INTRODUCTION TO BUSINESSENVIRONMENT

External EnvironmentReporters : Eugene Aldrich PaguiriganJohn SorianoAlfreda Abis

WHAT IS BUSINESS ENVIRONMENT? Environment of any organization is “the aggregate of all

conditions, events and influences that surround and affect it”.

The combination of internal and external factors that influence a company’s or business operating situation.

TYPES OF ENVIRONMENT?

Internal Environment

External Environment

Micro Environment

Macro Environment

EXTERNAL ENVIRONMENT Factors outside the organization which provide

opportunities or pose threats to the organization

Factors that can impact the ability of a business or investment to achieve its strategic goals and objectives.

Uncontrollable factors

Classified into two categories Micro Macro

Micro Environment Refers to the environment which is in direct contact with

the business organization and can affect the routine activities of business straight away.

Types of Factors Suppliers Customers Marketing Intermediaries Competitors Publics Financial Intermediaries

Micro Environment SUPPLIERS

Suppliers are the persons who supply raw material to company.

CUSTOMERS Customers are the persons who buy goods

from company.

Micro Environment MARKETING INTERMEDIARIES

Market intermediaries are those person who helps company to sell its products.

COMPETITORS Competitors are those who also sell

same product as the company or business.

Micro Environment PUBLIC

Group of people who can buy or who can show their interest to buy the products of company. FINANCIAL INTERMEDIARIES

Are those institutions who provide loan, credit and advance to company.

Macro Environment Refers to the external factors which affects company and

its business and there is no control of company on these factors.

Types of Factors Economic Non-Economic

Political Demographic Socio-Cultural Technological Natural

Macro Environment ECONOMIC

The economic environment constitutes of economic conditions, economic policies, and the economic system that is important to external factors of business.

Economic environment refers to the nature and direction of the economy within which business organisation are to operate.

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Macro Environment NON-ECONOMIC

Political and Legal Forces Refers to the political, government and

legal environment. It has close relationship with the economic system and economic policy.

This refers to set of laws, regulations, which influence the business organizations and their operations

Macro Environment NON-ECONOMIC

Demographic Forces Demography refers to study of the

population. Demographic factors are as below: Size of population Growth rate Family size Educational level Age composition Sex composition

Macro Environment NON-ECONOMIC

Socio-Cultural Forces Socio-cultural environment is an important

factor that should be analysed while formulating company business strategies. These includes people’s attitude to work and wealth, ethical issues, role of family, marriage, religion and education and the social responsibilities of business

Macro Environment NON-ECONOMIC

Technological Forces Technological forces or factors could be said

to be the most pervasive in the environment.  Technology refers to the application of knowledge base which science provides.  It is a well established fact that information and communication technology has revolutionized business operations

Macro Environment NON-ECONOMIC

Natural Forces The natural environment includes

geographical and ecological factors that influence the business operations. These factors include the availability of natural resources, weather and climatic condition, location aspect, topographical factors, etc

BRIEF COMPARISON (MICRO – MACRO)BASIS FOR

COMPARISON MICRO (INTERNAL) ENVIRONMENT MACRO (EXTERNAL) ENVIRONMENT

Meaning Micro environment is defined as the nearby environment, under which the firm operates.

Macro environment refers to the general environment, that can affect the working of all

business enterprises.

Alternatively known as Internal Environment External Environment

Elements COSMIC, i.e. Competitors, Organization itself, Suppliers, Market, Intermediaries and Customers.

PESTLE, i.e. Population & Demographic, Economic, Socio-Cultural, Technological, Legal & Political and

Environmental.

Nature of elements Specific General

Are these factors controllable? Yes No

Influence Directly and Regularly Indirectly and Distantly

Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization’s performance. The analysis entails assessing the level of threat or opportunity the factors might present

What is Environmental Analysis?

DEFINITION AND CONCEPT It a process of conducting

research on the business environment within which an organization operates and on the organization itself, in order to formulate strategy.

STRATEGIC ANALYTICAL TOOLS

PEST AnalysisPESTLE AnalysisSTEEP AnalysisSTEEPLE Analysis

Examples of Analytical Method used in Strategic Analysis

This is a framework used to analyze the external environmental analysis. The process entails learning about various external factors which affect the organization.

PESTLE Analysis

POLITICALThese include

government regulation such as employment laws, environmental organizations and tax policy. Other political factors are trade restrictions and political stability

PESTLE Analysis

ECONOMIC These affect the cost

of capital and purchasing power of an organization. Economic factors include economic growth, interest rates, inflation and currency exchange rates

PESTLE Analysis

SOCIAL  These impact on

customer’s need and the potential market size for an organization’s goods and services. Social factors include population growth, age demographics and attitude towards health.

PESTLE Analysis

TECHNOLOGICAL  These influence barriers to

entry, make or buy decisions and investment in innovation, such as automation, investment incentives and the rate of technological change.

PESTLE Analysis

LEGAL  This factor has both

external and internal sides. There are certain laws that affect the business/organization environment in a certain country while there are certain policies that companies maintain for themselves.

PESTLE Analysis

ENVIRONMENTAL  this factor includes all

those that influence or are determined by more the surrounding environment.

PESTLE Analysis

END OF PRESENTATION

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