The popular saying that goes, 'no man is an island', does not only apply to humans but can also be attributed to the business world. In order to remain active and competitive, an organisation needs to take into account, not only internal processes but also look into consideration its external environment. Factors such as competitors,new rules and regulations,changing marketplace, changing workforce and other related factors that have direct impact on the existence of the business must be seen as a crucial factor to the organisation.
A business environment encompasses those factors outside the normal business activities of an organisation but directly affects its decisions and is uncontrollable by the organisation. A change in consumer's taste will likely result in a shift in demand of a product such as fashion.
IMPORTANCE OF BUSINESS ENVIRONMENT
The importance of analysing an organisation's business environment cannot be more emphasized. Most businesses operate in an environment and whatever occurs in that environment also affect the business. The major importance can be seen in the following :
1. Detection of opportunities and threats: A business that is able to identify potential opportunities will normally have the upper hand as being the first mover and early detection of threats will act as a warning signal of dangers ahead. 2. Coping with changes: With huge changes occurring in the society, there is need for business managers to be aware of these changes and develop the best strategies with which to handle the changes.
3. Performance Efficiency: Businesses that monitor their immediate environment closely and adapt fast to its changes will likely record successes than those who do not.
TYPES OF BUSINESS ENVIRONMENT
Every business operates in a micro environment and a macro environment. A micro environment of a business make up the factors that affect the performance and decision-making process of the business internally. Some of these micro-environments are the suppliers, the customers, shareholders , employees.
CUSTOMERS: Most businesses exist to meet the needs of their customers and it is these customers that determine whether the business succeeds or fails. It is therefore, crucial that the business takes them in account when making decisions.
SUPPLIERS: Businesses make extra effort to maintain close relationship with their suppliers as they also have impact on the business operations.
EMPLOYEES: It is the responsibility of any organisation to recruit the right staff and train them. This is because well-motivated employee would perform effectively and invariably lead to the overall success of the business.
SHAREHOLDERS: As owners of the business, shareholders play a major role in the decision-making made by the management of the organisation. One of the objectives of any business is to maximise shareholder's wealth and the organisation makes most of its decisions based on this.
A macro-environment of a business are those uncontrollable external factors that directly has a bearing on the business. The primary influences on a business are seen on political,economical,socio-cultural,technological,legal and environmental factors.
POLITICAL FACTORS : Every political decision made by any country has either a negative or positive effect on any business within its jurisdiction. For instance, most businesses located in the Middle East would not operate freely because of the political conflicts in that region of the world. This would affect their overall performance at the end of the year as losses from in-operations will reduce profits.
ECONOMICAL FACTORS : The economic factors that affect a business determines how well the business performs at the end of the year. During the global recession, consumers spent less on items they can do without such as luxury cars and invariably, most companies in the auto mobile suffered losses as a result of this. On the other...
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