external environment | business environment

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External Environment Shubham Ghimire

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Page 1: External Environment | Business Environment

External Environment

Shubham Ghimire

Page 2: External Environment | Business Environment

Business Environment

According to Stephen P. Robbins & Mary Coulter, “Environment refers to institutions and forces that affect organizational performance.

Page 3: External Environment | Business Environment

Types of Environment

Internal Environment

External Environment

Page 4: External Environment | Business Environment

External Environment Business environment may be defined as all

those conditions and forces which are external to the business and are beyond the individual business unit, but it operates within it.

External environment refers to the environment that has an indirect influence on the business.

The factors are uncontrollable by the business.

Page 5: External Environment | Business Environment

Types Of External Environment

Micro Environment• The micro environment is

also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm.

• The micro environmental factors are more intimately linked with the company than the macro factors.

Macro Environment• Macro environment is

also known as General environment and remote environment.

• Macro factors are generally more uncontrollable than micro environment factor.

• When the macro factors become uncontrollable , the success of company depends upon its adaptability to the environment.

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Micro Environment FactorsCustomers

Employees

Suppliers

Shareholders

Media

Competitors

Page 7: External Environment | Business Environment

Customers

 The major task of a business is to create and sustain customers. A business exists only because of its customers.

Page 8: External Environment | Business Environment

Employees

Employing staff with relevant skills and experience is essential. This process begins at recruitment stage and continues throughout an employee's employment via ongoing training and promotion opportunities.

Page 9: External Environment | Business Environment

Suppliers

An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company.

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Shareholders

As organisations require investment to grow, they may decide to raise money by floating on the stock market i.e. move from private to public ownership.

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Media

Positive media attention can “make” an organisation (or its products) and negative media attention can “break” an organisation. Organisations need to mange the media so that the media help promote the positive things about the organisation and reduce the impact of a negative event on their reputation.

Page 12: External Environment | Business Environment

Competitors

Competition is a basic feature of an open market economy. No business organization can ignore its competitors and their business stratergy.

Page 13: External Environment | Business Environment

Macro Environment FactorsPolitical

Economic

Social

Technological

Legal

Environmental

Ethical

Page 14: External Environment | Business Environment

Political

How changes in government policy might affect the business e.g. a decision to subsidies building new houses in an area could be good for a local brick works.

Page 15: External Environment | Business Environment

Economic

How the economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates and European and global economic factors.

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Social

How consumers, households and communities behave and their beliefs. For instance, changes in attitude towards health, or a greater number of pensioners in a population.

Page 17: External Environment | Business Environment

Technological

How the rapid pace of change in production processes and product innovation affect a business.

Page 18: External Environment | Business Environment

Legal

The way in which legislation in society affects the business. E.g. changes in employment laws on working hours.

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Environmental

Growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones.

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Ethical

What is regarded as morally right or wrong for a business to do. For instance should it trade with countries which have a poor record on human rights.

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