

Organizations designed to provide service to clients without expecting monetary gains; success is measured by evaluation scores.

Open/flexible business organizations

Business organizations formed specifically to meet today’s changing work environment.

Team structures

An organizational form where the whole entity is made up of small, focused work teams; popular in collectivist cultures.

Matrix business organizations

Organizations that assign specialists from different functional departments to work on specific projects with dual reporting relationships.

Dual reporting relationships

A feature of matrix organizations where managers report to both a functional manager and a divisional manager.

Project business structure

A flexible design where employees continuously work on projects and disband once the task is completed.

Boundaryless business organization

An unstructured, flexible organization that eliminates vertical, horizontal, or external boundaries to facilitate fast information flow.

Virtual business organization

Consists of a small group of full-time workers and outside experts hired on a temporary basis who usually communicate online.

Local Business Environment

Refers to a firm whose commercial activities, producers, and customers all reside within the same nation.

Domestic trade

Trade where the buyer and seller belong to the same country, following national practices, laws, and customs.

Power Distance

The degree to which a society accepts or rejects the unequal distribution of power among people and institutions.

Uncertainty Avoidance

The degree to which society is uncomfortable with risk, change, and situational uncertainty.

Individualism-Collectivism

The degree to which a society emphasizes individual accomplishments versus group accomplishments.

Masculinity-Femininity

The degree to which a society values assertiveness and material success versus concern for relationships.

Time Orientation

The degree to which a society emphasizes short-term thinking versus concern for the long-term future.

International Business

Manufacturing and trade across borders involving commercial activities like sales and logistics between two or more countries.