business environment

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MODULE 2.2MODULE 2.2

Business Environment

Introduction:

The current business environment is increasingly complex and dynamic,

which poses both opportunities and threats. Digitalisation, globalisation

and the rise of the knowledge economy are just some of the issues

changing the way companies do business. By analysing the environment,

companies are able to identify factors that affect business activities and

assess them while developing strategies to either mitigate or take

advantage of the factors. While there are two main areas of business

environment, microenvironment and macroenvironment, separating a

third level, mesoenvironment or operating environment, may prove

useful for the purpose of industry analysis. Consequently,

mesoenvironment refers to the industry in which the organisation

operates and the industry's markets.

MicroenvironmentMicroenvironment

Microenvironment refers to the forces, which have a direct impact on a

particular business. The effects of these forces are short-term

influencing the daily operations and performance of the business. As a

manager, understanding the core microeconomic factors affecting the

business helps in planning and operating, as well as long-term strategy

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development. These factors include customers, suppliers, competitors,

employees, shareholders, marketing intermediaries, and publics.

Image sourced from; Surbhi, S. (2015). Difference between Micro and

Macro Environment. Retrieved from

https://keydifferences.com/difference-between-micro-internal-and-

macro-external-environment.html

CustomersCustomers have the most direct microeconomic impact on a business.

Therefore, businesses must attract potential customers and retain

existing ones by taking into consideration their wants and needs.

SuppliersSuppliers provide input for production like raw material and

equipment. They may have bargaining power which they can use to

shape competition in the industry.

CompetitorsCompetitors can have a direct impact on business strategies as they

compete for the same customers and resources.

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EmployeesEmployees produce, sell or service the goods and services that the

business trades in. The availability of qualified, motivated employees

crucial to economic success.

ShareholdersShareholders own the business and expect returns on their

investment. In simple terms, businesses exist for creating profits and

shareholder value.

MarketingMarketing intermediaries include actors that create a link between the

business and its customers, such as wholesalers, distributors, and

retailers.

PublicsPublics are groups that may have an interest or an impact on the

business and its ability to achieve objectives. Examples of publics include

banks, media, and community organisations.

MacroenvironmentMacroenvironment

Macroenvironment is the general business environment within the

economy. It is uncontrollable and dynamic and influences all business

groups at the same time. Therefore, businesses need to be aware of any

changes in the macroenvironment that have a significant impact on their

operations, performance, decision-making, and strategy.

The macroenvironment is made up of six elements:

Political

Economic

Socio-Cultural

Technological

Legal

Environmental and Ethical

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A PESTLE analysis studies these elements to identify unavoidable

changes that might affect the development and working of a particular

business. Consequently, the manager is responsible for evaluating which

variables affect the organisation directly or indirectly and which will only

have a minor impact.

Mesoenvironment (Operating environment)Mesoenvironment (Operating environment)

Separating an additional field of business environment, the

mesoenvironment or operating environment, is convenient when

focusing on industries. It is nestled between the micro and

macroenvironments and consists of market factors wherein the business

is active, such as distribution, competition and competitors, and general

industrial factors.

Image sourced from; Elias, Z. (2017). PESTLE. Retrieved from

https://blog.hamk.fi/gfb/1-whats-around-us/

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The mesoenvironment determines the competitive position of the

business within the industry it operates in. It can be studied by

conducting an industry analysis in which the market forces of the

industry are assessed and analysed. This helps the business understand

its position relative to other participants in the industry and get a more

accurate present and future scenario of the industry.

An industry analysis requires the business to investigate the underlying

forces at work in the industry, the overall attractiveness of the industry,

and the critical success factors. A thorough understanding of the

company's operating environment is the key to formulating an effective

strategy, positioning the business for success, and making the most

efficient use of the limited resources.

ReferencesReferences

BPP Learning Media. (2012). CIM 2 Assessing the Marketing Environment

[Ebook]. Retrieved from https://lesa.on.worldcat.org/oclc/826853866

Inc. (n.d.). Industry Analysis. Retrieved from

https://www.inc.com/encyclopedia/industry-analysis.html

Marmol, T., Feys, B. & Probert, C. (2015). PESTLE Analysis: Understand

and Plan for Your Business Environment. France: 50Minutes.com.

Shaw, A. (2011). The Meso Environment – The Definition. Retrieved from

http://www.strategic-planet.com/2011/01/the-meso-environment-a-

definition/

Essential Resources:

Hans, B. (2018). Business Environment – Conceptual

Framework and Policies. Research Gate, 4(3), 67-74.

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This is a highly recommended reading for students to be

acquainted with the concept of business environment – succinct

summary of business environment including factors,

environmental scanning, analysis techniques, and economic

policies and systems.

Barik, B. & Kumar, S. (2018). Macro Environment of

Indian Life Insurance Business: A PESTLE Analysis.

Bimaquest 18(3), 77-94.

In this paper, the PESTLE analysis is applied in the context of Indian

life insurance business. The different elements of the PESTLE

framework are explained in a way that is easily understood.

Albright, K. S. (2004). Environmental scanning – radar for

success. The information Management Journal. 38-45.

This article defines environmental scanning and explains

its importance in strategic planning, whilst also describing how it

works and how managers can use the information.

Grant, R. M. (2008). Contemporary Strategy Analysis (6th

ed.). NJ, US: Blackwell Publishing. Chapter 3 64-94.

Fundamentals of industry analysis including analysis

tools – students should pay attention especially to the detailed

overview on Porter’s 5 Forces which will be examined closer in

Module 5.

Westpac Banking. (2017). Business planning: Understanding the

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operating environment. Retrieved from

https://www.youtube.com/watch?v=QMUB6ABQxE4

This video introduces three tools to use when evaluating

the company’s operating environment: Porter’s 5 Forces, PEST

analysis, and SWOT.

Learning Activity:

Learning activities are not part of summative/graded assessment;

however, they are designed to prepare you for incremental graded

assessment and expand your learning. These activities encourage a

community learning experience between peers, and provide

opportunities for facilitators to offer formative feedback, throughout a

module, to the student cohort.

Learning Activity 2.3: Discussion Forum forLearning Activity 2.3: Discussion Forum for

Assessment 2 Topic 1Assessment 2 Topic 1

For Assessment 2 you are required to participate in the discussion

located under Assessment 2 brief in the Assessment area of

Blackboard. Your contributions to the Discussion Forum will be

graded as part of your overall report.

In Discussion Topic 1, write 300-400 words about a business, which

you have previously worked for, or would like to in the future.

Please use the same business as your example in thePlease use the same business as your example in the

following Discussion Forum topicsfollowing Discussion Forum topics. Describe the size of the

business (employees, outlets, turnover etc.), the geographical

location, the core product (what it is that they are selling) also

identifying the industry in which it operates.

Post your contribution by 11:59pm AEST/AEDT Sunday of Module

2.2 (week 4).

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To participate in the Discussion Forum, click here to scroll

to the bottom of this page then click on the "AssessmentAssessment

2 - Discussion Forum2 - Discussion Forum" link.

Learning Activity 2.4: Wiki – Challenge yourLearning Activity 2.4: Wiki – Challenge your

thinkingthinking

After time, we all get comfortable in our daily lives and

surroundings. When that happens, we tend to lose the ability to

question the status quo and see things from another perspective.

Your task for this learning activity is to find a scholarly journal

article that challenges your thinking and beliefs on businesses

operations and how the government regulates them. Share it with

the other students on Wiki.

Write a short (200-300 words) description summarising the

arguments and ideas in the article and how they influenced your

thinking. Please include a link to the article itself as well as a

reference in APA 6th style.

Note:Note: The Learning activities above are not part of summative/graded

assessment; however they are designed to prepare you for incremental

graded assessment and expand your learning.

These activities encourage a community learning experience between

peers, and provide opportunities for facilitators to offer formative

feedback, throughout a module, to the student cohort.

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