Chapter No:2

The Business Environment

 Analysing the Business Environment
An Organisation is surrounded by two types of environment namely:

 Macro Environment
It covers all those factors that affects an organisation indirectly,
These factors are best abbreviated as PEST(Political-legal, Economic,
Social-cultural, Technological) factors.

 Micro Environment

It includes those areas that have direct impact on the organisation.

Porter analyses this environment into five competitive forces.
 POLITICAL FACTORS

Organisations will need to consider:

 Legislation
 Regulation
 Broader political issues.
 This may impact the organisation at a number of levels:
 Globally (supra-national organisations)
 Nationally
 Locally.
 HEALTH AND SAFETY REGULATION
Many countries (including the UK) have legislation in place to protect individuals at work.
Employers must provide:
 Safe entrance and exit to and from workplaces

 Safe working environment

 Safe equipment

 Appropriate training

 Appropriate investigation of accidents/injuries at work.

Employees must:
 Consider their own safety at work

 Consider the safety of those around them

 Comply with safety guidelines at work.

Health and Safety is a legal issue which employers must take seriously. There are other
reasons to take Health and Safety seriously:
 Ethics

 Motivation

 Reputation

 Financial issues e.g. damages

 Loss of business.
 DATA PROTECTION ACT
Organisations may hold information regarding their customers and
employees. Data protection relates to the protection of these
individuals against the misuse of personal information by the
organisation.
The principles of data protection

 Personal data should be acquired and processed lawfully

 Data should not be used for purposes incompatible with the original
collection purpose
 Data collected should be relevant for the purpose of processing, and
should not be excessive
 Data collected should be accurate, and be kept up to date
 Data should not be kept for longer than required
 The organisation should make every effort to protect personal data
from unlawful processing, loss, destruction or damage.
 Employment Protection
 Dismissal
Under the UK Law, there are three forms of dismissal;
 The termination of the contract by the employer.
 The ending of a fixed term contract without renewal.
 Resignation by the employees where the employer’s conduct breaches the
contract of the employment. This is called constructive dismissal.

Notice period depends upon the duration of continuous employee’s service.

An employee is entitled to a written statement of the reasons of the
dismissal.

 Wrongful Dismissal
Wrongful dismissal is the dismissal that breaches the contract of the
employment. For Example: Failure to give the contractual period of notice.
 Unfair Dismissal
A dismissal that is without good reason is said to unfair dismissal. A
dismissal need not to be wrongful to be unfair. Employee has to prove that
his dismissal is unfair.

 Redundancy
Redundancy is dismissal under two circumstances;
 The employer has ceased to carry out business at all or in the place where
employee was employed.
 The business doesn’t require the particular kind of service of the employee.

Employee is compensated for being redundant or been offered a suitable

alternative employment.
 SOCIO CULTURAL FACTORS

Population affects labour supply & HR policies

 New age structures, older workers

 Women participating, family life cycle

 Social structures/class

 Income and wealth, buying patterns

 Health and diet

 Equal opportunities
 DEMOGRAPHY

Demography is the statistical study of human populations

on the basis of age, religion, ethnicity and education etc.
Effects of IT in the workplace

 Quicker routine processing

 Digital information easily sorted
 Employee skills base changing
 Continued change to keep up
 Customer service enhanced
 Information as a ‘commodity’
 Email, voicemail, video-conferencing
 Outsourcing operations to specialists
Effects of technology on staffing
 Reduced staff

 Flatter organisation

 Communication is enhanced.
 PORTER VALUE CHAIN MODEL
The value chain model
Value chain primary activities

 Inbound logistics: receiving, handling and storing

inventory
 Operations: production of goods from raw materials
 Outbound logistics: storing and despatching final product
 Marketing and sales: advertising and promotion
 After sales service: installing, repairing, upgrading
Value chain support activities

 Procurement: obtaining resources

 Technology development: product design, resource
utilisation
 Human resource management: recruiting, training,
rewarding
 Firm infrastructure: planning, finance, quality control
PORTER FIVE FORCES MODEL