Chapter 2,The business environment,1 Analysing the environment,The environment is everything that surrounds an organisation, physically and socially. Management cannot control the environment, however it influences all aspects of organisational activity and so must be viewed strategically.,Organisation must consider its environment,Global / local General / task General (or macro) environment influence all organisations indirectly. PEST factors Task (or micro) environment has a direct impact on the organisation. Five competitive forces,The environment is a source of uncertainty. Simplicity / complexity The variety of influences faced by an organisation The amount of knowledge necessary The interconnectedness of environmental influences Stability / dynamism,1.1 The changing environment Globalisation of business Science and technology developments Mergers, acquisitions and strategic alliances Changing customer values and behaviour Increased scrutiny of business decisions by government and the public Increased liberalisation of trade, and deregulation and co-operation between business and government have eased access to foreign markets Changes in business practices: downsizing,outsourcing and reengineering Changes in the social and business relationships between companies and their employees, customers and other stakeholders.,Questions,Which of the following headings is not part of a normal PEST analysis? A Political B Ecological C Social D Technological Answer: B,2 The political and legal environment,2.1 The political and legal environment Common legal factors in environment General commercial law (contract, tort) Criminal law (theft, insider dealing) Company law (directors duties, reporting) Employment law (trade union, minimum wage),More common legal factors Health and Safety (fire, personal safety) Data protection (use of information) Marketing / sales (consumers, advertising) Environment (emissions, waste disposal) Tax law (VAT, PAYE),2.2 The impact of government Porter notes several ways whereby the government can directly affect the economic structure of an industry Capacity expansion Demand Divestment and rationalisation Emerging industries Entry barriers Competition Regulate the adoption of new products in some industries National and EU institutions also affect the operating activities of some organisations,2.3 Influencing government Employ lobbyists to put their case to individual ministers or civil servants. Give MPs (Member of Parliament) non-executive directorships Try to influence public opinion, and hence the legislative agenda, by advertising EU regulations, for practical purposes, take priority over national law It is therefore much better to influence the drafting process of new regulations than to try and get them changed once they have been implemented,2.4 Political risk and political change In UK, government will publish a green paper discussing a proposed change in the law, before issuing a white paper and passing a bill through parliament. The political risk in a decision is the risk that political factors will invalidate the strategy and perhaps severely damage the firm.,2.5 International trade Potentially subject to a higher level of political risk 2.6 The European Union The European Union operates a single European market, allowing for the free movement of labour, goods and services, and free competitions. Harmonising technical standards, opening up areas such as telecommunications to competition, consumer protection, mutual recognition of professional qualifications and so on.,2.7 International trade liberalisation: the World Trade Organisation (WTO) The World Trade Organisation was set up to promote free trade and resolve disputes between trading partners. The theory of comparative advantage suggests that free trade is the best way to promote global economic growth and, by implication, domestic prosperity.,3 Employment protection,3.1 Retirement Ban ageism Retirement ages for men and women are being equalised. 3.2 Resignation Exit interview Period of notice,3.3 Dismissal Statutory minimum period of notice A written statement of the reasons for dismissal 3.4 Wrongful dismissal The employer has dismissed an employee however they have breached the terms of the contract. It relates to the method of dismissal. 3.5 Unfair dismissal The employee has been dismissed for an arbitrary reason the onus is on the employer to prove that it was a fair dismissal. 3.6 Disciplinary procedures,3.7 Redundancy Certain legal minima for compensation offered, based on age and length of service 3.7.1 Procedure for handling redundancies The impact of a redundancy programme can be reduced in several ways Retirement of staff over the normal retirement age Early retirement to staff approaching normal retirement age Restrictions on recruitment to reduce the workforce overtime by natural wastage Dismissal of part-time or short-term contract staff Offering retraining and / or redeployment within the organi