EDS 111

ENTREPRENEURSHIP ENVIRONMENT
 OBJECTIVES
 At the end of this lecture, the students will
be able to;
 Define business environment
 Identify different ways of classifying
business environment
 Identify different environmental factors
INTRODUCTION
 To be successful in business, an
entrepreneur must take time to study and
understand his environment.
 Understanding the variability and the
heterogeneous nature of the business
environment enhances adaptability and helps
an entrepreneur to identify business
opportunities easily.
CONT’
 In support of this, As Kilby (1968) asserted
that
 entrepreneurs in developing economies
should be concerned with the adaptation
production process, through which they can
be familiar with their environmental setting
and by constant monitoring and evaluation,
they can get their business objectives
achieved.
Classification of Business
Environment
 Environment can be classified in terms of its
stability, size, nature and dynamics
 Classifying business environment using the
above classification, we might have;
CONT’
 (i) Stable Environment: This is an
environment that is fairly stable and all the
forces of the environment can be
predictable in irrespective of the
happenings in the environment.
(ii) Complex Environment: A complex
environment is an environment that is
highly dynamic, unstable and uncertain.
It is also highly unpredictable.
CONT’
(a) Evolving environment: This type of complex
environment might either be slowly or fast evolving.
It is full of the activities of creativity, inventions and
innovation. This environment is very suitable for the
emergence of entrepreneurs.
(b) Unstable environment: This type of complex
environment is full of uncertainty and business
operations.
(c) Turbulent environment: This is a complex
environment that is highly unpredictable and full of
troubles. Investment and business operations can
be risky.
CONT’
 Environment can also be classified in terms of the
size as micro and macro.
 (i) Micro environment: Micro environment
include all the firm’s or company specific
controllable forces which include employees,
suppliers, intermediaries, products, prices
etc.
 This is also known as the internal environment.
 (ii) Macro environment: The macro or external
environmental factors include; economic ,
socio- cultural, political, etc.
 This is also called the external environment.
ENVIRONMENTAL FACTORS
 Business success is a function of how an
entrepreneur is able to operate and
manipulate the key factors that make up
his /her environment.
 Some of these factors are subject to his/her
control while others are not.
 He should be able to know that those factors
that are beyond his control and know how to
get along with them for the achievement of
his business goal(s)
CONT’
 The SWOT analysis (which is an acronym for
Strength, Weakness, Opportunity and Threat)
will help the entrepreneur to analyze his/her
internal environment
 while PESTI analysis ( an acronym for
Political, Economical, Socio-cultural,
Technological and International) will help an
entrepreneur to analysis his/her external
environment.
CONT’
 The dynamic nature of this environment
necessitates its evaluation so as to know how
to cope with the constant changes in this
environment.
 The issue of adapting to the business
environment has provoked some questions
from social scientists on what environmental
factors should be made up of.
CONT’
 To support this Wilken, et al (1976)posed
these questions;
 What conditions (economic and non
economic) influence the emergence of
entrepreneurship?
 Does entrepreneurship appear primarily in
response to a particular set of economic
conditions or does it appear only where
specified economic, social, political,
psychological and cultural conditions are
present within a society?
CONT’
 To provide answers to the above questions,
the following environmental factors will be
addressed
 (i) Economic environment
 (ii) Soci-Cultural environment
 (iii) Technological environment
 (iv) Political environment
 (v) Physical environment
 (vi) International Environment
CONT’
 (i) Economic environment: This environment
according to Osunkeye (1995) is the mother of other
environment. The factors affecting this environment
include;
 degree of competition,
 forces of demand and supply,
 interest rate,
 inflationary rate,
 monetary and fiscal policies,
 exchange rate and
 income
 expenditure patterns of the individuals in the country.
CONT’
 (ii) Socio-Cultural Environment: According
to Ubom (2003), socio-cultural environment
consist of economic and political environment
that direct social values and norms.
 The socio-cultural environment thus is the
factor of public opinion and it operates
through the norms, it involves ethics, and
moral principles of a society.
CONT’
 The socio-cultural environment will help the
entrepreneur to understand;
 Beliefs
 norms
 cultural value system and
 other social factors of a particular location
where the entrepreneur is considering
starting up a business.
CONT’
 Political Environment: Although, an
entrepreneur is not a politician, he/she must
not be ignorant of the happenings of his/her
political environment.
 The political environment ensures that
business and entrepreneurial activities are
put into check.
CONT’
 The political system of a country has a lot to
offer as long as the success or otherwise of
the business in a particular country is
concerned.
 This has to do with;
 Laws
 rules
CONT’

 regulations
 government policies and
 government agencies that contribute and
affect the activities of the business in a
particular business environment.
 government involvement in business. Why
and where?
CONT’
 For instance, In Nigeria, with the help of the
government license for the operation of GSM
business in the country has opened business
opportunities for many entrepreneurs whose line of
business is in the area of telecommunication.
 Secondly, the stability of the political setting that the
country have been witnessing since 1999 when
“democracy” started has contributed positively to the
inflow of many businesses in the country.

CONT’
 Also with the help of the government policies,
fake, adulterated drugs and expired products
have seriously been under check.
 NALFDAC is helping the country in sanitizing
the business environment in terms of quality
control.
 EFCC is working against corruption.
 Entrepreneurs are compelled to obey all the
government laws and regulations.
CONT’
 Technological Environment: The whole
world is becoming a global village. The
advent of computer and other electronic
devices have helped many businesses to
interact with the rest of the world .
 Lack of technological development and
innovation have been identified as hindrance
to entrepreneurial development in developing
countries.
CONT’
 As Wilken (1977) asserted, when existing
technologies are suitable for entrepreneurial
needs, then the opportunity conditions will be
even more favorable.
 Entrepreneurs must therefore have a proper
understanding of their technological
environment in achieving their business
objectives.
CONT’
 Physical Environment: This has to do with
the;
 climate
 humidity
 vegetation
 soil type
 weather
 plantation
 animals and minerals resources
CONT’
 rivers and other physical features that in one
way or the other can affect business in a
particular country.
 An entrepreneur’s success somehow
depends on his/her ability to study and
understand these physical attributes and
know how to ensure his/her business
adaptability in the environment.
CONT’
 International Environment: This has to do
with laws, regulations, policies, agencies and
institutions guiding business transactions
across boarders of different countries.
 It also has to do with different currencies and
the prevailing exchange rates of these
currencies.
CONT’
 The understanding of these factors will help
an entrepreneur to take advantage that exist
in his/her environment in terms of business
opportunities.
 It also includes the economic, social, political
and cultural factors that are involved in
transacting business across the border which
is usually known as an international business
or trade.
CONT’
 The issue of globalization has become so important
in the international market that an entrepreneur
should not be ignorant of its consequences.
 Some of the institutions involved in the international
market include; IMF, World Bank, WTO, etc.
 It is the responsibility of an entrepreneur to know how
these institution can affect his/her business
transactions.
CONCLUSION
The understanding of all these environmental
factors and variables and their consequences
to entrepreneurship will enable an
entrepreneur to take advantage of any
business opportunity in his/her environment.
An entrepreneur should not claim to be
ignorant of these factors because ignorance
in law is never an excuse.
THANK YOU