Environment of Firms Essay

Environment of Firms Introduction Business environment consist of all those factors that have a bearing on the business. The term â€Å"business environment† implies those external forces, factors and institutions that are beyond the control of individual business organizations and their management and affect the business enterprise. These forces are customer, creditors, competitors, government, socio-cultural organizations, political parties national and international organizations etc. some of those forces affect the business directly which some others have indirect effect on the business. Types of Environment 1Internal Environment The internal environment is the environment that has a direct impact on the business. Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment. A) VALUE SYSTEM The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and the objectives of the organization, business policies and practices. B) MISSION,VISION AND OBJECTIVES Vision means the ability to think about the future with imagination and wisdom. Vision is an important factor in achieving the objectives of the organization. The mission is the medium through which the objectives are achieved. C) Organizational Structure It includes the values and expectations of your firm’s stakeholders; its mission, goals and objectives; and its resources. These factors combined  determine what your organization is trying to accomplish and how successful it is likely to be. 5 basic parts of organization: Operating core, Strategic Apex, Middle line, Technostructure, and Support staff basic organization structure: a) Functional b) Divisional c) Hierarchical d) Line and Staff Structuree) Task Force The Need for Organizational Structure Organizations needs structuring so that lines of authority along with individual duties and responsibilities can be understood by every company member. f) Matrix Structure TRENDS IN ORGANIZATIONAL STRUCTURES The growth in retailing, both on-site and off-site, has required merchants to readdress their tables of organization so that they will better serve the needs of their customers and make their companies more profitable. Some of today’s trends in organizational structuring for the fashion-retailing arena are described in this section. Restructuring to Accommodate Multichannel Expansion When department stores in particular expanded their catalog operations, many initially opted to make this division part of their brick-and-mortar operations. Similarly, when retailers saw that the Internet had the potential to increase revenues, they changed their organizational structure to reflect this and to make the overall operation function more efficiently. Today, the trend is for the major multichannel retailers to adjust and expand their tables of organization and separate the three functions into separate channels. Macy’s, for example, is one of the giants in the industry  that has changed to that format. Consolidation of Divisions The acquisition of department stores by major retail groups has become a dominant trend. May Department Stores and Federated Department Stores, for example, are two companies that have expanded their operations by purchasing other retail companies. In their pursuit of maximizing profits, these groups have, in many cases, decided to merge the new acquisitions into some of their own stores. May, for example, purchased sixteen Wanamaker’s stores and three Woodward & Lothrop stores and merged some into their Hecht’s division and some into the Lord & Taylor group. Through this practice, fewer buyers and merchandisers were needed as were other executives who previously worked exclusively for one store. As this acquisition trend continues, this staff consolidation is likely to continue as well. Decentralization Much of the growth in large-scale retailing has come about by expansion into new trading areas. Although centralization was once the forte of the chain organization, this expansion has necessitated some decentralization of functions. Merchandise distribution, for example, has now been decentralized to include regional operations. When stores were so far from the single distribution center, the time it took for merchandise to reach many of the units was both inefficient and costly. SMALL STORE APPLICATIONS The manner in which small stores are organized is unlikely to change, because these operations require few employees to run them. The key roles are usually performed by the owner or partners with the remainder of the functions such as selling and stock keeping left to the sales associates. When there isn’t a store manager on site, as is often the case, a particular salesperson should be designated to take charge and assign tasks such as handling temporary changes in sales associates’ hours. When outside tasks, such as advertising and visual merchandising, are required, outside agencies should be hired to take care of them. The need for in-house specialists to perform these tasks is limited and is too costly for small businesses to afford. Strengths and Weaknesses Strength is any attribute or ability of the organization that may help it in accomplishing its mission and in fulfilling its vision Weakness is any attribute or ability of the organization that may hinder it in accomplishing its mission and in fulfilling its vision †¢For example factors relating to products, pricing, costs, profitability, performance, quality, people, skills, adaptability, brands, services, reputation, processes, infrastructures, etc †¢Factors tend to be in the present Starbucks SWOT analysis 2013 Strengths 1.Sound financial records 2.No. 1 brand in coffeehouse segment valued at $4 billion 3.Starbucks experience 4.Largest coffeehouse chain in the world 5.Employee management Weaknesses 1.Coffee beans price is the major influence over firm’s profits 2.Product pricing 3.Negative publicity Opportunities 1.Extend supplier range 2.Expansion to emerging economies 3.Increase product offerings 4.Expansion of retail operations Threats 1.Rising prices of coffee beans and dairy products 2.Trademark infringements 3.Increased competition from local cafes and specialization of other coffeehouse chains 4.Saturated markets in the developed economies 5.Supply disruptions 2External Environment It refers to the environment that has an indirect influence on the business. The factors are uncontrollable by the business. Two types of external environment: Micro Environment The micro environment is also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm. a) Suppliers An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company. b) Customer The major task of a business is to create and sustain customers. A business exists only because of its customers. c) Marketing Intermediaries The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. d) Financers The financers are also important factors of internal environment. e) Public Public can be said as any group that has an actual or potential interest in or on an organization’s ability to achieve its interest. Public include media and citizens. Macro Environment Macro environment is also known as General environment and remote environment. Macro factors are generally more uncontrollable than micro environment factors. When the macro factors become uncontrollable, the success of company depends upon its adaptability to the environment. a) Economic Environment Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc. b) Social Environment The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, mobility of labor etc. have far-reaching impact on the business. c) Political Environment The political environment of a country is influenced by the political organizations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. d) Legal Environment Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts. e) Technical Environment The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used. Financial System of the Country and Selected Items of Monetary & Fiscal Policies The structure of the Philippine Financial system is dominated by a banking system. Bangko Sentral is the official central bank in the Philippines. The structure of the financial system allows the option to take debts and buy bonds or stocks. There are many private banks present for this purpose. Financial Institutions are the intermediaries that mobilize savings and facilitate the allocations of funds in an efficient manner Fiscal policy refers to the â€Å"measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals.† In the Philippines, this is characterized by continuous and increasing levels of debt and budget deficits, though there have been improvements in the last few years. The Philippine government’s main sources of revenue are taxes, with some non-tax revenue also being collected. To finance fiscal deficit and debt, the Philippines rely on both domestic and  external sources. External Sources of Financing are: 1 Program and Project Loans – the government offers project loans to external bodies and uses the proceeds to fund domestic projects like infrastructure, agriculture, and other government projects. 2 Credit Facility Loans 3 Zero-coupon Treasury Bills 4 Global Bonds 5 Foreign Currencies Domestic Sources of Financing are: 1 Treasury Bonds 2 Facility loans 3 Treasury Bills 4 Bond Exchanges 5 Promissory Notes 6 Term Deposits In 2010, the total outstanding debt of the Philippines reached Php4.718 trillion: Php2.718 trillion from outstanding domestic sources and Php2 trillion from foreign sources. According to the Department of Finance, the country has recently reduced dependency on external sources to minimize the risks caused by changes in the global exchange rates. Efforts to reduce national debt include increasing tax efforts and decreasing government spending. Monetary policy is the monitoring and control of money supply by a central bank, such as the Federal Reserve Board in the United States of America, and the Bangko Sentral ng Pilipinas in the Philippines. This is used by the government to be able to control inflation, and stabilize currency. Monetary Policy is considered to be one of the two ways that the government can influence the economy – the other one being Fiscal Policy (which makes use of government spending, and taxes). Monetary Policy is generally the process by which the central bank, or government controls the supply and availability of money, the cost of money, and the rate of interest. The Philippines’ inflation target is measured through the Consumer Price Index (CPI). For 2009, inflation target has been set to be 3.5 percent, having a 1% tolerance level, and 4.5 percent for 2010, also having  1% tolerance. Also, the Monetary Board of the Philippines announced a target of around 4 ±1 percent from 2012 to 2014. Opportunities and Threats Opportunities are any issue, event or trend that may help the organization in accomplishing its mission and in fulfilling its vision Threats are any issue, event or trend that may hinder the organization in accomplishing its mission and in fulfilling its vision †¢for example, factors relating to markets, audience, fashion, seasonality, trends, competition, economics, politics, society, culture, technology, environmental, media, law etc †¢factors tend to be in the future