Business Environment Revised Edition

120 Pages·2009·38.009 MB·English

by  Elearn (Auth.)

Pergamon FlexibleLearningisan imprintof Elsevier
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Firstpublished2005
Revisededition2009
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Seriespreface
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Introduction
Doyou knowwhat your organisation isworkingto achieve? Can
you explain its key goals? Do you understand the reasons for its
major priorities? Do you knowwhat challenges it isfacing?
The big picture
Toanswer these questions you need to take a strategicview of your
business. Youare likely to contribute to the process of developing
and implementing strategy, even if in an indirectway. Youwill
be more able to fulfil your responsibilities ifyou have an
understanding of the broad picture in which your organisation
operates.
This booklooks at howyour organisationworks and at the major
factors that influence it. Bydevelopingyour awareness ofyour
organisationyou will be able to contribute more effectivelyto
achieving the overall goals.
1 Theorganisation in context
Business environmentisabout exploringthe nature of the
organisationyou are workingin. This first theme considers a
numberof fundamental questions about the
organisation: What's the organisation for?What major
factors influence organisations? Why are there
different types of organisation? What isyour
organisation'svision for the future? And how isthe
vision translated into a strategyfor every level?
Think ofthis big picture asa fly-past in an aeroplane at
altitude before the detailed plottingof the landmarks
and features of your business.
Within this theme you will:
Review the core components ofyour
organisation and what makes itdifferent from
others
Identifyways to communicate the goals ofan
organisation
Identifyyour organisation's vision, mission and values and
how these translate into strategic objectives
Develop a strategic understanding ofyourbusiness.
Asimpleway oflooking at what an organisation isand what it isfor
isto picture the core of the organisation asa system that transforms
inputs into outputs that are provided to customers. SeeFigure 1.1.
Figure 1.1 Abasictransformationprocess
Inputs include labour, raw materials, expertise, capital, data and
information
Transformationprocesses includebusiness operations and
production processes
Outputs include goods, services, profits and wages, and
information and waste products.
Business Environment
Transformation processes may involve convertinginputs,
transporting, combining or addingvalue to them in some otherway
in orderto produce outputs that customerswant.
This system for transforminginputs into outputs does not exist in a
vacuum. It is not isolated from the environment in which it
operates. On the contrary, the system exists in aunique context and
it interactswith factors in this context in a dynamicway
constantlyinfluencing and being influenced by them. For a start,
the system provides its outputs to customers outside the system, and
ifthere are no customers then the system isunlikelyto continue to
operate for long.
This suggests that the organisation can be seen as an 'open' system
- the effectiveness and efficiencyof the basic system are affected by
majorfactors in the contextin which the organisation operates.
Figure 1.2 The contextin which theorganisationworks
The internal environment
This includes the system (inputs, transformation processes and
outputs) and all of the resources, knowledge and the actions of
decision makers and employees that make up the organisation. All
these factors maybe controlled and deployed to enable the system
to operate effectivelyandefficiently. The organisation as awhole
has mostcontrol over its internal environment; it can shape its
strategy and organise and direct its resources to achieve what it
wants to achieve.
The industry environment
This isthe external environment closestto the organisation. Itisthe
organisation's marketplace, where it buys its materials, resources and
otherinputs and provides goods and services to customers. Italso
includes competitors, those organisations that compete for the same
1 The organisation in context
customers. The industryenvironment affects the organisation's
scope for action, but the organisation can also take action to
influence the industryenvironment. Forexample, it maydevelop
partnershipswith suppliers or enter into a price war with
competitors. In some industries it isalso vital to influence standards
and regulations and the more aggressive organisations also set out
to change the structure of theirindustry and the way in which the
competitive game isplayed.
The macro environment
This isthe 'playing field' for all businesses in the global and national
economy. Itisthe external environment that provides a general
background in which all organisations operate. Itismade up of
political, economic, social, technological, legal and eco
environmental forces. These act on organisations and theirindustry
environments. Forexample, legislation affects an organisation's
abilityto hire and fire, merge with otherorganisations and dispose
of its waste products. The organisation cannot control these forces,
and it may not be able to influence them. However, much of the
lobbyingof politicalparties and governments by organisations is
aimedat influencingthese macro forces.
The following briefexample shows how the system of inputs,
transformation processes and outputs interacts withits internal and
external environments.
Different strokes for...
It soon becomes apparent why there are so manydifferent types of
organisation. Each has different inputs, transformation processes
and outputs, and operates in different industry environments.
Considerthe examples in Table 1.1.
Business Environment
Table 1.1 Theinfluenceofoperatingcontextonorganisations
Why analyse the organisation's environment?
Environmental influences have implications for the
organisation's direction and strategy.
Youanalyse your organisation's environment in order to make
decisions and take action. If you can analyse the organisation
you are part of and the major factors that are likely to impact on
performance, then you can begin to understand and make plans,
albeit for an uncertain future. Everyone, whatever their level in
the organisation, should be involved because strategy cascades
to all parts of an organisation. Youwill make better decisions at
your level if you understand how your organisation works in
its environment and how your area fits into this, and you
willcontribute to more informed decision making. Thisbookwill
enable you to make decisions based on your business awareness.
Business awareness is not an end in itself.
1 Theorganisation in context
How to analyse the business environment
So,how do you go about analysingyour environment? The answer
isto use avarietyof environmental analysis tools to help you. The
tools you will use asyou workthrough this bookare asfollows:
The balanced scorecard
Portfolio analysis
Stakeholder analysis
Market research
Ansoff's matrix
Porter's FiveForcemodel
Benchmarking
PESTLE analysis
SWOTanalysis.
Change and the organisation
Change isthe catalyst for environmental analysis. Itiswhywe must
analyse and analyse again. Becauseof the rapid, ever-changing
nature of the environment, the impactsyou face are changing. If
you are complacent, you and your organisation can be caught out.
Itiswhen organisations are moving along smoothly- in a state of
equilibrium- that they should start to worry, according to
complexityor chaos theory. How manyof the 43 qualitycompanies
mentioned in Tom Peters' InSearch ofExcellence (1982) are still doing
well? Fiveat the last count.
BusinessEnvironment
1 The organisation in context
Strategy isconcernedwith the long-term direction of the
organisation. Itdetermines the scope and focus of the
organisation's activities. Strategies can make organisations great or
bring them down.
Source:GrantandNeupert(1999)
Asthe example of Eastman Kodak shows, forming strategyisnot
just a one-offexercise. In a changingenvironment, it's a continual
process. The strategyprocess involves asking the key questions
shown in Figure 1.3.