The Effect of Business Environment on the Effectiveness and Functioning of an Organization

The Effect of Business Environment on the Effectiveness and Functioning of an Organization
To best answer the question of how different business environments affect the effectiveness of a business it is imperative that we first define what the business environment is and what all its factors are. The business environment perse? is: the environment in which a firm exists, this setting is a dynamic unity of everything inside and outside of the Company which adversely affects the activities of a firm either directly or indirectly. The idea that; "a firm does not exist in isolation and that it works within its overall environment"; just reinforces the importance of this environment to all business? and the need to consider it. Seeing also as how the world is changing with time and technological advancements, the business environments of today are a constantly changing group of situations that a firm has to deal with. By monitoring and adjusting to the changes in its environment, a firm is best prepared to succeed. And it is only through this preparation that a firm can survive. As a whole, the ?business environment? is the single most important factor a company must study, monitor and adjust to, to be assured the success and realizations of its goals.
The following table illustrates clearly the Business Environment: Firm Internal Environment External Environment The two divisions which compose the whole of the business environment; though the effects of these 2 differ on the firm none is more important than the other and both must be taken into consideration. The first division of the environment is the "Internal environment. The internal environment is the environment within the company itself and it has the most direct impact on the daily activities of the company. The factors which comprise the int. environment are: first, the customers, they comprise most of the firm?s sales, income and later profits so they must always be satisfied or the company loses money. The second factor in the int. environment is the competition. The importance of which: is knowing and planning the most effective way to beat competitors; either with new ideas or cheaper products. Comprising the third factor of the internal are the employees these are the people who make the company operate and its progress is very much dependent on their work. The firm in turn must look after their well being and keep them happy so they will be motivated to work well. An unhappy labor force usually means an unproductive company. In any form of production it is hard to forget the suppliers; they are the firms who provide other firms with raw materials and tools needed in production. A firm with a good supplier is assured of high quality materials at good prices and on time. Thus making this factor an important consideration. Wrapping up the internal environment are 2 factors which work hand in hand. The first are the share holders, being investors the so called cash cows; these people can influence policies and procedures within the company. They also expect good dividends on their investment and if are not satisfied can withdraw their money and invest elsewhere. The second of the cash cows are the financial institutions; these are the banks responsible for lending money to the firms for capital increase company growth or other reasons. These institutions must be repaid on time and as agreed so that the company can always turn to these institutions in times that they need financial support. As a whole the internal division of a firms environment is a necessity to its existence and success. Hand in hand with the internal environment, the other half of the ?business environment? is its external environment. the factors found here don?t so much affect the day to day or operations of the firms, but they do affect the long term strategies and policies that a firm will adapt to survive in the future. The first factor in the external environment is the: Physical environment, this is important to firms specially those entering foreign lands aside from their own. The physical environment includes such considerations as geographical size, location of a country, weather, availability of raw materials, and the readiness of infrastructure; Which it might need for operations in and around the country and region (ex. Airports, docks, highways, etc.). In collaboration with this, a company must also take into consideration the technological environment. The rapid growth of technology use is a consideration which assures the company better products at a faster production pace, and at a cheaper price. It makes it easy for firms to invent new products or improve existing ones. Two factors of the external environment which exist together are the Politico-Legal environment and the Economic environment. the politico-legal considerations include the attitudes of government which will later have a direct impact on operations, and the legal framework with which the firm is to exist. In the economic stand point government also plays a large role, with differing economic policies which regulate different state economies. The state of this factor plays a large part in the level of sales and profits of a firm. For both these factors a stable government is a critical factor and must be sought out by the firms. The last and probably the most sensitive factor in the external environment is the socio-cultural environment. These are the attitudes of people towards certain things, be it because of culture, custom, or experience these attitudes will differ and must be dealt with by the firm. Also these attitudes do change with time so firms must monitor and adjust to the changes. One type of business which clearly illustrates the differences the business environment can bring to certain organizations is the case for example of the hospitals. There are hospitals the world over and each and every one of them is different because of its business environment. Even hospitals in the same city are different depending on this environment. Take for example hospitals in the US, finding themselves in seemingly perfect external environments; it?s given that at present the United States can boast of a very positive setting, factors like a very stable political government; that can boast of probably the most stable economic standing in the world. Couple that with the socio-cultural attitude of the American people as a whole: that medical care is essential to their lives. Also found with all that is the availability of the most technologically advanced medical equipment and knowledge in the world. All factors which provide the backdrop for very successful hospitals and medical health organizations. With that positive external setting goes an internal business environment filled with well educated doctors, who are dedicated to their work. And a host of competition in the form of other hospitals equal in quality of staff, technology and supplies. Being in this perfect situation these organizations find ways and means to provide their patients with sufficient if not excellent health care and services. Through the constant break-troughs and miracles of modern medicine, medical care is fast affordable and efficient, and in the process many lives are saved. To this organization in the 1st world country things are as good as they get. All the different factors of their business environment meld together perfectly, and all the firm has to worry about is keeping up with technological changes and procedures. The end product of all the above: is a hospital dedicated to saving lives, efficiently and professionally. The success rate for this hospital is very high, even for the really bad cases. On the opposite side of the spectrum, take a third world hospital for example: in its external environment: the government is poor so nothing is subsidized; people are so poor no one has health insurance, some are even so uneducated that they put their lives in the hands of witch doctors and the such. The hospitals are usually poor and have no money to buy new equipment many times doing with what is left over from era?s gone by, or donations from other countries. In such a case the interior environment usually consists of ill educated medical staff and doctors; supplies which are extremely old and in some cases expired even; the patients who come in have no money whatsoever and the general attitude is if you can?t pay you die. The resulting effect of the given third world situation is that hospitals become ineffective because of lack of knowledge, lack of money and, lack of technology. Many patients are untreated, and many die because of the deficiencies in the hospitals. Also many get infections which could have been avoided had better precautions been taken. In some worst case scenarios people are not even diagnosed because the doctors were ill educated, and these people die without a fighting chance. Given the case of my example it is really hard if not almost impossible for a hospital like this to make changes and adjustments, mostly because of its lack of capital and no where to get it. It just continues to exist, not achieving its mission and definitely not making a profit. All in all the business environment affects organizations adversely, in my example although two extremes it is clear that the environment can literally facilitate an organization?s effectiveness or take it to its failure. In view of this: it is important to note that a firm?s success relies heavily on the notion that it studies its business environment in depth, and makes the necessary plans, changes and adjustments needed for it to continue in its given situation. The success or failure of an organization rests mainly on its ability to adapt to its environment and make the best out of its situation. Firms which fail to adapt to the changes brought about by the differences in the business environments, will fail at achieving their goals and in worst case scenarios go bankrupt.

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