Micro-Scholarship, What it is, How can it help me.pdf
Pob stage 2_session_1_lecture_1 without notes
1. Principles of Business
Lecture 1: Introduction to the
Business Environment
Stage 2 Session 1
2. Overview
• Recap – what is a business?
• What environments does a business operate in?
• The Internal Environment
• The External Environment
• The Competitive Environment
2
3. Learning outcomes
of this Seminar
• To be able to define the environments in which a
business operates
• To be able to distinguish between the internal and
external environments and how they impact on
business decision making
• To be able to explain the explain the difference
between the micro and macro environment
• To appreciate the concepts of organisational
culture and politics
3
4. What is a Business?
4
Large
Medium
Small
Major
corporates
Public Utilities Government
Agencies
Franchise
networks,
chains of
medium sized
companies
Private
hospitals,
educational
establishments
Not for profit
businesses
Small
businesses
Co-operatives,
social
partnerships
Small
associations
and charities
Economic goals,
private benefit
Mixed goals,
mutual benefit
Social goals,
public benefit
Adapted from Preston and Others (2012) What is a Business, Open University, Milton Keynes
5. The environments a Business Operates in
MACRO EXTERNAL
MICRO EXTERNAL
INTERMEDIARIES
INTERNAL
Structure
Culture
Resources
SUPPLIERS
COMPETITORS CUSTOMERS
POLITICAL
ECONOMIC
SOCIO-CULTURAL
LEGAL
TECHNOLOGICAL
ENVIRONMENTAL
8. Drennan (1992)’s twelve factors
• The influence of a dominant leader
• The history and tradition of the business
• The type of technology used or the type of goods or services produced
• The industry or sector the business is in and the nature of competition it faces
• The customers of the business
• Company expectations
• Types of information and control systems
• The external environment in which the business operates
• The procedures and policies in place
• The reward systems that exist
• How the business is organised and resourced
• The goals, values and beliefs
David Drennan (1992) Transforming Company Culture: Getting Your Company from Where You are Now, to Where You Want to be; McGraw
Hill
10. Personal Stakeholders
Your
manager
You
Your
colleagues
Your
subordinates
Project
Sponsor
Internal
Suppliers
Senior
Managers
Budget
holders
Internal
Customers
12. Stakeholder Mapping
Level of Interest
Low High
Low
Level of
Power
High
Category A
Minimal effort
Take action if they acquire a stake
Category B
Keep informed
Ensure they do not form powerful coalitions
Category C
Keep Satisfied
Ensure they do not feel marginalised
Category D
Key Player
Ensure involvement is maintained
Johnson G and Scholes K (1999) Exploring Corporate Strategy, Prentice Hall
13. The External Environment – The Micro Environment
MICRO EXTERNAL
SUPPLIERS
INTERMEDIARIES
COMPETITORS
CUSTOMERS
14. SUPPLIERS
Bargaining power of suppliers
similar to that of buyers
BUYER POWER
POTENTIAL
ENTRANTS
THREAT OF
SUBSTITUTES
INDUSTRY
RIVALRY
Threat of
substitute
products
or services
Bargaining power
Porter (1980)
• Size/concentration of buyers vs
makers
• Buyers’ switching costs
• Buyers’ information
• Buyers’ ability to backwards
integrate
Price sensitivity
• Cost of product relative to
total cost
• Product differentiation
• Competition between
buyers
• Economies of scale
• Absolute cost advantages
• Capital requirements
• Product differentiation
• Access to distribution
channels
• Govt. & legal barriers
• Retaliation by existing
producers
• Buyers’ propensity to
substitute
• Relative prices and
performance of substitute
products
• Concentration
• Diversity of competitors
• Product differentiation
• Prod’n capacity levels
• Exit barriers
• Cost conditions
15. The Macro External Environment
• The Political Environment
• The Economic Environment
• The Sociological Environment
• The Technological Environment
• The Legal Environment
• The Environmental Environment
16. In summary
• Recap – what is a business?
• What environments does a business operate in?
• The Internal Environment
• The External Environment
• The Competitive Environment
17. Next session
• In the next two seminars we will be doing case studies
• The first will look at and provide you with an opportunity to undertake a
stakeholder analysis using the Johnson and Scholes model
• The second will look at and provide you with a chance to look at Porter’s five
forces model
• In the second lecture we will be looking in more detail at the macro external
environment and at some tools that are available to carry out environmental
mapping
