Key Factors Shaping the Business Environment
The business environment plays a crucial role in shaping an organization. Internal elements such as personnel, resources, assets, and systems interact among themselves and with external elements of the environment.
Environment
The environment consists of external or exogenous factors that cannot be controlled by the organization. These elements are also called the context, such as economic, political, social, ecological, moral, and technological factors.
Economic Environment
The economic environment determines the survival of the organization. Its effect is very important in almost all companies, regardless of whether they are for-profit or non-profit organizations.
Examples include financial institutions, suppliers, the labor market, competitors, and consumers.
Financial Institutions
Many financial institutions have relationships with all other organizations. They not only act as intermediaries for money but also provide other services. For example, banks provide capital or changes in machinery, and merchandise warehouses under warranty (warrant).
Stock Market
Also called the capital market, the stock market is where stocks are traded in exchange for money.
Suppliers
Suppliers are a group of people or entities that provide resources when they cannot be obtained from another source. They provide the organization with raw materials, services, supplies, construction labor, etc.
Competitors
Competitors are organizations that provide similar goods or services and satisfy similar needs. Therefore, they must compete in the consumer market.
Consumers
Consumers are current or potential buyers of goods and services. They exchange resources for goods and services. The client may be an institution, an enterprise, or an individual consumer.
Labor Market
The labor market comprises all those who are seeking work or are currently employed and are interested in finding better remuneration or better working conditions.
Social Environment
The social environment includes education, customs, culture, and fashion.
Culture
Culture is the set of beliefs and attitudes of a society. It responds to questions and problems posed by reality.
Education and Expectations
The population’s education level influences the organization because it acts and reacts according to its cultural education level, skills, and expectations of growth and development.
Fashions and Customs
Fashions and customs are reactions of society to the situations it is presented with. In some cases, they are temporary behaviors (fashion), while in others, they can take root in society and be maintained for generations (customs).
Sociocultural Trends
- Changes in this environment are more evolutionary than revolutionary, but they occur within a specific generation.
- There is an interest in changes in social values, family structure, employment, the use of free time, and people’s expectations about their future.
Political-Legal Environment
The political-legal environment includes the legislative branch, provincial government, judicial branch, municipality, and the executive branch.
Constitutional or Legal Framework
The constitutional or legal framework sets the pattern of behavior and relations between government, business, and the population. It unveils tax policies and employment, among others.
Ecological Environment
Earthquakes, fires, and rising sea levels are some of the events that are not controllable or expected but have a certain probability of occurrence. Organizations must take them into account when formulating long-term plans.
Ethical-Moral Environment
The ethical-moral environment includes beliefs, religions, moral values, and ethical behavior.
Beliefs
Beliefs are a collective force influencing the actions of organizations, such as popular beliefs that respond to spirituality and faith, motivating people to acquire and assume a certain attitude and behavior.
Values and Ethical Behavior
The family, religious institutions, and educational institutions are called upon to build on the individual a set of values or attitudes that allow people to interact and live with their peers in a supportive way conducive to the common good.
Technological Environment
The technological environment includes institutions of scientific research, equipment and machinery manufacturers, and system vendors.
Institutions of Scientific Research
These institutions conduct research that successfully results in discoveries and inventions of new elements or new uses of elements in technical instruments.
OEMs and Machinery
These are the teams made to satisfy the high demand for advanced technology.
System Providers
System providers offer administrative systems, computerized production, etc.
Technology Trends
Technology is continually setting the time between ideas, inventions, and marketing. It is the driving force behind the development of new products and markets but is also the major cause for other products and markets to decline or disappear.
Members of the Organization
In this group, we return to the internal elements of an organization. We will focus our attention on those considered the most important: the staff or members of a company.
Characteristics of Organizations
Existential and functional characteristics:
- The existence of a hierarchy structure, i.e., staggered positions and posts at various levels of authority.
- As one descends the hierarchy, the number of members in each level increases with respect to the previous level.
Employer
The employer is the initiator or founder of a business. They invest money or capitalize on the company and are the owner or landlord of the same.
The employer assumes the risk of economic activity, adding to their capital gains or losses, if any.
Characteristics of an Entrepreneur
Project: New routes, new activities, seeking business opportunities, and launching new challenges.
Good decision-maker: Making decisions not only requires opportunity but also the capacity to assume risk and liability. The employer puts their capital at stake and accepts the result.
Clear objectives: Every good idea should be translated into clear and precise objectives. These can be long-term, mid-term, or short-term.
Administrator
The administrator is the person who manages resources efficiently throughout the enterprise. They conduct or direct the enterprise towards the goals set by its owners.
Effective
An effective administrator successfully completes their objectives or complies with their commitments under the stipulated conditions of time and resources in advance.
Efficient
An efficient administrator meets their goals or objectives in addition to getting it fixed, with resource savings or excess benefits.