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Business and Its Environment Chapter 2

This document discusses key concepts related to business and its environment. It defines business as profit-seeking activities that provide goods and services, and notes that profits reward business owners for taking risks. It outlines different types of businesses including commerce, industry, and services. The document also discusses the objectives of business, the external environment including direct and indirect elements, matching organizations to their environment, and designs for business organizations. It covers dimensions of environmental uncertainty and strategies for coping with and controlling the external environment.

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Gerald Niño Elardo
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270 views20 pages

Business and Its Environment Chapter 2

This document discusses key concepts related to business and its environment. It defines business as profit-seeking activities that provide goods and services, and notes that profits reward business owners for taking risks. It outlines different types of businesses including commerce, industry, and services. The document also discusses the objectives of business, the external environment including direct and indirect elements, matching organizations to their environment, and designs for business organizations. It covers dimensions of environmental uncertainty and strategies for coping with and controlling the external environment.

Uploaded by

Gerald Niño Elardo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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BUSINESS AND ITS

ENVIRONMENT
What is Business
• All profit seeking activities and enterprises that provide
goods and services necessary to an economic system.
Profits
• Refers to the rewards for businesspersons who take the
risks involved in producing and marketing goods and
services.
Kinds of Business
• Commerce – trading, merchandising and marketing
• Industry – production
• Classifications
• A. Genetic Industries- agriculture, forestry, and fish culture
• B. Extractive Industries – extraction of goods and natural resources
• C. Manufacturing Industries - Raw materials into finished products
• D. Construction Industries – building infrastructures
• Services – sells service to the buyer
• A. Recreation
• B. Personal
• C. Finance
Objectives of Business
• Creation and distribution of a product or service.
• Satisfaction of personal objectives like profits for owners,
salaries and other compensation for executives, wages,
and other compensation
• Protection and enhancement of the human and physical
resources of society
• Economy and effectiveness of operation
Environment of Business Firms
External Environment
• 1. Direct Action Elements - stakeholders of the
organization
• Customers
• Suppliers
• Labor Supply
• Competitors
• Monopoly
• Oligopoly
• Pure Competition
Financial Institutions
Government Agencies
• 2. Indirect Action Elements of the External Environment
• Technological Variables
• Economic Variables
• Socio-Cultural Variables
• Political – Legal Variables
• International Variables
Matching the Organization with the Environment
• Types of business environment

• 1. Static: Few forces in the environment are changing to affect


business.
• No new competitors
• No new technological breakthroughs by current competitors
• Little activity by public pressure groups

2. Dynamic: When significant number of environmental forces that affect


business are changing.
rapidly changing government regulations affecting business
new competitors
difficulties in acquiring raw materials
Continuosly changing socio-cultural aspects of the population.
Environment Uncertainty
• Analyze constituencies and their needs
• Predict future state of affairs, and
• Understand their potential implications for the
organization.
Dimensions of Environmental Uncertainty
• 1. Complexity: this refers to the different factors the
environment such as information, capital, material,
people, and other organizations.

• 2. Rate of Change in these Factors: factors in external


environment change from time to time.
Designs of Business Organization
• 1. Mechanistic Design – vertical structure typically
operates with
• A. more centralized authority
• B. many rules and procedures
• C. a precise division of labor
• D. narrow spans of control
• E. formal means of coordination
• 2. Organic Design
• A. decentralized authority
• B. fewer rules and procedures
• C. less precise division of labor
• D. wider spans of control
• E. more personal means of coordination
Survival Strategies in Uncertain Environments
• 1. Application of Coping Strategies
• 2. Adaptation of Environmental Control Measures
Coping Strategies
• Buffering
• Smoothing
• Forecasting
• Rationing
• Boundary Spanning
• Structural Complexity
• Executive Succession
Environmental controlling
• Creating favorable linkages
• Mergers
• Joint Ventures
• Interlocking Directorates
• Executive Recruitment
• Institutional Advertising
• Resource Flows
• Frequency of Exchanges
• Quantity Involved in the Exchanges
Manipulating the Environment
• Changing Elements
• Lobbying
• Forming Trade Associations
• END

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