UNDERSTANDING AND MANAGING BUSINESS ENVIRONMENT

ORGANISATION

OPEN SYSTEM

CLOSED SYSTEM

YES

INTERACTION WITH EXTERNAL ENVIRONMENT

NO

SPECIFIC

GENERAL ECONOMIC CONDITIONS POLITICAL/ LEGAL CONDITIONS SOCIOCULTURAL CONDITIONS DEMOGRAPHIC CONDITIONS TECHNOLOGICAL CONDITIONS GLOBAL CONDITIONS 1

CUSTOMERS

SUPPPLIERS COMPETITORS PRESSURE GROUPS

EXTERNAL ENVIRONMENT Outside institutional or forces that potentially affect an organisations performance SPECIFIC ENVIRONMENT The part of environment that is directly relevant to the achievement of an organisations goal GENERAL ENVIRONEMENT Broad external conditions that may affect the organisation HOW THE ENVIRONMENT AFFECT MANAGERS ENVIRONMENT UNCERTAINTY

DEGREE OF CHANGE

STABLE

DYNAMIC

ENVIRONMENT UNCERTAINTY The degree of change and complexity in an organisations environment ENVIRONMENT COMPLEXITY The number of components in an organisations environment and the extent of an organisations knowledge about its environmental components

STAKEHOLDER MANAGEMENT STAKEHOLDERS: Any constituency in the environment that is affected by an organisations decisions and policies and that can influence the organisation. Examples: Customers, Social/Political groups, Competitors, Trade and Industry Associations, Government, Employees, Unions, Shareholders, Communities, Suppliers, Media. HOW TO MANAGE STAKEHOLDER RELATIONSHIP? 4 STEPS 1. 2. 3. 4. Identify the Stakeholders. Determine their interests: product quality, financial, safety. How critical each Stakeholder is. Determine the specific approach to manage each Stakeholder.

Stakeholders Importance Critical Important Stakeholders Partnership Stakeholder Management Critical Not Important Boundary Spanning Scanning and Monitoring the Envr.

Low High Envr. Uncertainty

BOUNDARY SPANNING Interacting in specific ways with various external stakeholders to gather and disseminate important information. STAKEHOLDER PARTNERSHIPS Proactive arrangements between an organisation and a stakeholder to pursue common goals. THE ENVIRONMENTAL ANALYSIS AND DIAGNOSIS PROCESS 3

Environment of the Firm General Socioeconomic Technological Government Industry Customers Suppliers Competitors International

Strategist Analysis & Diagnosis Gap Analysis . Identify the current strategy the firm uses to relate to the envt. What are the assumptions or predictions about the envt on current strategy is based? . Predict the future enyt conditions. Are the assumptions or predictions the same as in step 1? Is there a gap? Diagnosis . Assess the significance of the gap between the current and future envts of the firm. Are changes in objectives needed? Do changes in strategy appear useful to consider? Will they reduce the gap?