Business Studies
Home > Business Studies > Business Management and Change > The business environment
The business environment
All businesses have stakeholders and operate within internal and external environments. This tutorial explains more about these concepts.
Sources of change in the internal
environment
Sources of change in the external
environment
Stakeholders in business
Sources of change in the internal environment
The internal business environment consists of those factors which the business can control such as personal, marketing, and accounting systems. Some of the other things a business can control within its internal environment are its:
- strategic plans, tactical plans and operational plans and vision and mission statements
- choice of prime function
- organisational structure, and issues like authority, responsibility, chain of command and span of control
- use of support services.
A successful business continually reviews and changes, where necessary, factors within its internal control such as its:
- decision making process
- relationship with its customers and suppliers
- relationship with creditors in terms of credit terms, charges and interest rates
- personnel policies, in terms of rates of pay, productivity, training and benefits
- resources and technological requirements
- competitors.
Sources of change in the external environment
The external business environment consists of a range of influences over which management has little or no control. It includes things like government policies, labour and finance markets, world trends, technological change, community values and economic cycles.
The external environment is affected by factors such as:
- pressure groups like Green Peace
- levels of actual and potential competition
- international politics and globalisation
- resource markets
- all levels of government
- all forms of the media
- trade unions and employer associations.
Examples of situations that may cause change in the external environment include:
- improvement in production techniques
- fluctuations in the levels of demand
- fluctuations in interest rates
- changes in laws and regulations
- changes in taxation
- new social trends, fashions or lifestyles
- international influences.
Stakeholders in business
A stakeholder is anyone with a vested interest in a business. Stakeholders are not simply the owners. Stakeholders and their major interests include:
- customers and clients, interested in fair pricing, safe products and after sales service
- employees, interested in fair pay, safe and pleasant working conditions, training opportunities and career paths
- owners and shareholders, interested in a reasonable return on funds invested
- government, interested in standards and in receiving taxation
- society, interested in conformity to morals, customs and beliefs
- environment, interested in protection of air, water and soil
- future societies, interested in ecologically sustainable practices.
|