Dawari Akobo DP17MBA0967
According to Bayard O. Wheeler every object external to the firm and which affects the former in its operation and organization are described as the external business environment. For Arthur M. Weimer, the atmosphere of the business environment is made of socio-political economic or institutional conditions where in business operations are conducted. All the factors that have a bearing on the business, including strength, weaknesses, internal power relationships and company ideology; policies and government regulations, economic status, demographics, natural forces, global trends and transnational developments.
The external business environment is consistent with an open system. Supplies and resources are obtained from the environment, so are the supply of goods and services made to the environment. For example the business entity obtains its technology and human resource form the external environment and must adhere to government policy and also pay the prerequisite tax. Internal forces and external regularities abound, however the external forces are along national, regional and international boundaries. There are threats and opportunities available to the business communities. The external environment cannot be changed, but rather firm reacts to such changes. The firm changes its internal business elements to cope with changes from the external forces.
In addition the business environment is both micro and macro in nature. Micro factors are the immediate factors which affect the firms operations and performance. These are suppliers, customers, competitors, marketing intermediaries, financiers; the public. Macro environment is made up of the political environment, the legal environment, the economic environment, the socio cultural environment, the technological forces, the demographic forces; global or international environment.
Notwithstanding, there are different approaches applicable by the business organization in mitigating the external forces of business environment. They are, but not limited to scenario development, forecasting, benchmarking, trend exploration, and expert opinion, cross impact matrices, SWOT or TOWS. More precisely, tools to militate against external influences are environmental scanning, PESTEL Analysis; STEEPLE Analysis.
Environmental scanning involves a methodological process that surveys and interprets relevant data to identify external opportunities and threats. An organization gathers information about the external world, its competitors and itself.
PESTEL analysis is a technique which identifies and lists the socio – political economic, technological, environmental and legal factors within the general business environment that is significant for the firm.
STEEPLE analysis just like PESTEL analysis identifies and lists the social, technological, economic, environmental, political, legal and ethical factors in the general environment that are most relevant to an organization’s activities.
Contrary, it is obvious that environmental analysis though a useful tool of firms in decision making, comes with varying limitations in its applicability, the analysis of external business environment is not an exact science and hence would not discard probabilities in the organization. In fact events which are unexpected and abstract from the status quo tends to distort these information’s
Dawari Akobo DP17MBA0967