Unlocking the Business Environment

John Brinkman, Ilve Navarro, Donna Harper

• Publisher: Routledge
• Year: 2014
• Print ISBN: 9781138456150
• eBook ISBN: 9781444169812
• Topic: Business
• Subtopic: Business General
• Index: Business

The business environment is a fundamental subject in any Business Studies degree course. This new, student-friendly book divides the subject into the internal and external environment and, where relevant, discusses the interface between the two. It is written with the outward-looking student in mind and, as a result, encourages readers to reflect on what they have read and to consolidate their learning through regular self-testing exercises and discussion points. The text contains highly relevant and 'household name' case studies, ensuring that it is a highly topical and engaging book. Where organisational styles differ, the authors put forward the pros and cons of different points of view, ensuring that students have the information necessary to make up their own minds and develop management strategies of their own.

1 Introduction

‘Some books are to be tasted, others to be swallowed, and some to be chewed and digested.’

(Francis Bacon, 1561–1626)

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Chapter Outline

1.1 What is business?

1.2 The factors that impact on business

1.3 The internal business environment

1.4 The external business environment

1.5 How it all fits together

1.6 Summary

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Chapter Objectives

After carefully reading and engaging with the tasks and activities outlined in this chapter, you should have a better understanding of:

• the impact that business has on society

• the fact that there are internal and external factors that affect how businesses operate

• the difference between descriptive, prescriptive and a critique

• the concepts of macro and micro analysis

• the coverage of each of the different chapters in the book.

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1.1 What is business?

Look around you. Ignore living things. Can you see anything that has not been produced by business? Business is life, everything we have has been produced by a business: the clothes we wear, the road we walk on, the iPod we listen to our music on, the chocolate we eat, the book you are reading now, the chair you sit in, the canvas you paint on, the show you watch, etc. We live in a world dominated by business, from the giant conglomerate that can have a bigger financial base than some small countries, to the sole trader who may be reliant on one day’s trading to simply survive to the next day.

Understanding business and the environment in which organisations operate and consequentially how they affect business operations is both fascinating and complex. Indeed this very complexity is what makes business such an exciting area of study. You will get much more out of your studies if, as in the opening quotation, you chew over and digest some of the ideas presented here, rather than simply reading through the text.

The fascination and complexity arise simply because of the sheer variety of different businesses and the way they are organised. This book explains and analyses business environments – internal and external – in a systematic and comprehensive manner but for now we will content ourselves with looking at a few different businesses.

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Key Terms

A business can have many factors that affect how it operates. We refer to the factors that are contained within the business as the internal environment in which the business operates. There are also many factors that are external to an organisation but nonetheless have an impact on the business. We refer to these as the external environment.

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For many people business means a large profit-making organisation, such as Tesco or British Petroleum (better known as BP), which have a variety of different internal departments, e.g. Finance, Human Resources and Marketing. However, this is only a small subset of the differing types of organisations that exist. In fact, the majority of UK businesses are classified as small (less than 10 employees) profit-making enterprises.

It should be clear by now that business is vital for the economy, and hence welfare, of us all. Getting it right is important as we increasingly face a world of limited resources. We are not prepared any more as a society to run a business at any cost, and many people are very concerned about environmental issues.

Figure 1.1 An industrial scene

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Key Terms

Organisations are sets of people who are coordinated in order for them to achieve common goals.

One of the largest organisations in the world is the National Health Service, more usually referred to simply as the NHS, which is a large non-profit making business.

Given the rich variety of differing businesses it will be useful to have a working definition of what we mean when we use the term business.

By business we mean the organised effort that is required to produce services and goods that are required by society. Note that this includes profit- and non-profit concerns and ranges from a one-person business to a large business organisation.

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This concern for the environment is becoming more important for the success of business. This is one of a number of themes that run throughout the book, along with ethical issues, an international dimension and critique of theory.

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Key Terms

A critique of theory is when we analyse, as opposed to simply accepting, the facts around a particular issue.

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As an example of critiquing a recognised theory, imagine that you have been told that two hours per night is the optimum time for your revision when learning a new topic. However, how do you know that this is the best way for you? It could be that four hours per night is better, or perhaps only 30 minutes. By experimenting with different times, places, etc. you may come up with an alternative theory. You could also investigate what is known scientifically about revision. Then you would have some evidence to challenge the idea that two hours per night is the optimum time. Arguing that two hours was too long without any evidence would not be a critique, instead, it would be a subjective opinion.

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Key Terms

We say something is subjective when it is based more on personal opinions rather than hard facts. If we can manage to strip away our opinions and concentrate on what we know about something, rather than what we think we may know, then we say we are taking an objective view.

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Businesses are under increasing pressure from different groups such as environmental and consumer groups to behave in a way that considers the consequences of their actions. The simplicity of working to the profit ideal alone is no longer accepted fully throughout society. Added to this, the impact of globalisation on all businesses of all sizes throughout the UK has introduced new challenges to the way in which businesses operate.

As well as explaining and analysing the business environments, we will attempt to demonstrate the complexity of the issues involved by offering a critique of theory and considering the pros and cons (i.e. the advantages and disadvantages) of arguments presented. To this end we will offer a range of further reading at the end of each chapter should you wish to delve deeper into a particular topic area that may have caught your interest. You will have noticed the quotation by Francis Bacon at the start of the chapter. This is a book that is best chewed over and digested.

1.2 The factors that impact on business

There are numerous different parts and processes that organisations require as they seek to conduct their business. Most of us will never actually engage with many of them although we may well hear about them (The Bank of England raising the base rate, for example). We may not even be aware of some of the different functions of organisations (you probably went through your last school without a thought about the school’s finance officer) and some we know of but only have limited contact with (e.g. the finance department of a business you work for would supply details of your pay).

Each of the various parts of a business have internal factors that they need to take account of – this is the subject of the next section (1.3) and up to the end of Chapter 7. The factors that are external to a business form the subject of Section 1.4, and from Chapter 8 onwards.

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Case Study

Toyota, the Japanese car company, is viewed by many business experts as the ideal automobile company. This is not simply because of the quality of its cars but more because of the way they have become, from relatively humble beginnings, a car company that competes on even terms with two of the biggest automobile rivals, the Ford Motor Company and General Motors (GM). In fact, Ford and GM are two of many organisations that have tried to replicate Toyota’s ‘lean manufacturing’ method.

Lean manufacturing has helped Toyota to develop products more quickly than its competitors. In 2006 they could...

Table of contents

• Cover
• Title Page
• Copyright Page
• Table of Contents
• Features guide
• Acknowledgements
• Chapter 1 – Introduction
• Chapter 2 – The Rise of Management
• Chapter 3 – Strategy, Mission and Stakeholders
• Chapter 4 – Structure, Size and Growth
• Chapter 5 – Communicating Across the Functions
• Chapter 6 – Leadership and Motivation
• Chapter 7 – Organisational Culture and Change
• Chapter 8 – The External Micro Environment
• Chapter 9 – The Macro Environment – Political Influences
• Chapter 10 – The Macro Environment – Economic Influences
• Chapter 11 – The Macro Environment – Socio–cultural Influences
• Chapter 12 – The Macro Environment – Technological Influences
• Chapter 13 – The Macro Environment – Legal Influences
• Chapter 14 – The Macro Environment – Environmental Influences
• Chapter 15 – The Macro-environment – Demographic Influences
• Index