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

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 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

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 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.

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 ENVIRONMENT

Definition:
1. The totality of surrounding conditions.

2. Existing surroundings that affect an

activity: circumstance, condition.

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 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)

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 Business Environment

Internal Environment factors are:

(1) Financial Aspects
(2) Marketing Aspects
(3) Personnel Aspects
(4) Production Aspects

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 Business Environment

External Environment factors are:

(1) Social
(2) Economic
(3) Political and Legal
(4) Technological

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 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.

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 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.

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 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.

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 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.
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 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.

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 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

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 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

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 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

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 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

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

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 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.

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 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.

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Question and Answer Session

Q&A

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 Next Lesson

- Political issues :

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