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Service firms may be classified as: a. Recreation — movie houses, television and radio stations, theatres for drama and stage presentations, resorts and the like b.

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Personal — restaurants, barber shops, transportation, hotels, tailoring shops, slimming salons, and the like and; c. Finance — banks, insurance companies, investment houses, financing institutions, credit unions, savings and loans associations and the like.

Chapter 2 Business and its Environment

Objectives of Business Profit - Making profit is the primary goal of any business enterprise. Objectives of Business Growth - Business should grow in all directions over a period of time. Objectives of Business Power - Business houses have vast resources at its command.

These resources confer enormous economic and political power. Objectives of Business Employee satisfaction and development - Business is people. Caring for employee satisfaction and providing for their development has been one of the objectives of enlightened business enterprises.

Objectives of Business Quality Products and Services - Persistent quality of products earns brand loyalty, a vital ingredient of success. Objectives of Business Market Leadership - To earn a niche for oneself in the market, innovation is the key factor. Objectives of Business Challenge - Business offers vast scope and poses formidable challenges. Objectives of Business Service to society - Business is a part of society and has several obligations towards it.

The Environment of Business Firms Business Environment Business Environment means all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand and business regulations. The External Environment The term external environment are factors and institutions that are beyond the control of the business and they affect the function of the enterprise.

Business and Its Environment (7th edition)

The external environment consists of elements outside an organization that are relevant to business operations. Types of Elements in the External Environment 1. Direct Action Elements - 2. Indirect Action Elements - The Main Function of Business Firm Direct Action Components First and foremost is the transformation of production inputs like raw materials, energy, services, equipment and labor into usable products or services.

Note: Business firms must maintain good relationship with suppliers if they want on-time deliveries of inputs. In either case , the company will need funds. The Indirect Action Elements Type of Business Environment Among the notable features of static environments are no new technological breakthroughs by current competitors , and little activity by public pressure group to influence the organization. Among the features of a dynamic environment are rapidly changing government regulations affecting business, new competitors, difficulties in acquiring raw materials, and continuously changing socio- cultural aspects of the population.

Environmental Uncertainty This may be defined as a lack of complete information regarding what exists and what developments may occur in the environment. The uncertainty makes it difficult for managers to perform the following: 1. Analyse constituencies and their needs 2. Predict future state of affairs and 3. Understand their potential implications for the organizations Dimensions of Environmental Uncertainty 1. Complexity — This refers to the number of different factors in the environment such as information, capital, material, people, and other organizations.

Rate of Change in these Factors — These are the factors in the external environment change from time to time. For instance, income levels and the number of qualified teachers may increase or decrease after a few years. Environmental uncertainty rises as the rate of changes increases. Designs of Business Organizations This design is characterized by a vertical structure that typically operates with: a.

Organization members exchange information about adjustments in tasks and changes that have occurred in the environment making communication as primarily horizontal. Survival Strategies in Uncertain Environments Coping Strategies Coping Strategies are those used to protect internal operations from the harmful effects of changes in the environment Input buffer is the stock file of fuel by a shipping company to provide some assurance of unhampered operation for a certain period.

If such disruption will jeopardize operations, management may choose to sell their product at low prices, sometimes even lower than production costs. This action is referred to as buffering on the output side. This is so because of the difficulty in making adjustments concerning manpower and equipment.

Offering of discounts during slack seasons like selling raincoats at big discounts during summer. If forecasting is effective, the business firm will be able to make the necessary adjustments in its operations to meet changes in the environment University, which temporarily deploys its research personnel to assist in enrolment activities. After the enrolment period, the reassigned employees go back to their permanent units.

The information gathered can also be used to reduce uncertainty in some areas of operation. Another example is the creation of senior citizens lanes in various government offices and large retail establishments. The replacement of a top manager by another manager is referred to as executive succession.

External business environment

Most organizations are limited to influencing their industry. A few organizations wield such power and influence that they can shape some elements of the general environment. While most organizations simply react to major technological trends, for example, the actions of firms such as Intel, Microsoft, and Apple help create these trends. Some aspects of the general environment, such as demographics, simply must be taken as a given by all organizations. Overall, the environment has a far greater influence on most organizations than most organizations have on the environment.

Business and Its Environment: Meaning and Factors

Understanding the environment that surrounds an organization is important to the executives in charge of the organizations. There are several reasons for this. First, the environment provides resources that an organization needs in order to create goods and services. As the human body must consume oxygen, food, and water, an organization needs to take in resources such as labor, money, and raw materials from outside its boundaries.

Subway, for example, simply would cease to exist without the contributions of the franchisees that operate its stores, the suppliers that provide food and other necessary inputs, and the customers who provide Subway with money through purchasing its products. An organization cannot survive without the support of its environment. Second, the environment is a source of opportunities and threats for an organization.

Subway faces a threat from some upstart restaurant chains. Saladworks, for example, offers a variety of salads that contain fewer than calories. Noodles and Company offers a variety of sandwiches, pasta dishes, and salads that contain fewer than calories. Executives must also realize that virtually any environmental trend or event is likely to create opportunities for some organizations and threats for others.

This is true even in extreme cases. In addition to horrible human death and suffering, the March earthquake and tsunami in Japan devastated many organizations, ranging from small businesses that were simply wiped out to corporate giants such as Toyota whose manufacturing capabilities were undermined. As odd as it may seem, however, these tragic events also opened up significant opportunities for other organizations. The rebuilding of infrastructure and dwellings requires concrete, steel, and other materials.


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