Introduction and Background Information
Businesses in operation are bound to face numerous confrontations. Most firms’ find these forces be over and above their check. Nevertheless, all firms are bound to operate under this harsh reality; the external environmental forces. As a result, it is understood that all business establishments need to critically identify and analyze those changes and threats, which may affect positively or negatively their operations and the general performance. Companies that consider the internal and external environmental forces in their policy formulation usually emerge triumphant in dealings with such unavoidable circumstances (Botha, Kourie and Snyman, 2014). This research digs into the most important forces regarding the external environment; customer trends, public opinion, competitor analysis and government regulation, will predictably spell doom or survival for a business depending on how they are dealt with. In addition, the problem-solving frameworks, and the decision-making process will also be discussed in relation to the business environment (Wood, 2015).
External Business Environment Factors
Customer Trends, Public Opinion, Competitor Analysis and Government Regulation
Micro Analysis of business scans
Microenvironment factors of customer trends, public opinion, and competitor analysis and government regulation are usually beyond the marketers control although they determine the decision during creation of strategic marketing approaches. Cutting from bargaining power of customers, suppliers to threats of new entrants, substitutes and competitor rivalry , critical consideration need be taken into account.
The first external business environment factor is the Competitor analysis, which entails getting to know your rival well so as to device ways of getting ahead of them (Leonidou, 2016) . Ignoring or underestimating your competitor can mean downfall in your business even with the massive fan base. Your competitor business expansion, pricing of products and service together with their quality of the latter means your success or business death. These factors can be dealt with through the making of informed decisions. Improving on one’s quality of services and products can help in remaining as the best option for your customers (Aithal, 2016).
The next external factor is the public opinion, which goes hand in hand with Their Preference, has a huge impact on a business either in a constructive or destructive manner. Whether a firm focuses on a specific niche in the market and wins convincing that particular niche to consume their products and services, at the end of the day, the masses decide the fate of the business (Leonidu, 2016). With the final say on whom to buy or spend their money on, the customers’ perspectives about a business ought to be taken care of in all means possible. Making itself, extra appealing relative to their competitors will certainly win them the customers. Customer opinions towards a particular product can be based on residents’ growth rate, age division, career attitudes and the impact of the product or service on their daily lifestyles. For instance, a product or service conflicting with the target market customs and beliefs will have very damaging opinions on a certain product (Yang and Gabrielson, 2016).
Government regulation is the third factor from external forces. Government regulation entails all those laws and procedures set by the business-hosting nation including laws that are discriminatory, antitrust law, employment law, health and safety law and consumer law. These factors can greatly influence a business’ operation as well as determining the demand for the services or products offered by the firm. Unfavorable government regulations like high taxation on production or importation of raw materials for production means high cost of production which leads to expensive prices which cannot be sustained in the market and eventually lead to a change of product type of even low-quality production. Conversely, if the government regulations are enabling and attractive, the business will thrive and even improve on their quality but at an affordable price hence more profits for the business (Stewart, Boks and Bey, 2017).
Customer trends and bargaining power defined by their type for instance B2B or B2C will surely determine the mode of approach to the market are another vital factor in business, which closes this papers discussion on the external business environment. The consumer trends from their buying power which represent their purchasing capacity, which can be due to shifts in the economic situation. Consumer trends also cover the purchasing power, or the number of products and services together with consumer purchasing index and confidence are other factors affecting the consumer trends as an external business environment (Khan, 2015).
Concerning the bargaining power of suppliers, depending on whether they hold the power in the sense of they are the sole suppliers or have the largest market share. Threats of new entrants especially those engaging in the sale of similar product or service should be considered based on their pricing and quality to know how to deal with them.
In addition, the threat of substitutes entails emergence of a similar product or service that is similar to your company’s products. Depending on factors like services customer service, quality and price of the substitute, it is easy to deal with such threat. Rivalry among competitors should also be considered so critical. Based on their service or product differentiation, the competitors majors differences like quality and prices are never to be overlooked.
Concerning porter analysis, which has five forces, is an essential tool for explaining a company’s business environment which is then used in identification of techniques and possible profitability.
However, there exists another external factor of Technology involving the technological elements like technology influence, Research, and Development action, the rapidly changing trend in technology and computerization. These technological factors are employed in the determination of entry constraints, substandard production level as well as controlling final say regarding outsourcing. The changes in technology can shape the product costs, stimulate further invention, quality and even spur competition that was not predicted to arise (Norton, 2017).
Problem-solving frameworks for business issues include the structured problem solving and hypothesis Generation, the PDCA problem-solving tools and technique and the 8D problem-solving process. In addition, the root causes analysis together with Issues based work planning and hypothesis problem solving completing the frameworks put in place (Kashyap, 2018)
Defining the business decision-making process
Through choosing a path to take from an examination of possible options, and weighing evidence, business experts, and other related executives can solve business issues one step at a time using the decision making process. This decision-making process also allows individuals to make a revision on unsatisfactory decisions after completing the steps. The 7 decision-making process steps begin with the identification of the decision to help you solve the issues in the picture or the question demanding an answer. The decision identification requires a very clear approach to avoid solving a wrong business issue. The decision should also be measurable and timely for the best results.
The second step in the decision-making process is the gathering of relevant information according to the identified decision. Start from an internal assessment highlighting your company’s success and failure areas as far as the decision you arrived at is concerned. You then can go for the external sources like studies, evaluation from paid consultants and carry out a market research while only focusing on information that concerns yourself only (Titus, 2018).
Identifying the available options comes third in the decision-making process has found the required information for the process. With a number of alternatives on the table to choose from, as a business executive, the best and most viable option should also be the one picked with the next two in the rankings to be retained as back up alternatives in case emergence of issues with the chosen option. The business executive can then weigh the evidence for or against said options. Revisiting similar companies’ options in the past that have succeeded and compare with the situation being experienced in your organization. You may be convinced to weigh the proof using a decision tree or use Lucid chart in creating pros and cons list depending on the decision.
At fifth place comes settling for one among the alternatives in the decision-making process. Tracking from identification and clarification of the decision to be made and have gathered all information needed and built and noted the possible paths to follow, any business personnel is set to choose (Sharma and Mithas, 2015).
Taking action follows the actual decision chosen where a plan ought to be developed to make the chosen decision achievable, viable and tangible. During this step, you can use the Lucid chart diagrams in planning the tasks linked to your decision, and then let off your group programs once the plan has been installed. The final step in the decision-making process is reviewing your decision after the amount of time predetermined at step one. You now need to answer whether you solved the issue, got the right solution to the question and if you met the goals that you had set. If so, document the solution that materialized for future reference purposes otherwise begin the whole process again as Van and Berends( 2018) states in the “problem solving in Organizations”.
Solutions to the Factors Influencing Business Environment
The external environment holds a very important place critical role in deciding the future of individual businesses and the entire industry. Executives must suit techniques matching demands continually in order to keep the business prepared to compete and survive hard times. Carrying out an external analysis at the beginning of the technique reconsideration process is a very critical practice. First, you need to converge as a team for a PEST analysis process. The team’s gathering will result in getting your business’ environment synopsis; the environment is threatening and supporting factors, and the problems that will need attention in the set techniques. As the discussion rolls on, all the factors brought forward by the team relating to the political, economic, social, and technological conditions.
Concerning the political analysis, the political stability of the area where your firm is located, the possibilities of military action, the legal plans and procedure for contract enforcement, intellectual property protection, trading laws and tariffs, those trading partners that are favored the team's main consideration. The next discussion regards economic analysis, where types of economic system in the region and their operation will be given weight. Government intervention level in the unrestricted market, financial markets efficiencies, standards and quality of infrastructure, labor costs and employee skill level are some of the points of discussion in the economic analysis (Gollay, 2016).
Furthermore, a social analysis, which entails demographic issues, culture, education, environmental consciousness, class structure, health and entrepreneurial spirit as the primary considerations in a business environment, also plays a big role. Putting in mind that those values and attitudes of the employees are drawn religion, family, and social institutions ought to be considered also. Such values go a long way in determining workforce views regarding the change, risk-taking, success, achievement motivation, work, use of time and competition, the other thing is technological analysis, where discussion involving the recent technological advancements, their impact on cost and value chain structure together with the rate of technological diffusion will be of great importance (Gong, 2016).
The external forces increase with an unbalanced economy and usual internal forces are evidence of functioning firms. Executive -employee tensions, safety problems, pay variances, character clashes amongst the workforce, unmatched interests and value among the employees together with poor communication are some internal factors which determine workplace disagreements (Ferrel, 2015)
Recommendations for the Business Environment Issues
As a result, a number of recommendations have been put forward to address the issues experienced at almost all organizations with the aim of maintaining a cohesive work environment. Starting from developing solid policies and procedures with the equal administration of the set policies without having any deviation and training the executives and other heads on effective communication. Developing a possible behavior policy documenting it and publishing it in the firm for all the workforce together with the establishment of goal setting for all business stakeholders can greatly help solve the problems experienced in organizations.
Managers avoiding micromanaging their subordinates and allowing freedom within established regulations on top of having a policy for problem resolution where the staff can be given directions to follow in cases of conflicts. Finally, as a manager, you need to provide the workforce with plenty of information, resource and idea pooling possibilities, legal assistance, self-help programs and counseling services (Molina, 2015).
Conclusion and Additional Recommendations
To sum up, underscoring the fact that the external environment of any organization involves threats and opportunities, mostly operating beyond the organization’s control is imperative. The aforementioned external factors result in uncertainty in the business operation due to their unpredictability nature. Overall, customers are very fundamental when it comes to determining a business success or downfall. There is much focus on Agitated competition leaving out the crucial question of whether organizational forms can lead to variance in the firm’s success. Flexible form beginning from the favorable conditions as discussed in The PESTLE, which is a model that explains the framework that affects the external environmental factors external environmental forces. Conversely, it goes without saying that all business establishments need to critically identify and analyze those opportunities and threats, which may positively or negatively impact their operations and the general performance.v
Aithal, P. S. (2016). Study on ABCD analysis technique for business models, business strategies, operating concepts & business systems.
Botha, A., Kourie, D., & Snyman, R. (2014). Coping with continuous change in the business environment: Knowledge management and knowledge management technology. Elsevier.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.
Gollay, I. N., Gollay, A. V., Shindina, T. A., Salimonenko, E. N., & Chuvashova, A. D. (2016). Priority areas of analysis of the external environment of a company-innovator depending on a type of introduced innovations. Polish journal of management studies, 13.
Gong, M., Simpson, A., Koh, L., & Tan, K. H. (2018). Inside out: The interrelationships of sustainable performance metrics and its effect on business decision making: Theory and practice. Resources, Conservation and Recycling, 128, 155-166.
Kashyap, R. (2018). Problem Solving with and without Mathematics for Business and Everything Else.
Khan, U. A., Alam, M. N., & Alam, S. (2015). A critical analysis of internal and external environment of Apple Inc. International Journal of Economics, Commerce and Management, 3(6), 955-961.
Leonidou, L. C., Christodoulides, P., & Thwaites, D. (2016). External Determinants and Financial Outcomes of an Eco?friendly Orientation in Smaller Manufacturing Firms. Journal of Small Business Management, 54(1), 5-25.
Molina-Azorín, J. F., Tarí, J. J., Pereira-Moliner, J., López-Gamero, M. D., & Pertusa-Ortega, E. M. (2015). The effects of quality and environmental management on competitive advantage: A mixed methods study in the hotel industry. Tourism Management, 50, 41-54.
Norton, T. A., Parker, S. sL., Zacher, H., & Ashkanasy, N. M. (2015). Employee green behavior: A theoretical framework, multilevel review, and future research agenda. Organization & Environment, 28(1), 103-125.
Rastogi, N. I. T. A. N. K., & Trivedi, M. K. (2016). PESTLE technique–a tool to identify external risks in construction projects. International Research Journal of Engineering and Technology (IRJET), 3(1), 384-388.
Sharma, R., Mithas, S., & Kankanhalli, A. (2014). Transforming decision-making processes: a research agenda for understanding the impact of business analytics on organisations.
Stewart, R., Boks, C., & Bey, N. (2017). A review of key dimensions for designing environment-driven collaboration practices with external business partners. In DS 87-5 Proceedings of the 21st International Conference on Engineering Design (ICED 17) Vol 5: Design for X, Design to X, Vancouver, Canada, 21-25.08. 2017.
Titus, P. A., & Koppitsch, S. (2018). Exploring business students' creative problem-solving preferences. Journal of Education for Business, 93(5), 242-251.
Wood, D. J., Logsdon, J. M., Lewellyn, P. G., & Davenport, K. S. (2015). Global Business Citizenship: A Transformative Framework for Ethics and Sustainable Capitalism: A Transformative Framework for Ethics and Sustainable Capitalism. Routledge.
Van Aken, J. E., & Berends, H. (2018). Problem solving in organizations. Cambridge University Press.
Yang, M., & Gabrielsson, P. (2017). Entrepreneurial marketing of international high-tech business-to-business new ventures: A decision-making process perspective. Industrial Marketing Management, 64, 147-160.