Internal Environment

Internal Environment in Businesses

Organisational Culture

  • Organisational culture refers to the shared values, norms and behaviours that characterise an organisation’s employees and management.
  • This can affect decision-making, employee behaviour, and the overall image of the business.

Management and Leadership

  • The management and leadership style can significantly impact various aspects of a business like office environment, performance, and employee morale.
  • The two primary styles are autocratic (centralised decision-making) and democratic (shared decision-making).

Human Resources (HR)

  • Human resources are responsible for managing employees in a business, including recruitment, training, development, engagement, and wellbeing.
  • High-quality HR can lead to improved productivity, lower turnover, and higher morale, while poor HR can lead to higher turnover, lower morale and productivity.

Operational Issues

  • Operational problems in business may include supply chain issues, quality control problems, or IT system failures.
  • Understanding these issues is essential for any business to prevent or mitigate damage.

Financial Performance

  • A company’s financial condition can significantly influence its strategy and actions.
  • Profitability, liquidity, efficiency, and stability are some key indicators of a business’s financial condition.

External Environment of Businesses

Macro Environment

  • This includes larger, broader forces that affect businesses, such as political, economic, social, technological, legal, and environmental factors (known as PESTLE analysis).

Market Environment

  • The market environment involves forces directly linked to a company’s relationship with customers and competitors, such as target market size, buyer behaviour, competitor activity, and market trends.

Competitive Forces

  • These forces include things like competition intensity, the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products or services.
  • Laws and regulations influence how companies operate, what costs they incur, and the demand for their products. They cover areas like employment law, health and safety regulations, and industry-specific regulations.

Economic Environment

  • This refers to the state of the economy, which can affect consumer spending and demand, the cost of capital, inflation and exchange rates.

Aims and Objectives of a Business

Understanding Business Aims

  • A business aim is the goal a business wants to achieve. These could include survival, profit maximisation, growth, market share, or corporate social responsibility.

SMART Objectives

  • These are specific, measurable, achievable, relevant, and time-bound targets that help a business achieve its wider aims. For example, a SMART objective may be to increase market share by 5% within the next year.

Objectives Linked to Stakeholders

  • Stakeholders can influence a business’s objectives. For example, shareholders may want maximised profits, while employees may seek job security and good working conditions.

Monitoring and Reviewing Objectives

  • It’s vital for businesses to frequently monitor and review their objectives to track progress, adapt to changing conditions, and keep everyone focused on common goals.

Structures and Organisation of a Business

Types of Business Structures

  • Main types include sole traders, partnerships, and limited companies.

Business Function Departments

  • Common business departments include marketing, finance, operations, and human resources, and depending on the business size, these may be sub-divided further.

Organisational Structures

  • These are the ways a business organises its staff and can include hierarchical, flat, matrix, and project-based structures. Each has its advantages and disadvantages.

Effective Business Communication

Types of Business Communication

  • These include verbal, non-verbal, written, and visual communication.

Barriers to Effective Communication

  • Common barriers include language differences, physical separation, status differences, lack of clarity or detail, and distractions.

Overcoming Communication Barriers

  • Effective ways to overcome such barriers may include simplification of messages, use of clear and precise language, training, and use of different communication channels.

The Role of IT in Business Communication

  • Information technology can facilitate quick, efficient, and global communication for businesses, but it may also present challenges such as security risks and reliance on technology infrastructure.

Stakeholders and Their Influence

Types of Stakeholders

  • Stakeholders can include employees, customers, suppliers, shareholders, government and the community.

Interests of Different Stakeholders

  • Different stakeholders have unique concerns and interests related to a business. For example, employees might be interested in job security and working conditions, while shareholders might prioritise profit and return on investment.

Influence of Stakeholders

  • Stakeholders can influence the operations of a business in different ways. For example, shareholders might influence strategic decisions, while consumers influence product popularity and brand image.

Managing Stakeholder Conflict

  • Difficulties may arise when the interests of different stakeholders conflict. Businesses may need to negotiate, compromise, or offer incentives to manage this conflict.

Features of Businesses

Types of Business Enterprises

  • Examples include for-profit businesses, non-profit organisations, cooperatives, and social enterprises.
  • Businesses can have different legal structures, such as sole proprietorships, partnerships, corporations, and limited liability companies.

Business Sectors and Industries

  • The sector refers to the broad area of the economy in which the business operates (e.g. primary, secondary, tertiary), while the industry refers to a more specific group of businesses with a similar product or service.

Business Size

  • Size can be determined by measures such as number of employees, turnover, or market share. Business size can influence factors like decision-making processes, resource availability, and the scale of operations.

Business Life Cycle

  • This cycle refers to the stages a business goes through over time – from startup to growth, maturity, and decline or renewal. It can influence factors such as financing, marketing strategies, and organisational structure.