You are on page 1of 25

Business Environment

ABUS001-3-1

The Nature of the Business Environment

Topics & Structure of Lesson


Business Environment
What does the business environment comprise? Use of PEST analysis Influences and drivers for change Glocalisation

Title of Slides

Learning Outcomes
At the end of this lesson, you should: Understand the nature of the business environment which includes ; What does the business environment comprise? Use of PEST analysis Influences and drivers of change Glocalisation

Title of Slides

Business
Can be defined as: An organization or enterprising entity engaged in commercial, industrial or professional activities. A business can be a for-profit entity, such as a publicly-traded corporation, or a non-profit organization engaged in business activities, such as an agricultural cooperative.

Title of Slides

ENVIRONMENT
Definition: 1. The totality of surrounding conditions. 2. Existing surroundings that affect an activity: circumstance, condition.

Title of Slides

Business Environment
Business Environment- of an organisation; refers to the elements that affect the achievement of it aims. Change in environment will affect both its input and output. The two parts of a business environment are: a) Internal Environment (controllable) b) External Environment (uncontrollable)

Title of Slides

Business Environment
Internal Environment factors are:
(1) Financial Aspects (2) Marketing Aspects (3) Personnel Aspects (4) Production Aspects

Title of Slides

Business Environment
External Environment factors are: (1) Social (2) Economic (3) Political and Legal (4) Technological

Title of Slides

Business Environment
Factors that are influences and drives for change:
Customers develop new needs and wants. New competitors enter a market. New technologies mean that new products can be made. A world or countrywide event happens e.g. Gulf War or SARS disease. Government introduces new legislation e.g. increases minimum wage. Change in management style or new management.
Title of Slides

Importance of Business Environment


Determining Opportunities & Threats
Helps the business enterprises for meeting the challenges successfully

Giving direction for Growth


Opens up new frontiers of growth for the business firms Enables the business to identify the areas for growth and expansion of their activites

Title of Slides

Importance of Business Environment


Continuous Learning
Easier to deal with business challenges Managers are motivated to continuously update their knowledge, understanding and skills to meet the predicted changes in realm of business

Image Building
Environmental understanding helps the business in improving their image
Title of Slides

Importance of Business Environment


Meeting Competition
It helps the firms to analyse the competitiors strategies and formulate their own strategies accordingly

Identifying Firms Strength & Weaknesses


In view of the technological and global developments

Title of Slides

PEST Analysis
Use of PEST analysis PEST Analysis is a simple but important and widely-used tool that helps you understand the big picture of the Political, Economic, Socio-Cultural and Technological environment you are operating in.

Title of Slides

PEST Analysis
The use of PEST analysis in important for the main reasons: 1. By making effective use of PEST Analysis, you ensure that what you are doing is aligned positively with the powerful forces of change that are affecting our business. By taking advantage of change, you are much more likely to be successful than if your activities oppose it.

Title of Slides

PEST Analysis
2. Good use of PEST Analysis helps you avoid taking action that is doomed to failure for reasons beyond your control.
3. PEST is useful when you start operating in a new country or region. Use of PEST helps you break free of unconscious assumptions, and helps you quickly adapt to the realities of the new environment.
Title of Slides

PEST Analysis
How to use PEST Analysis: Using the tool is a three stage process: Firstly, brainstorm the relevant factors that apply to your business; Secondly, identify the information that applies to these factors; and Thirdly, draw conclusions from this information.

Title of Slides

PEST Analysis
The following factors may help as a starting point for brainstorming : Political: Government type and stability Freedom of press, rule of law and levels of bureaucracy and corruption Regulation and de-regulation trends Social and employment legislation Tax policy, and trade and tariff controls Environmental and consumer-protection legislation Likely changes in the political environment

Title of Slides

PEST Analysis
Economic: Stage of business cycle Current and project economic growth, inflation and interest rates Unemployment and labor supply Labor costs Levels of disposable income and income distribution Impact of globalization Likely impact of technological or other change on the economy Likely changes in the economic environment

Title of Slides

PEST Analysis
Socio-Cultural: Population growth rate and age profile Population health, education and social mobility, and attitudes to these Population employment patterns, job market freedom and attitudes to work Press attitudes, public opinion, social attitudes and social taboos Lifestyle choices and attitudes to these Socio-Cultural changes

Title of Slides

PEST Analysis
Technological Environment: Impact of emerging technologies Impact of Internet, reduction in communications costs and increased remote working Research & Development activity Impact of technology transfer

Title of Slides

Glocalisation
The global economy is becoming truly integrated and there is simultaneous global and local focus known as glocalisation.

Title of Slides

Glocalisation
- Glocalisation strategy empowers local communities and at the same time linking them to global resources and knowledge. - It provides opportunities for the local communities to direct positive social change in the areas that most directly affect them, and to shape an innovative and more equitable international system.

Title of Slides

Glocalisation
- By creating a new socio-economic balance, Glocalization has far-reaching benefits for both developed and developing countries, -

emphasizing social equity as a basis for


international stability and ensuring a more secure and stable global environment to bring about development and peace.

Title of Slides

Question and Answer Session

Q&A
Title of Slides

Next Lesson
- Political issues :

Title of Slides