The environmental scan is aimed at proposing solutions to the environmental challenges faced by firms. Using the tools and frameworks provided in the content of the subject, you must:
- Discuss general and historically relevant responses to the four types of factors which can influence the environments in which businesses operate
- Categorically and comprehensively respond with a solution to all of the environmental risks and challenges.
Factors that Influence Business Environment
The environment within any business organization has been in making for a number of decades and keeps on changing depending on how various firms are carrying out their operations. In the year 1960 and 1970s, many business organizations were almost giving up due to the environmental challenges that faced them in the market(De Brentani, Kleinschmidt, & Salomo, 2010). Therefore, it’s very crucial for any firm to transact and interact with its surrounding since the environment around the business play a key in firm’s operations. The failure or the success of a business organization is basically built on its influences from the environment around it. According to (Scott, 2009) various restrictions are faced by the business organizations are derived from the environment. The firm has minimal impact on the environment hence, its very vital for the organizations to identify some of the factors that influences it operation and come up with the right solutions in order to maximize the profits(Babar & Abbas, 2013).
For instance, business firm can be affected by various environmental factors which when put together constitutes the business environment. These factors are the competition, economic, legal, political, social and technological factors. Thus, business environment is the complete external aspects which influences the operations of the organization(Majumdar, 2008). The main objective of this piece is to give the solution to different factors that may impact the success of the firm.
(Williams & Figueiredo, 2014) proposed the factors that impacts the environment in which the business operates using the Porter’s five forces concept. However, in the year 1990, Austin suggested extra four aspects to porter’s framework namely; the political, demographic, cultural and political aspects. These factors are equally important to aspects within the PESTEL (political, social, technology, ecological and legal) concept which was developed by (Sibbel, 2009). Hence the technique was therefore used in scanning macro-environment which recognized legal/political environment, social/cultural environment, physical/ecological environment technological and economic environment. Therefore, these critical forces together formed the threats and the opportunities to any firm in its industry.
The political environment in any given firm and the country in which its operating is an important external aspect that impacts the management of that firm. Political aspects are associated with public organizations like government agencies and state-owned parastatals. The political aspects can be categorized into the micro and macro political threats(Liao, Chuang, & To, 2011). Macro political threats is due to wars and other changes within the government which negatively influences all the firms operating within the target country. Transformation in the leadership and the systems of the politics may cause the expropriation or the confiscation in which the state might decide to seize the properties of the firm with no compensation. For the micro political aspects could be taxation and the regulations imposed on various firms in a given sector(Sidik, 2012).
Strategies for Handling Environmental Risks and Challenges
Political aspects allow the proper way of handling the government’s interventions within the firm with respect to the trade regulations, taxation labor and considering political stabilities and the policies of the government(Margaretha & Supartika, 2016). The factor also outlines the demerit and merit of the products that defines the type of goods government may want to be offered and the ones they don’t wants. Therefore, in the process of making the decision in what to provide to the consumers, its goods to think on different dimensions which overwhelm the kind of the services and goods to be provided and to what extent. The political position of any country can impact many significance areas within the business like the learning of the employees, their health and the other infrastructures within the economy(Bjornali & Ellingsen, 2014).
Social aspects are very crucial in the demand of the firm’s services and goods. The main focus is usually on the attitudes from the consumers and consciousness of their health towards the services and the products being offered by the organizations(Öner, 2015). Therefore, any change in the social trend may affect the demand for the goods, their availability and the individual’s willingness to do the job. In any business organization its vital to consider the cost and availability of the skilled workforce, the distribution of the age and the statistics of the crimes within a given country. Within the social factors, is the culture which may impact the firm’s operations in terms of macro level. That is the aspects within the cultural and social environment and the at the micro level comprised of the national identity, the pride and the attitude towards the goods brought from other countries. Social factors are very vital in the firm since they create long-term stand concerning the future rewards via persistence and thrift(Shin, Park, Choi, & Choy, 2017).
Appropriate technologies enable the creation of the new services and products. This is because the technologies play a key role in reducing the cost and improving the quality of the commodities which in turn results to innovation. Such developments help the consumers and also the firm that is producing the goods and services. The technological factors overwhelm the factors like automation, R&D activities, the technology incentives and the rate of change in technology. These may be used in determining barriers to the entry, low in production cost and impact in outsourcing the required decisions(Krasniqi & Mustafa, 2016). The shift of the technology may affect the cost, innovation and the and the quality of the goods and services. Hence, technology factors are very essential processes in the growth of the industries and world integration and changes in these technological processes impacts both the sellers and the consumers. For instance, the consumers may need the appropriate products and the firm is able to develop a way to produce such products(Tung, Baird, & Schoch, 2011).
The legal aspects are linked to all the legal environment in which the business organizations are operating. In such environment, the law the supreme and the firms have to take care when carrying out their activities in the limit established by the law. These laws are associated with the health, distribution and the employment procedures. The disability and discrimination legislations introduced in many countries affected many business organizations’ operations. The legal transformations can as well impact the cot of the firms like developing the new procedures and the systems and the demand especially the regulations influence the likelihood of the consumers in purchasing the goods and services. For the countries with insufficient transparency in their legal systems, the employees in the government may practice corruption thus discouraging foreign investors in such countries. Thus, firms should be well equipped in knowledge concerning the risks within the legal government and are therefore, advised to have an attorney or partners to deal with bureaucracy and legal matters(Okpala, 2012).
The economic aspects consider the parts which may impact the operation of the firm and making of the decisions. These aspects include the taxation rates, the interest changes, the exchange rates, inflation and the growth rate. The exchange rate affects the imporedt5ed and the exported products, then interest influences the firms’ cost of the capital and the rate of inflations impacts the day to day operations of the firm. The economic situation faced by a firm can be categorized into local and global economy. The approach of the global trade overwhelms the trade among nations, the alliances, regulations and organizations like the World Trade Organization (WTO). The world trade organization is usually in charge of the international markets and controls the global trade as well(Gutierrez, Boukrami, & Lumsden, 2015). Thus, exposing many business organizations to financial risks like foreign exchange threats and the political instabilities. The exchange rate influences exporting cost of the goods and supplying of the same products to the consumers. One of the impact from the exchange rate is translating the exposure which is as the result of changes in the value of the foreign properties during the conversion to the local currency. Fluctuations in the prices of goods and services could result to increase in the substitute goods being more affordable to the customers when compared to firm’s inputs. Such competition can therefore negatively impact the normal running of the company and the general level of the prices within the community(Joha & Janssen, 2014).
Porter’s framework tried to describe strategy as the establishment of a valuable and unique which involve various set of the activities(Phillips, 2011). The main aim of such strategies is to eliminate the challenges and the risks in order to create some superior profits thus offering a firm competitive advantage and effective in its operations. In order to handle some of the environmental risk and challenges within the firms in Australia, following strategies can be employed. These strategies can be categorized into, the low-cost leadership strategy, the differentiation strategy and the focus strategies(Taylor & Taylor, 2014).
The firms that try to produce their products at the lowest cost should be able to use this strategy. The strategy targets price sensitive consumers and such firms within Australia will sell their goods and services to acquire more profits compared to their competitors. Its vital to consider that these firms may lead in cost however, it does not guarantee them the low price to their commodities. Although the firm can charge their goods an average cost following the low-cost strategy to maximize their profits. If the firm like Telstra is able to employ this strategy it will gain extra profit margin and offer a very competitive cost which will invite more customers. In order to implement the strategy, the firm will be required to consider the structure of the organization, cost of implementations, management systems and the policies of compensation. The porter’s framework has categorized the strategy into skills needed and common organizational necessities. The common organizational necessities comprise of responsibilities, the monitoring reports, monitoring costs and the incentives(Yeung, 2008).
If the local firms like Telstra in Australia embrace this strategy will have an addended advantage in creating a high level of the consumer’s loyalty. This strategy is usually focused in achieving minimal cost of the production linked to economic factors within the business organization. A number of firms have employed the strategy through putting more attention in markets with low competitions. For the focus strategy to be effective, the firms must also require to select market segments, capabilities and the resources appropriately. In case this strategy works well for a given firm like Telstra, it might be in position to explore a wide range of the market for their goods and services or even establish strengths within a relative low economic surrounding(Samson & Singh, 2008).
This plan aims at winning specific consumers through providing differentiated goods and services that are considered to be more appropriate to the competitors’ services or products. This will enable the firm to win more consumers through the perception of the uniqueness of their goods and services. The differentiation strategy used by the business organization to enable it remain unique in the market and obtain the premium cost which can not be easily engaged by its rivals. Its usually linked with the higher premium price for the firm especially those with internal strength(Hemmatfar, Salehi, & Bayat, 2010).
The environment within the businesses has been established for a number of decades and keeps on changing depending on how various methods in which used by the firms in carrying out their operations. In the past few years, many business organizations were almost giving up due to the environmental challenges that faced them in the market. Thus, business environment is the complete external aspects which influences the operations of the organization. Therefore, for the sake of handling some of the environmental risk and challenges within the firms in Australia, following strategies can be employed. These are the focus, low-cost and the differentiation strategies and when used appropriately, they can help to eliminate the environmental challenges and the risks to create superior profits for the firm.
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