CHAPTER 4
Environmental Context of Management
Nature/Features of Business Environment
• Complexity
• Dynamic
• Multi-faceted
• Far-reaching impact
• Aggregate of Factors
• Interrelatedness
• Reciprocal
Complexity
• Business environment consists of
interacting events so it is complex
in nature
Dynamic
• Business environment keeps
on changing continuously
• Main reasons for dynamic
(Globalization & Technology)
Multi-faceted
• Environmental change can be an opportunity
for one business, but threat to another
business, so it is multi-faceted.
Far-reaching impact
• Business environment has
impact on businesses both
location wise and time wise.
Aggregate of factors
• Business environment is not
just one thing, it is a
combination of many things
Interrelatedness
• A change in one factor could have
an impact on the other factor
(Political factor could affect
economic factor and vice versa
Reciprocal
• Business environment affects
business and the business also
affects the business environment
Types/Component/Classification of Business Environment
Elements of Internal Environment
• Organizational Goals and Policies
• Organizational resources (Tangible & Intangible)
• Organizational Structure
• Organizational Culture
• Owners and Directors
Organizational Goals and Policies
• Goals are desired outcome
• All business activities are
directed towards the
achievement of goals
Organizational resources
• They are input in firm’s production process
• Eg: Capital, Equipment, Skills, Patents,
Finances)
• Tangible Resources ( Financial, Machinery,
Land, Vehicle)
• Intangible Resources (Skills, Innovation,
Patent, Trademark, Logo)
Organizational Structure
• It specifies job relationships
• It is important to maintain chain
of command in any organization
Organizational Culture
• It is the ideologies and core
values with the organization
Owners and Directors
• They are the founders of the company
• they make strategic decisions
Micro Environment factors
• Also….. Media, pressure
groups, strategic alliance
Macro Environment
• Along with these factors, in modern
organizations, GLOBAL ENVIRONMENT is
the most important factor.
Techniques/Methods of Environmental Scanning
• Executive Opinion Method
• Expert Opinion Method
• Delphi Method
• Extrapolating Method
• Historical Analogy
• Intuitive Reasoning
• Scenario Building
• Cross-Impact Matrix
Executive Opinion Method
• Environment is forecasted
on the basis of opinion and
views of top executives.
Expert Opinion Method
• Environment forecasting is done on
the basis of opinion of outside
experts or specialists.
Delphi Method
• Select experts and let them
discuss until a consensus is
reached about certain
aspects of the environment.
Extrapolating Method
• Predict future events based on past experiences.
• Useful in predicting what will happen in the
future as past usually tends to repeat itself.
• For Example: The companies in Nepal today are
more ready to face any blockade from India as
they already have experience from the past.
Historical Analogy
• Analyze future based on parallel historical
trends of other products
• Example: Sales history of similar product
Intuitive Reasoning
• Use of rational and unbiased
intuition to make judgement.
• The reliability of this method is
questionable
Scenario Building
• Imagine possible things that could
happen in the future.
• Always better to be prepared than
to respond when things happen.
Cross Impact Matrix
• Combine all methods to find the
best possible scenario for the future.
• It is the best method to scan the
environment.
Types of Environmental Scanning
• Centralized Scanning: Scan only one factor
of the environment. The validity of the
method is questionable.
• Comprehensive Scanning: All components
are analyzed in a detailed way.
Process of Environmental Scanning
• Study the forces and nature of the environment
(Political, Social, Cultural, Technological etc..)
• Determine the sources of Information
(Mass Media, Reports, Employees, External agencies, Spying)
• Select the Scanning method
• Scan and Access the trend
Elements of Socially Responsible Organization
• Accountable
• Voluntary
• Create an open environment where employees can voice their concerns
• Put Social Responsibility in writing
• Put Social Responsibility in budget
• Support of Senior Management
• Train employees to become more socially responsible
Approaches to Social Responsibility (CSR)
• Social Obstruction (Lowest Level)- More focus on Profit
• Social Obligation/ Defensive Approach- Little focus on CSR
• Social response/ Accommodation Approach- To satisfy stakeholders (Ncell)
• Social contribution/ Proactive Approach (Highest Level)- Tata Group
Areas of Social Responsibilities of Business
“The aim aim of Social Responsibility is to build long term relationship with the stakeholders of the society”
Business Ethics
• Set of rules or principles
that define right or
wrong and then making
the right choices.
• Concerned with truth
and justice
Importance/ Significance of Business Ethics
• Promotes Goodwill and Image
• Good Relationship with Stakeholders
• Less Government Intervention
• Promotes Competition
• Promotes Social Responsibility
• Improves working Environment
Ethical issues in business
• Finance and Accounting issues (Financial fraud, Insider trading, Showing
higher profits to shareholders)
• Human resource management issues (Nepotism, gender equality,
diversity, privacy of employees, fair salary)
• Marketing management issues ( False advertisement, advertising to
children, hiding facts)
• Production issues (Lower quality raw material, safety of employees)
Criteria for Ethical Decision Making
• Compliance
• Promote Good and Reduce Harm
• Responsibility
• Respect and Preserve Rights
• Promote Trust
• Build Reputation
Emerging Business Environment in Nepal
1) Increasing role of Private Sector
2) Growing Urban Population
3) Rising awareness and Consumerism
4) Changing role of Government
5) Rising Economic Agenda
6) Use of Modern Technologies
7) Globalization
8) Changing Socio- Cultural Values
9) Growth of Service Sectors
10) Workforce Diversity
1) Increasing role of private sectors
• With the rise of globalization, the
investments in core national activity
such as Telecom, Transportation and
Hydro have grown massively.
2) Growing Urban Population
• With people moving to City areas, the
development rate is increasing but
villages are getting more backwards.
3) Rise in Consumerism
• Consumers today are far more aware than
in the past and the companies are forced
to make consumers the king of their
business rather than focus on profits.
4) Changing role of the government
• Government today is just a
facilitator rather than regulator
with the role of government
decreasing over the years.
5) Rising Economic Agenda
• In the past, bandas and hadtaals
used to be simply about political
issues but citizens today take streets
to protest Inflation and rise in prices.
6) Use of Modern Technologies
• Nepalese market has seen massive
changes in technological
development over the last decade.
7) Globalization
• The world is a global village and boundaries
are simply for the shake of making maps.
• Products made in Nepal are sold globally.
8) Changing Socio-cultural values
• Nepalese society today is largely
affected by western culture.
• The impact can be seen in all sectors
ranging from clothes we wear to food
we eat to the music we listen
9) Growth of Service Sectors
• Example: Banks, Hospitals, Hotels,
Schools & Colleges, Movie Halls
• Why?
10) Workforce Diversity
• While workforce diversity is
rising and it is good, sometimes it
could also result in conflict.