Business

Operations
Contents
• Understanding of Business Environment
• Internal Factors
• External Factors
• Business In A Global Environment
• Economics & Business
Understanding of Business Environment
• To get a proper understanding of the business environment, we should step by step
analyze individual elements of this term.

• “Environment” can be acknowledged as the surroundings or conditions in which a specific

activity is carried on.

• Secondly, because we know that a business firm is a social entity which is formed by a
hierarchical structure where all necessary items of its own are activated together to reach
the collective goal.

• Therefore, it is absolutely that every factor inside or outside a business organization has a
profound influence on business activities.

• Internal and external environment together create a business environment.

Internal Factors
Internal Environment Factors
• The internal factors refer to anything within the company and under the control of the
company no matter whether they are tangible or intangible.

• These factors after being figured out are grouped into the strengths and weaknesses of
the company.

• If one element brings positive effects to the company, it is considered a strength.

• On the other hand, if a factor prevents the development of the company, it is a weakness.

• Within the company, there are numerous criteria that need to be taken into consideration.
Internal Factors
There are 14 types of internal environment factors:

• Plans & Policies

• Value Proposition
• Human Resource
• Financial and Marketing Resources
• Corporate Image and brand equity
• Plant/Machinery/Equipments (or you can say Physical assets)
• Labour Management
• Inter-personal Relationship with employees
Internal Factors
• Internal Technology Resources & Dependencies
• Organizational structure or in some cases Code of Conduct
• Quality and size of Infrastructure
• Task Executions or Operations
• Financial Forecast
• The founders’ relationship and their decision-making power
Internal Factors
Human Resources
• In the modern global economy, where ideas and digital skills - rather than physical
resources are increasingly where economic value is realized, human resource can be a
company’s greatest treasure.

• In general, the employees can be either a strength or weakness of the company

depending on the level of practical skills, attitudes toward work, and performance.

• Example: If a business has skilled and motivated workers, they are sure to be the biggest
asset of this enterprise.

• Conversely, employees without carefully trained and have negative attitudes to their task
will be an enormous challenge for the company to address. In short, the CEO should have
a strategic and effective human management not only for the sake of company benefits
but also for the positive development of their employees.
Internal Factors
Capital Resources
• From a general view, financial capital is the funds necessary to grow and sustain a
business. CEO takes financial capital to invest in not only tangible goods such as
factories, machines, tools and other productive equipment to produce an output but also
intangible resources such as marketing, employee training, etc.

• No company can survive without having capital resources. Once a company has enough
budget, they can easily launch their projects, expand its scale and even achieve
impressive result.

• Example: In 2010 Coca Cola spent 2.9 billion USD for marketing, which was more than
that total marketing investment of Microsoft and Apple. It can be said that without the big
investment and stable financial resource, Coca Cola’s success would not be guaranteed.

• There are also several ways for an enterprise to maintain stable budgets by some
resources such as investment opportunities, funding, and annual income.
Internal Factors
Operational Efficiency
• The concept of operational efficiency encompasses the practice of improving all
processes, which are all of a company’s activities leading to the final product or service.

• Because Operational efficiency directly affects the company’s success in the marketplace,
a businessman needs to truly know his company’s processes and follow them to discover
whether they’re being performed in the correct manner or not.

• How to achieve this efficiency :

• Study the business situation

• Pay attention to product cost
• Map process failure and discover failure
• Use technology for better operation productivity
Internal Factors
Organizational Structure
• To have a suitable organizational structure requires the owners have to consider carefully
set up a system to work smoothly within the company.

• Whether it is a centralized or decentralized system, the most important thing is how

effective the structure is when applied for the company.

• The heads of departments need to make sure that the information flow is widely conveyed
to all customers. Suitable rules and regulations are being applied to ensure the benefits of
employees, and the business as well.
Internal Factors
Infrastructure
• When a company already has well-trained and motivated workers, and an effective
operational and organizational system, it must be ensured that the infrastructure of the
company are good enough for all your functions.

• With the modern and high quality facilities, stable power, internet and wifi connection, and
so on your company is likely to perform better. In other words, the better your
infrastructure, the more opportunities for your company to perform successfully.
Internal Factors
Innovation
• In the competitive marketplace and industrial revolution we are living now, no company
can survive without upgrade new ideas and technology served overall success.

• Fundamentally, innovation refers to the introduction of something new into your business
with the ideas come from inside the business such as from employees, developers,
managers or from the outside world like suppliers, customers, etc.

• Innovation is rewarding for your business only when you step by step start to holistically
approach to innovation, plan and encourage innovation and spread investment for
innovation in your business.
External Factors
External Environmental Factors
• Contrary to internal factors, external elements are affecting factors outside and under no
control of the company.

• Considering the outside environment allows businessmen to take suitable adjustments to

their marketing plan to make it more adaptable to the external environment.

• Example: Sometimes this involves developing a new Amazon product photography

strategy if you advertise your products on this platform, finding trustworthy partners willing
to make an investment, or pruning the original business plan.

• There are numerous criteria considered as external elements. Among them, some of the
most outstanding and important factors need to listed the are current economic situation,
laws, surrounding infrastructure, and customer demands.
External Factors
Technological Factors
• As technology continues to advance, companies can benefit from these breakthroughs or
face challenges in competing with them.

• Example: A company that manufactures GPS devices for personal cars may experience a
decline in business because of the integration of GPS on mobile devices, but they can
confront these challenges by developing new products.

• Other companies, such as health care providers, can use modernized methods to collect
information from their patients, keep patient records and streamline patient care.
External Factors
Economic Factors
• The state of the economy plays an important role in every aspect of daily life from the
well-being of personnel to the ability of a company to thrive.

• When the economy trends downward and unemployment rises, businesses may have to
work harder to keep their staff and change their processes to continue earning revenue.

• If the company produces products for retail sale, for instance, they may consider lowering
the price to increase sales and positively affect their revenue.
External Factors
Political & Legal Factors
• As political officials leave office and new ones replace them, the policies they implement
often affect businesses in relevant industries.

• Because of the inconsistent nature of politics, businesses monitor legislative bills closely
to prepare for potential changes. Policies that can have long-term effects on companies
include:

• Taxation
• Tariffs
• Employment law
• Competition regulation
• Import restrictions
• Intellectual property law
External Factors
Demographic Factors
• Companies with successful products and services evaluate the demographics of their
target market to ensure they meet the needs of those who benefit from their offerings.

• They also perform tests to measure how well they serve their customers.

• This helps them understand if their target market has changed and how they can develop
better ways to serve their loyal customers and earn new ones.

• Example: When mobile phone companies emerged in the 1990s, their marketing efforts
focused on young, successful professionals.

• Now, people of all ages use mobile devices daily. Telecommunications companies have
adapted to this change by modifying the features of their products and taking different
approaches to advertising methods.
External Factors
• Demographics that affect business decisions and processes include:

• Age
• Gender
• Race
• Nationality
• Belief system
• Marital status
• Occupation
• Income
• Level of education
External Factors
Social Factors
• Where people live, their personal values and their socioeconomic status affect what,
where and why people make purchases.

• Businesses take social factors into consideration when developing and marketing
products, and many use current events, movements and social issues to appeal to their
customers.

• Example: A company that supports a women's organization may earn the trust and loyalty
of customers who identify as female.

• Catering to the specific preferences and expectations of underrepresented groups, who

have more influence on the market today than in past years, can also contribute to
customer satisfaction and business growth.
External Factors
Competitive Factors
• Businesses can increase their market share and stay relevant to their customers by
keeping track of their competitors.

• They can identify and evaluate successes and challenges, thus learning what to
incorporate into their own processes and how to prevent revenue loss.

• They can also use the information they gather to develop ideas for product changes,
product relaunches, and new product development.
External Factors
Global Factors
• Executives have a duty to keep track of both domestic and global issues, especially if they
conduct business internationally.

• By learning about social issues that affect those in other countries and their cultural
norms, consumer trends and economic status, company leaders can provide their teams
with relevant training.

• This enables them to develop products or offer services that meet the needs of
international customers by providing solutions to challenges they face as consumers.
External Factors
Ethical Factors
• Because everyone has a distinct concept of ethics and morality, some companies may
find it challenging to balance the personal lives of staff members with their expectations in
the workplace.

• Employees' leisure activities, such as social media accounts, can reflect on their
employer.

• As representatives of the company, they have a responsibility to avoid behavior that could
negatively affect the business.

• Managers can address issues such as sharing classified information or the harassment of
a colleague outside of work by establishing guidelines and taking disciplinary action when
necessary.
External Factors
Natural Factors
• As environmental awareness continues to grow, more consumers have realized the
effects of business processes on the planet.

• Some consumers have used their purchases to support companies that develop
ecologically friendly practices, such as using compostable packaging and solar energy.

• By paying attention to these external concerns and changing their operations, businesses
can make changes that help them protect the environment, retain customers and increase
revenue.
Business In A Global Environment
• Globalization is the process of integrating the economy of a country with the world
economy.

• Through the globalization process, organizations develop influences at international

level and operate on an international scale.

• A scenario of globalization is where MNC’s operate on a global scale with offices and
branches in numerous locations. They might outsource their job to be done by a person
residing in a struggling country, creating a job opportunity for them. This would be a win-
win situation for both, since the person gets employed and the MNC reduces labour
cost.

• Another scenario of globalization would be a shirt sold in the United States could have
been made using Chinese cotton by workers in a factory in Thailand. This shows that
due to globalization, production of even a single product might use the work from many
countries to complete the work in an efficient and cost-effective manner.
Business In A Global Environment
• Countries are importers when they buy goods and services from other countries and
exporters when they sell products to other nations.

• But exactly why do countries trade, instead of just making everything they need
themselves? It is simply because no national economy can produce all the goods and
services that its people need. The cost of labor, the availability of natural resources,
and the level of know-how vary greatly around the world.

• Most economists use the concepts of absolute advantage and comparative advantage
to explain why countries import some products and export others.
Business In A Global Environment
Absolute Advantage
• A nation has an absolute advantage if it’s the only source of a particular product or it
can make more of a product using fewer resources than other countries.

• Example, because of climate and soil conditions, France had an absolute advantage in
wine making until its dominance of worldwide wine production was challenged by the
growing wine industries in Italy, Spain, and the United States.

• Unless an absolute advantage is based on some limited natural resource, it seldom

lasts. That’s why there are few, if any, examples of absolute advantage in the world
today.
Business In A Global Environment
Comparative Advantage
• Comparative Advantage is when a country can produce a product at a lower opportunity
cost compared to another nation.

• Opportunity costs are the products that a country must forego making in order to produce
something else. When a country decides to specialize in a particular product, it must
sacrifice the production of another product.

• Countries benefit from specialization, focusing on what they do best, and trading the output
to other countries for what those countries do best.

• Example, France and Italy are centers for fashion and luxury goods and are leading
exporters of wine, perfume, and designer clothing. Japan’s engineering expertise has
given it an edge in such fields as automobiles and consumer electronics. And with large
numbers of highly skilled graduates in technology, India has become the world’s leader in
low-cost, computer-software engineering.
Economics & Business
• Economics is the study of the production, distribution, and consumption of goods and
services.

• Economics is used to determine the supply & demand in a business.

• Demand is the quantity of a product that buyers are willing to purchase at various prices.
The quantity of a product that people will buy depends on its price. They will buy more
when the price is low and less when it’s high.

• Supply is the quantity of a product that sellers are willing to sell at various prices. Price
also influences the quantity of a product that producers are willing to supply. They sell
more of a product when prices are high and less when they’re low.
Economics & Business
• Economists usually ask themselves these three questions when determining supply &
demand:
• What goods and services should be produced to meet consumer needs?
• How should they be produced, and who should produce them?
• Who should receive goods and services?

• In a competitive market, the decisions of buyers and sellers interact until the market
reaches an equilibrium price. This is the price at which buyers are willing to buy the same
amount that sellers are willing to sell.
Economics & Business
• There are 3 types of competition in a free market system, which are Perfect
Competition, Oligopoly, and Monopoly.

• Perfect Competition - many sellers offer differentiated products that differ slightly but
serve similar purposes. By making consumers aware of product differences, sellers
exert some control over price.

• Oligopoly - a few sellers supply a sizable portion of products in the market. They exert
some control over price, but because their products are similar, when one company
lowers prices, the others follow.

• Monopoly - there is only one seller in the market. The market could be a geographical
area, such as a city or a regional area, and does not necessarily have to be an entire
country. The single seller is able to control prices.
Ethics in Business
• Business ethics is the application of ethical behavior in a business context. Ethical
(trustworthy) companies are better able to attract and keep customers, talented
employees, and capital.

• Acting ethically in business means more than just obeying laws and regulations. It also
means being honest, doing no harm to others, competing fairly, and declining to put own
interests above those of employer and coworkers.

• Corporate social responsibility refers to the approach that an organization takes in

balancing its responsibilities toward different stakeholders (owners, employees,
customers, and the communities in which they conduct business) when making legal,
economic, ethical, and social decisions.
Q&A