lecture 1-be business environment (1)
TRANSCRIPT
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External influences on the firm
The business environment
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There are six dimensions to
the business environment: 1. Political/legal factors
2. Economic factors:
The microeconomic environment
The macroeconomic environment
3. Social/cultural factors
4. Technological factors
5. Legal
6. Ethical & Ecological factors
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PESTLE ANALYSIS
The division of the factors affecting a
firm into Political, Economic, Social,
Technological, Legal and Ecological isknown as a PESTLE analysis.
This is widely used by business
enterprises to audit their environmentand to help them establish a strategic
approach to their business activities.
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Political/Legal Factors:
Firms will be directly affected by the
actions of government and other political
events. These might be major events affecting the whole of the
business community, such as collapse of communism,
War, or a change of government. Or may be actions
affecting just one part of the economy. Similarly,
businesses will be affected by the legal framework inwhich they operate. Such as industrial relations
legislations, product safety standards, regulations
governing pricing in the privatised industries and laws
preventing collusion between firms to keep prices up.
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Economic Factors
They can range from big to small, from
local to national to international, from
current to future; from the rising cost ofraw materials to the market entry of new
rivals, from the forthcoming Budget to
the instability of international exchangerates to the likely future cash flows from
a new product.
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Microeconomic Environment
This includes all the economic factors
that are specific to a particular firmoperating in its own particular market.
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Macroeconomic Environment
This is the national and international
economic situation in which business as a
whole operates. Businesses in general will do much better if
the economy is growing than if it is in
recession.
Government policies such as taxation,
interest rates and exchange rates will have a
major impact on firms.
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Social/cultural Factors
This includes social attitudes andvalues, such as attitudes towardsworking conditions, the length of theworking day, equal opportunities andthe use and abuse of animals andimages portrayed in advertising.
These trends have had a big impact onthe actions of business and the imagethat many firms seek to present.
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Technological Factors
They have a huge impact on the wayfirms produce products, but also on how
business is organised. The use ofrobots and other forms of computer-controlled production has changed thenature of work for many workers. It has
also created rapid communication and awide range of opportunities, many ofwhich are yet to be realised.
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Ethical and Ecological
Ethical considerations have become an
increasingly important influence on
business behaviour. One area where
this has been manifest is in the demand
for firms to act in a more socially
responsible way and to consider the
impact they might have on people, theircommunities and the natural
environment
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To be successful, a business will need
to adapt to these changes and if
possible take advantage of them.
Ultimately, the better businessmanagers understand the environment
in which they operate, the more likely
they are to be successful,either in
exploiting ever changing opportunities
or in avoiding potential opportunities.