LESSON 2: Environmemt

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Environmental Forces & Scanning, Local and International Business Environment of the Firm, Forms of Business Organizations

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Environmental Scanning
Looking for and sorting out data about the environment
Business Environment
Factors/elements that may have a positive or negative effect on the performance of the organization
External Business Environment
Factors or elements outside the organization
Internal Business Environment
Factors or elements within the organization
Period of above normal general price increases, as reflected in the consumer and wholesale price indexes
Interest Rates
Total amount that a borrower must pay annually to the lender and above the total amount borrowed
Changing Options
Consumers' change in preference of goods and services offered
People's Spending Habits
Consumers' changing ways of spending their money on goods and services
Economic Situations
Inflation rates of interest, people's spending habits, changing options, etc.
Environmental Scanning
Looking for and sorting out data in the environment
Political, Economic, Social, Technological, Environmental, Legal
General components of an external business environment
How and to what degree a government intervenes in the economy (General Component)
Impact on how an organization does business and how profitable they are (General Component)
Social (Socio-cultural)
Shared belief and attitudes of the population (General Component)
Affect marketing and the management in 3 distinct new ways: producing goods and services, distributing goods and services, and communicating with target markets (General Component)
Companies need to know what is and what is not legal to trade successfully (General Component)
Stakeholders, customers, pressure groups, investors/owners, employees
Specific components of an external business environment
Likely to be impacted by the activities of the organization (Specific Component)
Purchase the products and services of the organization (Specific Component)
Ensure the continuous flow of the essential and reasonably price inputs (financial and labor supply) or materials needed (Specific Component)
Pressure Groups
Special-interests groups that try to exert influence on the organization's decisions or actions (Specific Component)
Provide the company financial support (Specific Component)
Those who work for another or employer in exchange of salaries or wages or other considerations (Specific Component)
Resources, research and development, production, procurement of supplies, products and services
Components of the internal business environment
Developing a competitive mindset, considering future business scenarios, business prediction/forecasting, SWOT analysis, benchmarking
Components of environmental scanning
Strengths, weaknesses, opportunities, threats
SWOT meaning
Process of measuring or comparing one's own products, services, and practices with those of the recognized industry leaders to identify areas for improvement
Cultural Intelligence
Individual's ability to favorably receive and adjust to an unfamiliar way of doing things
Edward T. Hall
Anthropologist who noted that the way people approach and deal with time varies across cultures
Monochronic Cultures
Cultures wherein people tend to do one thing at a time, emphasize punctuality and sticking to set rules
Polychronic Cultures
Cultures that are more flexible with regards to time, accomplishing many different things at once is also common for these cultures
Geert Hofstede
Developed the 5 cultural dimensions
Power Distance, Uncertainty Avoidance, Individualism-collectivism, Masculinity-femininity, Time Orientation
5 cultural dimensions
Power Distance
Degree to which a society accepts or rejects the unequal distribution of power among people in organizations and the institutions of society
Uncertainty Avoidance
Degree to which a society is uncomfortable with risk, change, and situational uncertainty
Degree to which a society emphasized individual accomplishments versus collective accomplishments
Degree to which a society values assertiveness and feeligns of material success versus concern for relationsips
Time Orientation
Degree to which a society emphasizes short-term thinking versus greater concern for the future or long-term thinking
Rooted in a country's history, religion, traditions, beliefs, and deep-seated values
Politico-legal Environment
Laws and political climate of different countries
Gross National Product
Total domestic and foreign output claimed by the residents of a country
Gross Domestic Product
Total final output of goods and services produced by the country's economy, within the country's territory
Currency Exchange Product/Rates
Rate at which central banks will exchange the country's currency for another
Collection of people working together to achieve a common purpose
Business Organization
Collection of poeple working together to achieve a common purpose in relation to their organization's mission, vision, goals, and objectives, sharing a common organizational culture
Organizational Culture
Set of beliefs and values shared by organization members which guide them as they work together to achieve their common purpose
Simple, Functional, Divisional, Profit, Nonprofit
Traditional Business Organizations
Simple Business Organizations
Few departments, centralized authority, with a wide span of control, with few formal rules and oregulations; easy to manage because of its simple form
Functional Business Organizations
Group together those with similar or related specialized duties; still allow the CEO to retain authority for strategic decisions
Divisional Business Organizations
Made up of separate business units that are semi-autonomous or semi-independent with a division head responsible for its unit's performance; each division has its own functional organization and general manager
Profit Business Organizations
Maintain their organizational stability through income generation and profit-making activities; immediate revenues or cost factors account for their success or failure
Nonprofit Organizations
Provide service to clients without expecting monetary gains or financial benefits; success or failure is measured by the high or low evaluation scores they obtain
Open/flexible Business Organizations
Formed to meet today's changing work environment
Team Structures, Matrix Business Organizations, Project Business Structure, Boundaryless Business Organizations, Virtual Business Organization
Open/flexible Business Organizations
Team Structures
Organization is made up of work teams (small, but focused); popular in collectivist culture
Matrix Business Organizations
Assign experts or specialist belonging to different functional departments to work together on one or more projects; dual reporting relationships (functional and divisional manager)
Project Business Structure
Flexible design, employees continuously work on projects assigned to them; projects may be short/long term and members disband when the project is completed
Boundaryless Business Organizations
Its design eliminates vertical, horizontal, or external boundaries
Virtual Business Organization
Small group of full-time workers and outside experts who are hired on a temporary basis to work on assigned projects