1、Chapter 2The External Environment of BusinessLearning ObjectivesFindicate the basic features of business activityFportray the business organization as a system interacting with its environmentFdemonstrate the range and complexity of the external influences on business activityFidentify the central t
2、hemes inherent in the study of the business environmentText:The Business Organization and Its EnvironmentFBusiness activity is a fundamental and universal feature of human existence.FNarrow view of business“大商务”FBroad view of business“小商务”A model of business activity FAll business organizations are
3、ultimately involved in the same basic activity-the transformation of inputs(resources)into outputs(goods or services).The business organization as a transformation systemThe firm in its environmentTwo levels of environmentEnvironmental influences on a firms marketing systemThe general or contextual
4、environmentFThe political environmentFThe economic environmentFThe social,cultural and demographic environmentFThe technological environmentFLegal environmentFThe ethical environmentThe immediate or operational environmentFResources and resource marketFCustomersFCompetitors Analyzing the business en
5、vironmentFInteraction with the environmentFInteraction between environmental variableFThe complexity of the environmentFEnvironmental volatility and changeFEnvironmental uniquenessFDifferent spatial levels of analysisFTwo-way flow of influenceKey termsFinputs 投入投入Foutputs 产出产出Fprofit-making organiza
6、tion 营利性组织营利性组织Fnon-profit-making organization 非非营利性组织营利性组织Finternational(or multinational)corporation 跨国公司跨国公司Fdistributor 分销商分销商Fimmediate(or operational)environment 直接环境直接环境Fgeneral(or contextual)environment 宏观环境宏观环境Ftrade union 工会工会Fparent company 母公司母公司Ftrading bloc 贸易区贸易区Fexchange rates 汇率汇率Fe
7、nvironmental change 环境演环境演变变Fexternal environment 外部环外部环境境Fopen system 开放式体系开放式体系FPESTLE analysisPESTEL分析模型，又称大环境分析分析模型，又称大环境分析Ftransformation system 转化式转化式体系体系 Summary of key pointsFBusiness activity is essentially concerned with transforming inputs into outputs for consumption purposes.FAll busine
8、sses operate within an external environment which shapes their operations and decisions.FThis environment comprises influences which are both operational and general.FThe operational environment of business is concerned with such factors as customers,suppliers,creditors and competitors.FThe general
9、environment focuses on what are known as the PESTLE factors.FIn analyzing a firms external environment attention needs to be paid to the interaction between the different environmental variables,environmental complexity,volatility and change and to the spatial influences.FWhile all firms are affecte
10、d by the environment in which they exist and operate,at times they help to shape that environment by their activities and behavior.Comprehension QuestionsF1.Assuming that you are a researcher of the business field,how would you differentiate between the various business organizations?F2.What does th
11、e general environment and the immediate environment of business organizations comprise respectively?F3.What is a PESTLE analysis?F4.According to the text,what are the main factors of a business organizations immediate environment?F5.When analyzing the external environment of a business organization,
12、what are the aspects that we should consider?1.How would you differentiate between the various business organizations?FDifferentiate the various business organizations in terms of their size,type of product and/or market,methods of finance,scale of operations,legal status and so on.2.What does the g
13、eneral environment and the immediate environment of business organizations comprise respectively?FThe general environment economic environment political environment social,cultural and demographic environment technological environment legal environmentethical environmentFThe immediate environment re
14、sources and resource marketcustomerscompetitors 3.What is a PESTLE analysis?FPESTLE factors include political,economic,social-cultural,technological,legal and ethical influences on the business.FA PESTLE analysis is an approach to analyze a firms current and future political,economic,social-cultural
15、,technological,legal and ethical environment as part of the strategic management process.4.What are the main factors of a business organizations immediate environment?FAccording to the text,the main factors of a business organizations immediate environment include its resources and resource market,c
16、ompetitors and customers.5.When analyzing the external environment of a business organization,what are the aspects that we should consider?FInteraction with the environmentFInteraction between environmental variableFThe complexity of the environmentFEnvironmental volatility and changeFEnvironmental
17、uniquenessFDifferent spatial levels of analysisFTwo-way flow of influenceApply your understandingFTaking examples from a range of quality newspapers,illustrate ways in which business organizations are affected by their external environment.FGive examples of the ways in which business organizations c
18、an affect the external environment in which they operate.FIn what senses could a college or university be described as a business organization?How would you characterize its inputs and outputs?Essay questions Please write an essay of about 500 words to describe the impact that the Internet has had o
19、n the external environment businesses face.Case study:Disneys Strategy in ChinaFCase-related questions:F1.What strategy did Disney employ when it re-entered Chinas market?F2.How do you use PESTLE model to analyze the Chinas general environment for Disneyland?F3.Among these environment factors,which
20、are positive to the companys development and which are negative?Point-counterpointFDo Business Environment Reforms Have Great Impact on Poverty Reduction in Africa?PointFPeace,macroeconomic stability,and a stable business environment are all important for Africas development.FReforms in business env
21、ironment are critical in stimulating the growth Africa needs and bringing the employment which is critical in addressing poverty.FThe best way to create jobs for the poor in the private sector,and allow the informal operators to join the formal sector is business environment reform.FWithout a good e
22、nabling environment,there is no incentive for an individual to invest.CounterpointFThe idea of poverty reduction through business environment reform is simplistic and based on unrealistic assumptions.Fhere is no empirical evidence that Business Environment Reform(BER)is good for GDP growth.FWhat dri
23、ves successful reforms is passion which can only be created at the local level where present impacts are least felt.FBER risks treating the symptoms rather than the disease,and as such there is little hope that it will achieve much.FBusiness Environment reform is only the way forward in 1/3 of Afric
24、an countries;those that are resource poor and on the coast.Environment ScanningFEnvironmental scanning is a process of gathering,analyzing,and dispensing information for tactical or strategic purposes.FThe environmental scanning process entails obtaining both factual and subjective information on th
25、e business environments in which a company is operating or considering entering.Methods for Environmental ScanningFAd-hoc scanning-Short term,infrequent examinations usually initiated by a crisis FRegular scanning-Studies done on a regular schedule(say,once a year)FContinuous scanning-(also called c
26、ontinuous learning)-continuous structured data collection and processing on a broad range of environmental factors lMost commentators feel that in todays turbulent business environment the best scanning method available is continuous scanning.This allows the firm to act quickly,take advantage of opp
27、ortunities before competitors do,and respond to environmental threats before significant damage is done.The Macro-environmentFEnvironmental scanning usually refers just to the macro environment,but it can also include industry and competitor analysis,consumer analysis,product innovations,and the com
28、panys internal environment.Macro environmental scanning involves analyzing:FThe economyFGovernmentFLegal FTechnologyFEcologyFSocio-culturalFPotential suppliersFstakeholders The Economic FactorsFGDP per capita Feconomic growth Funemployment rate Finflation rate Fconsumer and investor confidence Finve
29、ntory levels Fcurrency exchange rates Fmerchandise trade balance Ffinancial and political health of trading partners Fbalance of payments Ffuture trends The Governmental FactorsFpolitical climate-amount of government activity Fpolitical stability and risk Fgovernment debt Fbudget deficit or surplus
30、Fcorporate and personal tax rates Fpayroll taxes Fimport tariffs and quotas Fexport restrictions Frestrictions on international financial flows The Legal FactorsFminimum wage laws Fenvironmental protection laws Fworker safety laws Funion laws Fcopyright and patent laws Fanti-monopoly laws FSunday cl
31、osing laws Fmunicipal licenses Flaws that favor business investment The Technological FactorsFefficiency of infrastructure,including:roads,ports,airports,rolling stock,hospitals,education,healthcare,communication,etc.Findustrial productivity Fnew manufacturing processes Fnew products and services of
32、 competitors Fnew products and services of supply chain partners Fany new technology that could impact the company Fcost and accessibility of electrical power The Ecological FactorsFecological concerns that affect the firms production processes Fecological concerns that affect customers buying habit
33、s Fecological concerns that affect customers perception of the company or product The Socio-cultural FactorsFdemographic factors such as:population size and distribution age distribution education levels income levels ethnic origins religious affiliations Fattitudes towards:materialism,capitalism,fr
34、ee enterprise individualism,role of family,role of government,collectivism role of church and religion consumerism environmentalism importance of work,pride of accomplishment Fcultural structures including:diet and nutrition housing conditions Potential SuppliersFLabor supply quantity of labor avail
35、able quality of labor available stability of labor supply wage expectations employee turn-over rate strikes and labor relations educational facilities FMaterial suppliers quality,quantity,price,and stability of material inputs delivery delays proximity of bulky or heavy material inputs level of comp
36、etition among suppliers FService Providers quantity,quality,price,and stability of service facilitators special requirements StakeholdersFLobbyists FShareholders FEmployees FPartners Changing External EnvironmentMarkets are changing all the time.It does depend on the type of product the business pro
37、duces;however,a business needs to react or lose customers.FSome of the main reasons why markets change rapidly Customer develop new wants and needs.New competitors enter a market.New technologies mean that new products can be made.Government introduces new legislation,e.g.increasing minimum wage.Bus
38、iness and Competition(1)Though a business does not want competition from other business,inevitably most will face a degree of competition.FThe amount and type of competition depend on the market the business operates in:Many small business-e.g.a shopping mall or a city center arcade-close rivalryA f
39、ew large rival firms-e.g.washing powder or Coke and PepsiA rapidly changing market-e.g.where the technology is developing very quickly-the mobile phone marketBusiness and Competition(2)A business could react to an increase in competition(e.g.a launch of rival product)in the following ways:Cut price(
40、but can reduce profits)Improve quality(but increases costs)Spend more on promotion(e.g.do more advertising,increase brand loyalty;but costs money)Cut costs,e.g.use cheaper materials,make some workers redundantWebalert Fhttp:/Fa website offering simple solutions and powerful advice concerning busines
41、s Fhttp:/Fa website providing business theories and business case for study at Fhttp:/www.thetimes100.co.uk/Fa website where you can find the newest business news and industry reportsFhttp:/www.doingbusiness.orgFurther reading Morris,H.&Willey,B.(1996).The corporate environment.New Jersey:Prentice H
42、all.Steiner,G.A.&Steiner,J.F.(1994).Business,government,and society:A managerial perspective.(7th ed.).New York:McGraw-Hill.Worthington,I.,Britton,C.&Rees,A.(2005).Economics for business:Blending theory and practice.(2nd ed.).New Jersey:Prentice Hall.AssignmentFAmong all the external factors which a business organization faces,which do you think is of the most significance?FAnalyze the external environment of your university as a business organization.Thank You!
