T5-The business environment

Not only for CAT T5 students,but to anyone who started to study business related subjects,this is an important topic to start off your long journey.People who just started to enter business world would probably do not know what is happening around the world,so let's get started with basics.

In business,most of the time you may not choose to work on your own,so-called sole trading,because you have an individual limits and you need to take care of everything in the business on your own.Therefore,the existence of organisations became more common.Organisation is defined as a social arrangement which pursues collective goals,which control its own performance and which has a boundary separating it from environment.It is basically mean people who have the same goals gather to share their expertise so that they can earn more profits.

So why do we need organisation?I had already mentioned above that individuals have limitations,they cannot do everything on their own especially if your business is growing.With organisation,members can specialise their skills and perform in the area that they are more capable of so that tasks can be done faster and better.I had also mentioned that when people are gathered,they can share their expertise and complex work can be done by synergy of people.There is much more benefits when operating under an organisation.

Organisation is an open system too.Let's see what is open system.Open system is a system which continuously interacts with its environment.It takes influences from its environment and also influences its environment.It also obtains inputs and generates outputs.

Why do we need to know that organisation is an open system?This is because that organisation is regularly exchanging feedbacks with its environment.That's why environment is an important issues for managing an organisation.Healthy organisations will regularly try to understand their environments through use of environmental scanning,market research and evaluations and often try to influence their external environment.

Environment can be divided into two types:micro environment and macro environment.Well the difference is just about the control,micro environment is the one that we can control easily for example customers and suppliers but macro environment is the one that is almost out of our control such as rise of interest rate,inflation and so on.We have to be careful in deciding what type of business is more suitable in different place.Well there is a well known model called PEST which analyse the external environment factors using political/legal,economic,social and technological.Let's me provide guidance on how to use this model.

Legal factor will affect all organisations,that's for sure.We can analyse the laws such as company law,employment law,health and safety act,data protection act,tax law and so on of an area.For example,if a certain country requires a strict health and safety procedures in an organisation,it will affect us and we must do so.

Political risk is an important factor to consider when looking for a new market.Political risk in a decision is the risk that political factors will invalidate our strategy and perhaps severely damage our organisation,for example,wars and political chaos.Remember investors will only come to invest if the politic is stable,we shall keep an eye on the government policy too.

Business planning must also take into account the forecast state of the economy.In this case,Gross Domestic Product(GDP) of a country can help a lot,we can start our business in the country where the GDP is higher because it measures the overall economic output of a country.Keep an eye on the local economic trends too such as the wages rate.Other factors such as inflation,interest rates,tax levels,government spending and business cycle of a country should be taken into account as well.

For the social factor,we analyse the demographic change.Demography is the study of human population and population trends.So for example,if our business is selling expensive items,we may open our business in the area where the wealth(buying power of people) is good,then we have business to do.Beside wealth,we can also see factors such as growth,age,geography,ethnicity,social structure and so on.

Technological factor is also important if our business requires high technologies to operate.Technology can help in gaining productivity,reduce costs and introduce new types of product.For example,if our business is selling computer,technological factor becomes very important to us as we want to improve our products from year-to-year so that we can compete with our competitors.

So you can see that PEST model actually helped us a lot in analysing the external environment.Okay now let's talk about stakeholders,who are stakeholders?Stakeholders are groups or individuals who have interests on the organisation.We can categorise stakeholders into three types:Internal(employees,managers),external(government,shareholder) and connected(bank,suppliers).In the basic,you just need to know who are stakeholders,for further studies,we need to analyse the stakeholders probably by stakeholder mapping,triple tasks method and so on because stakeholder analysis is a key part of stakeholder management.

Okay now you should have some basics knowledge about business,you should understand organisation,environment and stakeholders by now.Therefore,have you realise that we actually have a lot things to study in business,even these basics knowledge contain a lot of information.This article is an introduction to business studies,you need to understand this article and if you can explain the terms in your own words,that's the best!!I wish everyone good luck in business studies and enjoy it :)