ANALYSING THE BUSINESS ENVIRONMENT

In a subject as all-encompassing as the business environment it is possible to identify numerous approaches to the organization of the material. One obvious solutions would be to examine the various factors mentioned above, devoting separate chapters to each of the environmental influences and discussing their impact on business organizations. Whilst this solutions has much to recommend it – not least of which is its simplicity – the approach adopted below is based on the grouping of environmental influence into four main areas, in the belief that this helps to focus attentions on key aspects of the business world, notably contexts, firms and their markets and issues of significance to entrepreneurs and to society as a whole.

In part 2  considerations is given to the political, economic and legal context within which businesses functions. In additions to examining the influence of political and economic systems, institutions and processes on the conduct of business, this sectionfocuses on the macroeconomic environment and on influence affecting key organizational resources, particularly, labour, technology and raw materials. The legal system and the influence of law in a number of critical areas of business activity is also a primary concern and one which has links with part 3.

 In part 3, attention is focused on three central structural aspects: legal structure, size structure and industrial structure. The chapter on legal structure examines the impact of different legal definitions on a firms operations and considers possible variations in organizational goals based on legal and other influence. The focus then shifts to how differences in size can affect the organization (e.g. access to capital, economies of scale) and to an examination of how changes in scale and/or direction can occur, including the role of government in assisting small business development and growth. One of the consequences of changes in the component element of the economy is its effect on the overall structure of industry and commerce – a subject which helps to higligt the impact of international competition on the economic structure of many advanced industrial economies. Since government is a key actor in the economy, the section concludes with an analysis of government involvement in business and in particular its influence on the supply as well as the demand side of the economy at both national and local level.

In Part 4, the aim is to campare theory with practice by examining issues such as pricing, market structure and foreign trade. The analysis of price theory illustrate the degree to which the theoretical models of economics shed light on the operations of business in the “real” world. Similarly, by analyzing basic models of market structure, it is possible to gain an understanding of the effect of competition on a firm’s behavior and to appreciate the significance of both price and non-price decision in the operation of markets.

The analysis continues with an examination of external markets and the role of government in influencing both the structure and operation of the marketplace. The chapter on international markets looks at the theoretical basis of trade and the development of overseas markets in practice, particularly in the context of recent institutional and financial developments (e.g. the Single Market, the Exchange Rate Mechanism). The section conclude with an investigation of the rationale for government intervention in markets and a review of government action in three areas, namely, privatizations and deregulations, competitions policy and the operations of the labour market.

Finally, in Part 5, consideration is given to two aspects of business which are of increasing importance. One of these – corporate responsibility towards the natural environment – raises fundamental questions about the moral dimension of business activity, a subject often overlooked by writers and commentators on the business scene. Against a background of increasing national and international concern over the environmental impact of business, the chapter examines the idea of corporate social responsibility and the different force which impact on an organizations in this area. The chapter concludes with an analysis of the benefits which derive from an environmentally responsible approach by businesses and illustrates some of the ways in which such an approach has been implemented by large organizations.

The concluding chapter in this section – and appropriately, in the book as a whole – emphasizes the continuing need for organizations to  monitor change in the business environment and examines a number of frameworks through which such an analysis can take place. In seeking to make sense of their environment, businesses need acces to a wide range of informations, much of which is available from published material, including government sources. Some of the major types of informations available to students of business and to business organizations – including statistical and other forms of informations – are considered in the final part of this chapter.