The Business Environment

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The Business Environment


 An organisation does not exist in a vacuum. It exists in its environment, which provides resources and limitations.

 If an organisation adapts to its environment, it will prosper, otherwise it will fail.

 An organisation and its environment are interdependent and interact very intensively.

o The organisation depends upon its environment for the resources and opportunities necessary for its existence.

o The environment contributes resources to the organisation only if the organisation returns desired goods and services to it.

Effects of the Environment on the Organizations

Environmental factors affect an organisation in 2 ways. They set limits and pose threats and they also provide opportunities and challenges. A change in the government export policy may suddenly threaten an export oriented organisation. A reduction in the rate of interest may provide cheap finance to an organisation.

Effect of Organization on the Environment

Effects of the organisations on its environment are quite obvious in the case of cigarette manufacturing; liquor manufacturing, film making, pharmaceutical companies, etc. These organisations have an obvious impact on its environment.

Elements of the Environment

The business environment that firms operate in can be divided into the internal environment and the external environment.

A. Internal Environment

This refers to all the factors or forces that affect the day to day activities of the business.

1. Customers

• As Peter Duckers has put it, "The ultimate aim of all business organisation is - to create a customer". These days, for most products and services, the market belongs to the buyer. The customers e...

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...uct safety

• Misleading advertising

• Complaints from customers

3. The environment

• Pollution

• Noise

• Restoration of land to natural uses

4. Financial honesty and openness

• Bribery and corruption

• Company control and ownership

• Executive pay and compensation

• Contributions to political parties

Conflict between Social Responsibility and Profitability

1. Money invested in social responsibility comes out of the company's profits.

2. If shareholders do not receive what they believe to be a fair return on their investment they are unlikely to contribute to the future requirements of the company.

3. Managers of the business are evaluated strictly upon economic performance; rewards go to managers who keep costs down.

Therefore, social responsibility cannot be left to the whims of individual firms and managers must be enforced by law.

In this essay, the author

  • Explains that an organisation exists in its environment, which provides resources and limitations.
  • Opines that the organisation depends on its environment for the resources and opportunities necessary for its existence.
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