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1. WHAT IS A BUSINESS ENVIRONMENT?
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THE IDEAL
BUSINESS ENVIRONMENT
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You must develop a suitable organizational
culture within your company to succeed in the existing business
environment.
Wouldn't it be nice to wake up every morning
and find a pile of cash neatly stacked on a silver platter next
to your bed? And then the phone rings and you wake up! Sorry, this
was only a wonderful dream...
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THE REAL WORLD |
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In the
real world every business operates within the
confines of a specific environment. In fact,
there are two types of Business Environment
that you should be concerned with, as illustrated
below.
Each type of business environment is examined
next.
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TWO TYPES OF BUSINESS
ENVIRONMENT
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External
Environment
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Internal
Environment
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2. WHAT IS THE EXTERNAL
ENVIRONMENT?
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THE EXTERNAL
ENVIRONMENT
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The External Environment, described below, consists of several
elements outside of an organization which will influence its development
and behavior in the marketplace.
In addition, economic, political and technological
factors have a major influence on the development of our business.
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ELEMENTS OF THE EXTERNAL
ENVIRONMENT
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Customers
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Suppliers
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Banks
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Competitors
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Labor
Unions
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Government Agencies
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THE CYBER-ENVIRONMENT |
Of course, there is a new type of environment which has developed
in the last decade. This environment is called the
Cyber-Environment and it exists on the World Wide Web.
Since the beginning of the 1990's
the Internet has evolved into a major marketing vehicle
for many thousands of businesses world-wide. In fact, the Internet
became the most dynamic marketing and business environment at
the end of the 20th century.
There are approximately 500 million users surfing
the Net at present, and It is expected that about one
billion
people will be surfing the Net within the next
three-four
years. More details about the Wild
Wild Web are provided later in Tutorial 5.
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3. WHY ARE CUSTOMERS
SO IMPORTANT?
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CUSTOMERS
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According to Peter F. Drucker:" The only valid purpose of a business
is to create and satisfy a customer." In fact, the identification of Customers and their
needs is the first step toward survival of the organization.
Customers are the ones who generate the need for
products and services, thus initiating business interaction in
the marketplace. Since their needs change over time, customers
represent uncertainty to any organization. It is important, therefore, to ensure timely identification of
customers' needs in order to exploit the opportunity of satisfying
those needs at a profit. It is also essential to remember two important rules
related to customers, as presented below.
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TWO IMPORTANT RULES
RELATED TO CUSTOMERS
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. Rule No. 1: The customer is always right!
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. Rule No. 2: When the customer is wrong - use
Rule No. 1!
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4.
ARE SUPPLIERS IMPORTANT TO YOU?
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SUPPLIERS
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Suppliers represent another important factor in the external
environment which influences the development of the organization.
Managers must constantly make decisions related
to the purchase of raw materials, components, parts, and a broad
range of finished products in the process of running routine business
activities. Thus, the
development and success of an organization depends upon establishing
sound relations with suppliers to obtain required materials at
the right price and at the right time.
Effective liaison with suppliers is of a particular
importance to the organization if it aims to minimize its
level of inventory and ensure timely supply of goods and services
to customers. You should
cultivate your suppliers as your friends, because their dependability
and quality of their products or services will influence your
company's ability to satisfy your clients' needs.
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TWO IMPORTANT RULES
RELATED TO SUPPLIERS
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. Rule No. 1: If your supplier is good - you look
good!
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. Rule No. 2: If your supplier is bad - you don't
look good!
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5.
WHAT ABOUT BANKS?
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BANKS
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Banks and other financial institutions play
a significant role in the development of an organization by providing
lines of credit, loans and other financial services.
Once sufficient capital is obtained, the organization
can activate the business process and proceed with it's regular
operational activities. It is very important,
therefore, for business owners and managers to understand how
to negotiate with various financial institutions in order to secure
availability of capital for organizational growth.
Development of sound relations with banks is of
paramount importance to small and medium-sized companies, which
often experience shortages of funds and difficulty of obtaining
additional finances.
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TWO IMPORTANT RULES
RELATED TO BANKS
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Rule No. 1:
Your bank may "give you an umbrella, when
the sun is shining".
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Rule No. 2:
Your bank may "ask you to return the
umbrella, when the rain begins!"
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6.
IS COMPETITION REALLY GOOD FOR BUSINESS?
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COMPETITION
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Competitors constantly influence a broad range of managerial
decisions related to routine business activities and to the development
of an organization. If the marketplace is highly competitive, managers
must ensure that the organization remains competitive and provides
high quality products or services to customers at the right price.
Competitors represent a significant factor in formulating
the organization's marketing plan and adopting suitable product
development, price setting, promotion and distribution strategies. It is important,
therefore, that business owners and managers monitor relevant
trends in the marketplace in relation to competition in order
to secure the company's survival and growth in a highly competitive
environment.
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TWO
IMPORTANT RULES RELATED TO COMPETITION
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. Rule No. 1: Business is all about competition.
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. Rule No. 2: If you want to succeed - you
must always be "one step ahead"!
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7.
WHAT ABOUT LABOR UNIONS?
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LABOR UNIONS
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Small and many medium-sized companies are generally
not affected by Labor Unions. It's only when the company
really starts to grow and employ a substantial number of people,
labor unions usually begin to play a significant role.
Labor unions
were established to protect the interests of specific categories
of employees and to regulate the negotiating process between employers
and workers.
Organizations constantly need employees with different
skills and experience who often belong to a specific labor organization.
Several laws which relate to employment procedures and labor unions
have been passed in the United States since the 1930s. In accordance
with The National Labor Relations Act Of 1935, for example,
every organization must recognize and negotiate with a particular
labor union selected by its employees.
Business
owners and managers, therefore, need to be familiar with the labor
legislation which regulates employment procedures, collective
bargaining processes (for larger companies) and other labor-related
issues.
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TWO IMPORTANT RULES RELATED
TO LABOR UNIONS
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. Rule No. 1:
Be aware of labor unions.
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. Rule No. 2:
Don't make labor unions become aware of you!
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8. WELCOME TO GOVERNMENT AGENCIES!
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GOVERNMENT AGENCIES
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Whether you like it or not - Government Agencies
are here to stay! These agencies play a constant and important role
in our business lives and this is not likely to change! Federal,
state, and local governments have introduced a broad range of
laws and regulations which stipulate what organizations can or
cannot do.
Three examples of such laws are illustrated below.
Many more will be discussed later in this program.
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TWO IMPORTANT
RULES RELATED TO FEDERAL LAWS
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. Rule No. 1: Always respect and obey all federal
and state laws!
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. Rule No. 2: If
you have any doubts - use Rule No.1
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9. ADDITIONAL
FACTORS WHICH MAY AFFECT YOUR BUSINESS
The additional factors which may affect your business
are summarized below.
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EXTERNAL CONDITIONS
WHICH MAY AFFECT YOUR BUSINESS
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. Economic Conditions.
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| Economic conditions are impacted by the prevailing interest rates,
inflation rates, stock market indexes, the trend of the Gross
National Product (GNP), and other related factors. Improved
economic conditions naturally stimulate an increased demand
for products and services, thus creating additional opportunities
for organizational growth.
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| . Political Conditions.
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| Political conditions are stimulated by general stability within
a country and specific policies of government officials. In
the United States, organizations generally enjoy substantial
benefits and continuous encouragement of new business ventures
as a result of the free enterprise system.
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| . Social Conditions.
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| Social conditions must also be taken into consideration by managers
and entrepreneurs. These are particularly important since
values, tastes, and needs of customers change in accordance
with their specific lifestyles.
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| . Technological Conditions.
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| Technological conditions need to be examined on a regular basis
in order to secure continuation of organizational development
and growth in a highly competitive environment.
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10. WHAT IS AN
INTERNAL ENVIRONMENT?
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THE INTERNAL
ENVIRONMENT
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In addition to the external environmental
factors, organizational development depends upon the availability
of certain elements within your company.
These elements constitute the Internal
Environment of the organization, as illustrated below.
Each element of the company's internal environment plays
a critical role in its performance and development.
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MAIN
ELEMENTS OF THE INTERNAL ENVIRONMENT
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Human Resources
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Financial Resources
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Physical Resources
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Marketing Resources
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Corporate
Culture
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11. WHAT ARE HUMAN RESOURCES?
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HUMAN
RESOURCES
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Human Resources are of paramount importance to any organization. In
fact, most managers and entrepreneurs agree that skilled, experienced,
and loyal employees represent the biggest asset and provide
security for successful organizational performance.
The prime elements of human resources management include obtaining
suitable employees and ensuring their training, compensation
and integration within the organization.
Business owners and
managers, therefore, need to understand the fundamental principles
of human resources management and acquire the necessary skills
to conduct an efficient operation.
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12. WHAT ARE FINANCIAL
RESOURCES?
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FINANCIAL
RESOURCES
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Financial Resources are required by all organizations to
provide for continuous operations and to fund growth.
The prime sources of capital utilized by organizations include
their own retained earnings, equity capital provided by shareholders,
and debt capital provided by banks and other financial institutions.
Availability of sufficient capital is of prime
importance since it enables the organization to offer more favorable
payment terms to its customers and to obtain maximum discounts
from suppliers.
In addition, sufficient capital enables the organization
to offer competitive salaries, wages, and fringe benefits, thereby
attracting a higher caliber of employees. Furthermore, sufficient
capital enables the organization to purchase modern equipment,
thus ensuring higher operational efficiency and productivity.
Business owners
and managers, therefore, need to understand the basic principles
of financial management to ensure a profitable long-term organizational
performance.
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13. WHAT ARE PHYSICAL RESOURCES?
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PHYSICAL
RESOURCES
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Physical Resources of an organization include manufacturing
equipment and tools, inventories, production, assembly, storage, and
distribution facilities.
These resources are of particular importance to a
manufacturing organization and usually require a substantial
investment of capital. Acquisition, maintenance, and development
of physical resources represents an integral part of production
and operational activities.
Business owners and
managers, therefore, need to be familiar with the underlying
principles of production and operations management to ensure
efficient organizational performance.
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14. WHAT ARE MARKETING RESOURCES?
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MARKETING RESOURCES
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Marketing Resources of
an organization include experienced marketing employees, a well-prepared marketing plan,
productive sales force, and the company's goodwill in the marketplace.
Every organization
requires a detailed marketing plan which outlines its strategy
with regard to product or service development, price setting,
promotion, and distribution. An accurate marketing plan plays
a critical role throughout the budgeting process and helps to
secure effective utilization of all company resources.
A comprehensive marketing plan, productive sales force, and
strong goodwill are expected to help the organization to promote
its products and services to customers in the most efficient
manner.
Business owners and managers, therefore, need to understand
the basic principles of marketing and sales management and improve
their skills in the area of marketing and sales to ensure sound
functioning of the organization.
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15. WHAT IS THE
CORPORATE CULTURE?
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Corporate Culture represents another important element of
the organization's internal environment.
Corporate culture refers to the character of the organization
and is comprised of its unique values, traditions, and attitudes.
It is developed throughout the company's existence
and embodies the values, mentality, views, and aspirations of
its owners.
Ethical standards of managers and employees are
constantly affected by the corporate culture, thus influencing
behavior both within and outside the organization. Although
the corporate culture cannot be properly measured, it can be
assessed in terms of several elements, as illustrated below.
(11)
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MAIN
ELEMENTS OF THE CORPORATE CULTURE
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No
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Details
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1
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Individual Initiative.
To what degree are employees allowed to exercise their freedom
and independence within a company? .
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2
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Risk Tolerance.
To what degree are employees encouraged to be aggressive,
innovative, and risk-taking?
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Company Direction.
To what degree does the company provide clarity in formulating
objectives and performance expectations?
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Integration Of
Employees.
To what degree does the company supports cooperation and
integration within the organization?
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Management
Support.
To what degree do managers provide clear communication,
assistance, and support to their subordinates?
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6
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Control Of
Employees.
To what degree do company rules and direct supervision are
used to oversee and control employee behavior?
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Company Identity.
To what degree do the employees identify with the organization
as a whole, rather than with their particular work group
or field of professional expertise?
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Reward System.
To what degree does the reward allocation, such as salaries,
increases, promotions, is based on employee performance
criteria in contrast to seniority or favoritism?
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Conflict Tolerance.
To what degree are employees are encouraged to express
their opinions and criticisms openly?
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Communication
Patterns.
The what degree is the organizational communications limited
to the formal hierarchy of authority?
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16. FOR SERIOUS
BUSINESS OWNERS ONLY
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Reprinted with permission. |
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