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In your opinion which general environmental force is creating the most uncertainty for

organizations in 2009?

Business environment is a combination of a lot many factors that have a direct or an indirect

effect on every business. There is a constant need to analyze trends under way in the macro

environment. Without doing so, it would not be possible to develop business strategies that take

advantage of the opportunities and minimize the threats in the changing environment of business.

After all, most strategies derive from changes external to the firm.

The general environment consists of all conditions in the external environment that forms a

background context for managerial decision making. In other words, general environment is the

outer layer that is widely dispersed and affects organizations indirectly. Typical general

environment includes Technological conditions, Social cultural conditions, Economic conditions,

Political legal conditions, as shown by Fig.1 below.

Figure 1 General Environment and its components

Research shows that technology can substantially impact an industry’s performance. Identifying

the commercial potential of technological developments has dramatically accelerated, and the lag

between the ideas, invention, and commercialization has decreased. Technological progress over

the next 10 years is predicted to be several times greater than that experienced during the past 10

years. On the other hand the Socio-culture environment represents the values, attributes, and

general behaviour of the individuals in a given society. Compared to economic and technological

changes, the socio-culture environment evolves slowly.

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The general environment surrounding any business also includes the economic environment. The

economic environment can, and does, change quite rapidly. The effects can be far reaching and

may require changes in the business strategies. In recent times many Asian countries have

suffered from economic recession. In this period of “Asian flu” many businesses collapsed.

According to the book Marketing Strategy: Planning and Implementation (Walker,O.C ,

Boyd,H.W , Claude,J. 2002) every country has a legislative or regulatory environment within

which both local and foreign firms must operate. As with any external force, the political/legal

environment presents a firm with strategic opportunities as well as threats. Many third world

countries present an array of political risks to companies seeking to do business there.

Controversies over copy right infringement involve the highest stakes. In china, pirate factories

engage in counterfeiting items such as video movies, compact disks, computer software,

prescription drugs and Rolex watches. Counterfeiting costs U.S companies an estimated $1 to $2

billion a year.

The business environment as a whole effects the operations and strategies of every business. But

some of the factors are more dominating than the others, depending on the industry and the part

of the world. The economical environment changes have an everlasting impact on the business.

In fact the impact of economical environment can be seen by the fact that Startbucks, the iconic

coffee chain, reported that their revenue for fiscal year 2008 fell by 6% and sales have been

falling by 9% at many of its stores. As reported in the BusinessWeek (“Starbucks Cuts More

Stores and Workers Amidst Recession and Lower Earnings”, 2009), they have decided to layoff

some 700 corporate and 6000 store employees to cope up with the economic recession that is

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faced by the world today. Starbucks has eliminated bonuses to minimize as much costs as

possible. Even Howard Schultz, CEO of the company, cut his own annual salary from $1.2

million in 2008 to fewer than 10,000 a year in 2009.

In order to retain their customers, who have stopped spending on its pricy coffee, Starbucks is

coming up with different strategies to attract customers such as offering coffee at different times

of the day, especially in the morning and eliminating ready-brewed decaf coffee at afternoon.

Also the company will sell all but one of its private planes.

Like mentioned earlier, the economical environmental changes have a very serious impact on

every business therefore, it is crucial for companies to bend themselves according to the

economic conditions of their location. Same has been done by IBM, the world’s biggest

computer service provider, reported by IBM had already cut at least 4,000 positions since

January and still plans to cut 5,000 jobs. Their sales fell 4.5% last quarter as corporations pared

budgets to deal with the economic recession, reported Boston Globe (“IBM is said to cut 5,000

services jobs”, 2009). Moreover, Microsoft and Intel are also firing 5,000 and 6,000 employees

respectively. To cope up with the economic recession and falling demand, Intel also plans to shut

down five of its plants.

Similarly, 3M in France has also felt the jolts of worldwide economic unrest, reports Star

Tribune (“3M and Its Workers Feel the Pain of the Slumping Economy and Expect More

Trouble Ahead”, 2009). The international giant that makes Scotch Tape, Post-It notes and

everything else from dental crowns to band-aids, kitchen sponges and automotive adhesives, has

felt the economic punch in five of its six businesses. Like other industrial giants such as Dow

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Chemical, Dupont, Pentair, and H.B. Fuller, 3M is feeling the hardships of a recession that

respects no boundary or reputation.

"We saw all the classic signs one would expect at times like these: canceled orders, inventory

corrections in the channel, factory shut downs, layoffs and overall weak business conditions,"

Buckley, the CEO of 3M, said. "While weak business conditions, poor consumer confidence and

a fear factor made it worse, we believe the principal cause of the severe downturn was the

shortage of credit to lubricate the wheels of global commerce." To keep up with the worsening

economic situation 3M is focusing on reducing costs as much as possible and retaining cash.

Seeing the impact of economic environment on the operations and strategies of business, it is

concluded that economic changes affect the businesses more than any other general environment

component. If businesses do not respond to economical changes they will start losing the market

and will eventually withdraw. Technological, legal and socio-culture environment also affects

the business but the effect of economical changes is more drastic and threatening than any other

factor change.

REFERENCE LIST

Boyd,H.W . Claude,J . Walker,O.C , (2002).Marketing Strategy: Planning and Implementation.

Boston: McGraw-Hill Irwin.

DePass, D (January 28, 2009). The Winds of Economic Misfortune Struck Hard at 3M Co.
Thursday: 3M and Its Workers Feel the Pain of the Slumping Economy and Expect More
Trouble Ahead. Star Tribune, Minneapolis, Retrieved from
http://www.istockanalyst.com/article/viewiStockNews/articleid/2993508

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Helm, B. Kiley, D. (January 28, 2009). Starbucks Cuts More Stores and Workers Amidst
Recession and Lower Earnings. BusinessWeek, Retrieved from
http://www.businessweek.com/the_thread/brandnewday/archives/2009/01/starbucks_cuts.html
IBM is said to cut 5,000 services jobs. (2009, March 26). Boston Globe, p.8. Retrieved from

Monash online library database.