UniKL Technopreneurship CHP 2 - Business Environment

CHAPTER
1 2
Business
Environment
Learning Outcomes
At the end of this chapter, you should be able to:
• explain the components of business environment

• list out the major components of macroenvironment
• describe the major components of microenvironment
• explain the major factors of internal elements
TECHNOPRENEURSHIP Second Edition All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2016 1– 3
The Components of
Business Environment

The Components of Business
Environment (cont.)
Internal Environment

Environment (cont.)
Internal Environment (cont.)
Structure
•The structure of a firm is the hierarchical arrangement of
tasks and people which determines
– how information flows within the firm,
– which departments are responsible for which
activities, and
– where the decision-making power rests.

Environment (cont.)
Flat structure: An organizational
structure in which most middle
management functions are
eliminated, allowing senior
management to have greater
exposure to customers and to those
in the organization that deal with
customers
Tall structure: An organizational

structure with an overall narrow span
and more hierarchical levels. In such
organizations, there are usually many
managers, and each manager is in
charge of only a small group of people.
Environment (cont.)
• Also known as cross-functional team
• Is a hybrid type of departmentalization
• In which personnel from several specialties are brought together to
complete limited-life tasks

Environment (cont.)
Organizational Culture
• A pattern of shared basic assumptions the firm learns as

it solves its problems of external adaptation and internal
integration that have worked well enough to be
considered valid, and to be taught to new members as
the correct way to perceive, think, and feel in relation to
those problems.

Environment (cont.)

Environment (cont.)
Resources
Human
– Human resources are the vital resource for all businesses.
These are the people who work for an organization. Their skills
and knowledge are invaluable to the managers.
Monetary
– Monetary resources are amounts of money used by managers to
pay for goods and services for the organization.

Environment (cont.)
Resources (cont.)
Raw materials
– Raw materials are the elements used directly to manufacture
products.
– Examples of raw materials would be wood, rubber, metal and
lead used to make a pencil.
Capital resources
– Capital resources are the machines used during the
manufacturing process. Modern machines can greatly improve
the efficiency of the manufacturing process. If an organization
uses old obsolete machinery it may not be able to compete with
an organization using more efficient machinery.

Microenvironment

Microenvironment (cont.)
Customers
•Customers are people and organizations in the
environment who acquire goods or services from the
organization.
•Customers obviously represent uncertainty to an
organization. Their tastes can change and they can
become dissatisfied with the organization’s product or
service.
•For example, MIAT (organization) offers training courses
for aircraft engineers (customers) to serve the airlines
industry namely MAS, AirAsia, etc.

Competitors
•Competitors are other organizations in the same industry or
type of business that provide goods or services to the same set
of customers.
•In most industries, competitive moves by one firm affect other
firms in the industry, which may incite revenge or countermoves.
•Competitors compete with each other for market share and for
the favourable comments of the investment analysts.
•In many industries, every new product introduction, marketing
promotion, and capacity expansion has implications for the
revenues, costs and profits of other competitors.

Suppliers
• Suppliers for industries provide equipment, supplies,
component parts, and raw materials. The labour and
capital markets from which firms draw their employees
and investment funds are also a source of supply.
• Powerful suppliers can raise their prices and therefore
reduce profitability levels in the buying industry.
• They can also exert influence and increase uncertainty
for the buying industry by threatening to raise prices,
reducing the quality of goods or services provided, or not
delivering supplies when needed.
Government Agencies
• Government agencies provide infrastructure, advisory
services, training, and financial supports to existing and
future technopreneurs.
• For example, the Ministry of International Trade and
Industry (MITI) is a government agency that has been
given the mandate and responsibility to plan, legislate
and implement international trade and industrial policies
that will ensure Malaysia’s rapiddevelopment towards
achieving National Economic Policy and Vision 2020.

Non-Government Organization (NGO)

• Consumer societies, political organizations, religious
groups, business societies, environmental groups and
others are among interest groups that can influence
businesses.
• These groups can play their respective roles in business
through campaigns against products or services, and by
disseminating information regarding certain products,
which can further influence consumers and pressure the
government into taking action on certain issues.

Financial Institutions
• A financial institution is an institution that provides
financial services for its clients or members.
• The finance industry encompasses a broad range of
organizations that deal with the management of money.
• Among these organizations are banks, credit card
companies, insurance companies, consumer finance
companies, stock brokerages, and investment funds.

Macroenvironment
Components of a Macroenvironment

Macroenvironment (cont.)
Components of a Macroenvironment - Political

• The political environment can impact business
organizations in many ways. It could add a risk factor and
lead to a major loss. Organizations should understand that
the political factors have the power to change results.
• It can also affect government policies at local to federal
levels.
• Some political factors that have a significant impact on
businesses are
• government policies,
• tax laws and tariff ,
• stability of government, and
• entry mode regulations.
Components of a Macroenvironment - Economy

• Economic forces can be grouped into three main
categories:
– current conditions
– economic cycles
– structural changes

Components of a Macroenvironment – Socio-Cultural

• Socio-culture is the influence in a society and its
culture that changes people’s attitudes, beliefs, norms,
customs, and lifestyles.
• Demographic change is a major concern for an
organization, since changes in the number and age of
the population will directly affect the demands for
particular products and services.
• Demographics also play an important role in an
organization’s approach to marketing and advertising.
• Some of the demographic issues are population size
and distribution, age distribution, education levels,
income levels, etc.
Components of a Macroenvironment - Technology

• Technological analysis requires scanning and monitoring
from the beginning of basic research to product
development and commercialization.
• Technology is an increasingly important environmental
influence and is prompting managements to reconsider
the way they fundamentally operate.
• Advances in information technology in particular can
affect all aspects of a business, from its overall strategic
position to how it manages marketing, design, production
and distribution.
Components of a Macroenvironment – Technology

Change
• Technological change is an increase in the efficiency of a
product or process that results in an increase in output,
without an increase in input.
• Technological change takes two forms:
• breakthrough invention : Breakthrough (pure) invention
refers to the creation of something new that is different from
the existing technology or products that will create a new
platform for future research and process innovation.
• Process innovation refers to the changes in design, product
formulation and manufacturing, materials, and distribution.
Components of a Macroenvironment – Environment
• Key environmental issues affecting businesses include

industrial waste, sustainable development of raw
materials and water and air emissions.
• These issues affect businesses because laws require
businesses to change equipment and procedures to
meet imposed standards, which cost businesses money.
• Many businesses undertake stricter changes in an effort
to preserve the environment and ‘do what’s right’.

Components of a Macroenvironment – Environment
• Some environmental factors are

– geographical location,
– the climate and weather,
– waste disposal laws,
– energy consumption regulation, and
– people’s attitude towards the environment.

Components of a Macroenvironment – Legal
• Federal, state and local governments can infl uence what an

organization can and cannot do. Some federal legislations are known to
give signifi cant implications.
• Organizations spend a great deal of time and money to meet
governmental regulations but the effects of these regulations can extend
beyond time and money. They also reduce managerial discretion by
limiting the choices available to managers.
• Legal systems vary between countries and often have a direct impact on
organizations by placing boundaries on what they can and cannot do.
• Examples of such legislation include
– Green Technology Regulation,
– Occupational Safety and Health Act (OSHA)
– Intellectual Property Acts
– Employment Act 1955.

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CHAPTER

At the end of this chapter, you should be able to:

• explain the components of business environment

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Tall structure: An organizational

TECHNOPRENEURSHIP Second Edition All Rights Reserved

• A pattern of shared basic assumptions the firm learns as

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Non-Government Organization (NGO)

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TECHNOPRENEURSHIP Second Edition All Rights Reserved

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Components of a Macroenvironment - Political

Components of a Macroenvironment - Economy

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Components of a Macroenvironment – Socio-Cultural

Components of a Macroenvironment - Technology

Components of a Macroenvironment – Technology

Components of a Macroenvironment – Environment

• Key environmental issues affecting businesses include

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Components of a Macroenvironment – Environment

• Some environmental factors are

TECHNOPRENEURSHIP Second Edition All Rights Reserved

Components of a Macroenvironment – Legal

• Federal, state and local governments can infl uence what an

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