The document discusses the micro and macro environment factors that influence business organizations. It defines the micro and macro environment and provides examples of political, economic, social, technological, ecological, and legal factors that comprise the external environment. A PESTEL analysis is introduced as a framework for examining these external influences. The importance of continuously analyzing how external factors are changing and may change in the future is also highlighted.
The document discusses the micro and macro environment factors that influence business organizations. It defines the micro and macro environment and provides examples of political, economic, social, technological, ecological, and legal factors that comprise the external environment. A PESTEL analysis is introduced as a framework for examining these external influences. The importance of continuously analyzing how external factors are changing and may change in the future is also highlighted.
The document discusses the micro and macro environment factors that influence business organizations. It defines the micro and macro environment and provides examples of political, economic, social, technological, ecological, and legal factors that comprise the external environment. A PESTEL analysis is introduced as a framework for examining these external influences. The importance of continuously analyzing how external factors are changing and may change in the future is also highlighted.
The document discusses the micro and macro environment factors that influence business organizations. It defines the micro and macro environment and provides examples of political, economic, social, technological, ecological, and legal factors that comprise the external environment. A PESTEL analysis is introduced as a framework for examining these external influences. The importance of continuously analyzing how external factors are changing and may change in the future is also highlighted.
ENVIRONMENT 15-16 _09_2020 Prof. Francesca Di Pietro Week 1 schedule 2 Learning objectives 3
¨ To analyze the main characteristics of a business
organization and its external environment; ¨ To understand how firms analyze the external environment; ¨ To understand the main actors and institutions that affect firms’ decisions and results. What is a business organization? ¨ A business organization as system that turns inputs into goods and services ¨ Business organization as a sustainable system ¤ “To meet the needs of present without compromising the ability of future generations to meet their own needs.” (World Commission on Environment and Development, 1987) ¤ Sustainability: n Economic (job creation) n Environmental (natural resources and climate); n Social (equality; human rights). n http://www.ssfindex.com/ssi2016/wp- content/uploads/pdf/JRCauditSSI2006_2012.pdf
4 Business Environment 5
¨ An environment is everything that surround a system;
¨ A business organization is a system, whose performance is influenced by a whole range of phenomena in its environment; ¨ Open system ¤ Not all the elements can be identified
¨ A business organization generates transformation processes
¤ This transformation is not static process, but organization must adapt to the environment and ensure constantly that they continue to transform inputs to generate valuable outputs Environmental influences 6 External environment 7
¨ The firm’s environment is composed by all the variables
that influence firm’s decisions and results; ¨ Environmental influences can be classified ¤ According to the origin (i.e. technology, demographics) ¤ According to the degree of proximity (macro vs. micro environment); ¨ Different levels of environmental analysis with different intensity in the interaction: ¤ Macro environment; ¤ Micro environment; ¤ Internal environment. Micro and Macro Environment 8 Micro and Macro Environment 9
¨ The external environment comprises all those forces and events
outside the organization that influence on its activities. ¨ Macro-environment: ¤ Environments’ factors, e.g. actors and institutions, that are beyond the control of a business organization, but could still influence its strategic decisions; ¨ Micro-environment: ¤ Environments’ factors, e.g. actors and institutions, that affects the organization directly. It refers to the environment that most closely linked to the firm n This environment is not also under the full control of business. WHY IS the environment 10 IMPORTANT? ¨ Social : Healthy eating has become an important issue in the early twenty-first century. The profits of the fast-food company McDonald’s fell and it was forced to close branches worldwide as consumers sought more healthy convenience food, before the company belatedly responded to change with healthier menu items. ¨ Political: In the airline market, companies such as Ryanair and easyJet spotted the opportunities represented by government deregulation and offered profitable low-cost ‘no frills’ air services, often aimed at people who would not previously have flown. PESTEL analysis 12
¨ PESTEL is a model examining the external
environment and the global factors that may affect a business; ¨ It can provide a quick understanding of the external pressures facing a business and their possible constraints on its strategy; ¨ It is usually divided into six external influences on a business – political, economic, social, technological, ecological, legal The political environment 13
¨ It refers to institutions, such as local and
national governments, lobbyists and pressure groups ¤ The stability of the political system; ¤ Tax policy, trade and tariff controls;
¤ … Governments are responsible for
protecting the public interest at large, imposing constraints on the activities of firms (for example, controls on pollution) The economic environment 15
¨ It provides an indication of national prosperity:
¨ Growth rates: economic growth rate is a measure of the change in the amount of goods and services produced by a nation’s economy. n GDP n Disposable income n Unemployment rate n Average earning n Saving ratio n Customer spending n Inflation rate n Interest rates
¤ … The social and demographic environment 16
Role of women Leisure Career orientation
Cultural influence: Values Beliefs Religion – Islam prohibits payment of interests; debt is less common for companies but more common is equity The technological environment 17 Industry 4.0 18 Ecological forces ¨ Environmental issues, environmental regulations ¨ Natural environment, global warming, climate change ¨ Customer values, market values, stakeholder/ investor values ¨ Management style, staff attitudes, organizational culture, staff engagement Legal environment ¨ Strength of the rule of law ¨ Current home market legislation, future legislation ¨ European/international legislation ¨ Regulatory bodies and processes ¨ Environmental regulations, employment law, consumer protection ¨ Industry-specific regulations, competitive regulations The external environment and the organization ¨ 2 subjective aspects: ¤ Actors and conditions as they are configured in the present moment; ¤ Ways to influence actors and conditions.
¨ Compatibility between the firm and its environment:
¤ Ability to create such compatibility Issues of concern
¨ The main problem with external PESTEL factors is that they are continuously changing; ¨ Therefore PESTEL analysis should include a thorough analysis of what is affecting the firm now, and what is likely to affect it in the future; ¨ The result of a PESTEL analysis is usually a list of positive and negative factors. ¨ “Importance ¨ - Increasing > ¨ - Unchanged = ¨ - Decreasing < Case Discussion 25
