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Chapter 1 - Business Environment-1with Audio
Chapter 1 - Business Environment-1with Audio
Business
Essentials 6e
Ronald J. Ebert
Ricky W. Griffin
Business
An organization that
provides goods or
services that are then sold
to earn profits.
External Environment
Everything outside an organization’s
boundaries that might affect it
1. the domestic business environment
2. the global business environment
3. the technological environment
4. the political-legal environment
5. the sociocultural environment
6. the economic environment
© 2007 Prentice Hall, Inc. All rights reserved. 1–4
The External Environment (cont’d)
1. Domestic Business Environment
• The environment in which a firm
conducts its operations and derives
its revenues by:
Seeking to be close to its customers
Establishing strong relationships with its
suppliers
Distinguishing itself from its competitors
4. Political-Legal Environment
The regulatory relationship between business
and the government (legal system) and its
agencies that define what organizations can
and can’t do:
Product identification laws
Local zoning requirements
Advertising practices
Safety and health considerations
Acceptable standards of business conduct
4. Political-Legal Environment
Pro- or anti-business sentiment in
government and political stability
are also important considerations,
especially for international firms.
5. Sociocultural Environment
The customs, mores, values, and
demographic characteristics of the
society in which an organization
functions
Sociocultural processes determine the
goods and services and standards of
business conduct a society is likely to
accept
© 2007 Prentice Hall, Inc. All rights reserved. 1–10
The External Environment (cont’d)
vi.Economic Environment
The relevant conditions that exist in the
economic system in which a company
operates
Example:
If an economy is doing well enough that most people have
jobs, a growing company may find it necessary to pay higher
wages and offer more benefits in order to attract workers
from other companies.
If many people in an economy are looking for jobs, a firm
may be able to pay less and offer fewer benefits.
Cyclical Unemployment
Businesses continuing to eliminate jobs during a
business cycle downturn cause more reduced
revenues and further job losses.
Monetary Policy
The manner in which a government controls its money supply
Working mainly through the Federal Reserve System, the
government can influence banks’ willingness to lend money
and prompt interest rates to go up or down.
Stabilization Policy
Coordinating fiscal and monetary policies to smooth
fluctuations in output and unemployment and to stabilize prices.