BUSINESS ENVIRONMENT PROCESS

Prepared by : Team teaching of “IC-UTK”

Business Environment
The business environment is anything that affects business activity within an organization or
company. Factors that can cause an opportunity or threat and affect the business
environment are divided into 2 types, namely the internal and external environment of the
company.
- Internal Environment: This consists of everything directly related to the
organization / company and which affects the company.
- External Environment: This consists of everything outside the company which is not
directly related to the company but does affect it.
And the business environment is divided into 2 types ; Macro (external) environment and
Micro (internal) environment

Macro Environment factors :

Common environmental factors outside the company:
1. The Political Environment i.e. the Law (government).
2. The Social and Cultural Environment
i.e. demographic factors such as unemployment, population change, age, and gender.
3. The Economic and Business Environment.
4. The Human Resources Environment.
5. The Natural Resources Environment.
6. The Capital Environment.
7. The Knowledge and Technology Environment
8. The Information Technology Environment.
9. The Global Environment.

Micro environmental factors :

1. Management
2. Suppliers
3. Customers
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 4. Intermediaries
5. Competitors
6. Labor (Man)
7. Capital (Money) / creditors and shareholders
8. Material
9. Production tools (Machinery)
10. Methods
This internal environment is usually used to determine the company’s Strength or Weakness.
Environmental factors influential in the success or failure of a business
Because the elements in the environment can encourage or hamper business activities as
well as having a positive or negative impact on them.

Strategies in responding to environmental influences.

There are two basic strategies that can be performed by the organization to adapt to the
environment. One strategy is through internal changes and the other through environmental
control.
A. Internal changes.
Adjust aspects of the organization such as planning, structure, systems and work
procedures so as to adapt to changes in the environment.
B. Environmental Control
Strategies to control the environment include the following:
- Mergers
- Joint ventures
- Co-option, includes influential people into the environment, for example recruiting
government officials into the organization.
- Advertisement
- Association of similar employers.
- Changed fields of activity.

Management Strategy and Business Policy

Concept of " Management Strategy and Business Policy “ are :
- Business policy is the study of the functions and responsibilities of corporate leaders in
dealing with problems that affect the character and success of the company as a whole.

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- Strategic and business policy management can be interpreted as a comprehensive
activity to formulate, implement and evaluate business strategy for the future of the
company. It is always evolving in accordance with the development of the environment.
- For a newly established company, implementing and evaluating business strategies and
policies is more complicated than for an existing company.
- In large-scale companies the strategic level consists of: corporate strategy, business
strategy and functional strategy.
- In general, the strategy management process begins by creating an analysis of the
company's internal and external environment and then proceeds with formulating the
organization's vision, its mission and objectives, its strategy selection and the various
policies needed for the successful future of the company.

Business ethics
Business ethics is a study devoted to the moral standards applied in business policies,
institutions and behavior used to produce and distribute goods and services within an
organization. Because of the responsible for the company's product are : 1) Customers 2)
Workers (Employees) 3) Creditor 4) Environment and 5) Society (Communities)

Decision making strategies in Organizations

There are several methods in the business decision-making process, namely:
1. Authority Without Discussion (Authority Rule Without Discussion)
This method of decision-making is often used by autocratic leaders or in military
leadership. The advantage of this method is to have speed in decision making.
2. Expert opinion
This decision-making method is very good because it relies on several recommendations
from experts which reduce doubt.
3. Authority After Discussion (Authority Rule after Discussion)
This decision-making method is excellent for improving quality and responsibility.
4. Agreement (consensus)
This decision-making method can improve the quality of the decision because it has

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 supporters for the decision.
That the best decision-making method depends on the particular circumstances.

Business Policy
The term Business Policy is often associated with the term Business Strategy.
Policy is strategic thinking that brings overall impact to the organization's activitiesand is
comprehensive and long-term. Examples of strategic policies are long-term planning (long-
range planning) and strategic planning (strategic planning. Business policy is one part of the
more comprehensive strategic management.
Business policies are guidelines developed by an organization to regulate the business
actions that must be made, defines when a decision can be made by subordinates within an
organization. In other words, business policy is a guide that enables lower-level management
to handle business actions without always consulting top-level management in decision-
making.
Business policy also addresses the roles, functions, powers and responsibilities of top-level
management in response to something that affects organizational decisions over the long
term.

Effective business policies

An effective business policy has specific and clear features, so as not to complicate its
implementation. These include:
1. The policy is made as simple as possible so that it is easily understaood by everyone in
the organization;
2. A complete policy means having broad coverage (inclusive and comprehensive);
3. Policies can be translated in a flexible and applicable manner.
4. Policy has a wide scope, thus providing reassurance to use it repeatedly on routine
activities of the organization.
5. The policy should be stable, so as not to cause doubt and uncertainty amongst the
workers.
Policy formulation is the responsibility of top management

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Understanding policies and strategies.
Policies are the "blueprints" of relatively repetitive and routine organizational activities. They
are the responsibility of top management

Policies are guidelines for routine activities so as to run the organization's wheels effectively
and efficiently, a guide as to what can and cannot be done. Setting and maintaining policies
is the role, function, power and responsibility of top management, especially in dealing with
issues and phenomena of important organizational performance in the long term.
Strategy is a method used to achieve goals or targets set by a policy, generally carried out by
upper-middle management. A strategy is a plan developed and implemented to achieve the
purpose set by a business policy.

Types of Decision-making
1. Decision-making based on program or regularity consist of:
a. Programmed or structured decision making, ie routine, repetitive decision-making
that has alreay been determined.
b. Unprogrammed decision making: ie, non-routine decision making, requires specific
decision-making.
2. Decision-making based on Importance:
Decision-making based on this hierarchy is divided into 3 levels:
1) Decisions from top management, related to strategic planning decision problems.
2) Decisions from middle management, that handle the supervision problem, -the
nature of this work is about administrative / tactical problems.
3) Decision of operational management- decisions related to daily / operational
activities. (Operational decisions).
3. Decision-making based on Problem Type:
a. Short-term internal decisions, namely decisions related to routine / operational
activities such as deciding to purchase raw materials or determining production
schedules.
b. Long-term internal decisions, namely decisions related to organizational problems
such as organizational structure changes and departmental changes.
c. Long Term External Decisions, ie decisions relating to issues in the long term, such as
mergers

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4. Decision-making based on environmental conditions:
a) Decision-making under definite conditions
- Single or single alternative, has only one option.
- Decisions are supported by complete information / data, decision makers know
exactly what will happen in the future.
b) Decision-making in risk conditions, where decision-making alternatives are selected
with more than one possible outcome.
c) Decision Making under uncertain conditions, ie decision making where all conditions
that will arise / appear are unknown. Decision makers do not have complete
information about various circumstances. The thing to be decided is usually relatively
unheard of.
The degree of uncertainty of such decisions can be reduced by:
- Looking for more information.
- Doing research.
- Using subjective probability methods (A detailed explanation of the use of this
method will be discussed in the statistical material).
d) Decision-making under Conflict conditions is decision-making in which there are two
or more conflicting decision-making interests (a competitive situation).

Effective Risk Management Strategy

According to Terry (1989) the factors that must be considered in making the decision as
follows:
- Things are tangible or intangible, emotional or rational.
- Decisions should be materialized to achieve organizational goals.
- Decisions should pay attention to the interests of others.
- That rarely is a satisfactory type of choice.
- Decision making is a mental act which turns into physical action.
- Decisions take a long time.
- Practical decision making is to get good results.
- Decisions are to be developed so as to know whether the decision taken is right or
wrong.
- Each decision is an initial act for the next set of activities.

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Other factors that also influence decision making
- Physical: Based on the senses experienced by the body.
- Emotional: based on a subjective situation. Feelings and attitudes
- Rational: Based on knowledge, understanding the situation and its various consequences
- Practical: Based on ability or self potential and confidence in action.
- Interpersonal: Based on the influence of relationships with one another.
- Structural: Based on the scope of social, economic and political status.

A plan is to deal with any risk

- Risk management is the management of how to best prepare yourself for the possibility
of undesirable events.
- Risk management will increase the chances of success
Some important things to include in risk management planning are:
- List of risks
- An assessment of controls and their impacts
- An action plan to address them.

Steps / guidelines in formulating risk management

1. Undertake Planning :
The planning format may vary depending on the needs
2. Determine How to Handle Risks
Determining what to do with each risk so we can handle it well.
3. Monitor : Identifying and managing new risks.
Large companies have a special department to handle risk management.

Risk management
In the world of risk management, there are four strategies in dealing with risk, namely :
1. Risk Avoidance Strategies.
2. Risk Reduction Strategies.

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3. Risk Transfer Strategies.
4. Risk Acceptance Strategies.

1. Avoiding Risk Strategies

- The Strategy of Avoiding risk is the most effective way of dealing with risk.
- The disadvantage is that you will lose some profit because a risk can be a very
profitable thing.
- A strategy of avoiding risk is best used as a last resort, when other strategies are
considered to have too high a level of risk.
2. Risk Reduction Strategy
- That is to minimize the impact of a risk that will occur.
- This is the most common strategy as a result of the difficulty of avoiding a risk.
3. Strategy of Transfer Risk
- Risk is transfered through insurance.
- An insurance policy is a transfer of risk from one party to another in return for a
premium.
- This strategy is a good choice for dealing with risks that have a big impact.
4. Risk Acceptance Strategies
- A risk-averse strategy means restricting activity and missed opportunities.
- Reducing risk is a laborious process and and difficult to control.
- Transfering risk is also very expensive.
- A Strategy to accept risks means that whatever happens, the business continues as
the original plan.
- Important in risk-taking strategy is to ensure that risks are properly assessed and
evaluated, so that there is preparation in the face of an unforeseen or surprising risk.

Strategy alternatives
There are everal alternative strategies based on the analysis of the attractiveness and
business position of a company according to James W. Taylor (1992: 361)
1. A Holding Strategy
- This strategy is carried out by a company that has both a business appeal and a high
business position.

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 - In a strong position, the company must take a strategy to survive by maximizing
profits from an existing product or business.

2. Penetration Strategy (Penetration Strategy)

- This strategy is done by companies that have less business positions / medium
companies, but face a strong business appeal or want to be strong.
- Companies need to implement this strategy because it requires substantial
investment in order to be able to move toward a strong business position with
considerable profit potential.
3. Strengthening Strategy
This strategy is done by companies that have weak business positions, but face high
business attractiveness.
4. Reduction Strategy (Harvesting Strategy)
the company is facing a low or less attractive business but a strong business position, it
is necessary to choose a strategy for reducing its market share to maximize its revenue.
5. Strategy of Release or Withdrawal (Divestment or Withdrawal Strategy)
- A company that has a low level of business position and faces low business
attractiveness will usually be forced to adopt a disengagement or withdrawal
strategy.
- Products will be removed or withdrawn, especially unprofitable products.

3 (three) alternative business strategies proposed by Kotler (1997: 69):

1. Intensive Growth Strategy
In this stratergy the company's management assesses whether there is an opportunity to
improve the performance of existing businesses.
This strategy consists of:
1) Market Penetration Strategies
- The company seeks to capture a larger market share with existing products in
existing markets.
- Choice of this strategy: increase the old customer's usage level, lure competitor
customers or lure other customers to buy products.
2) Market Development Strategy

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 - The company seeks to develop new markets for existing products. The specific
choice of this strategy: opening up new geographic markets or attracting other
market segments.

3) Product Development Strategy

- Companies are trying to create potential new products for existing markets.
- The specific options of this strategy are: Develop new product attributes, develop
different levels of quality or develop different models and sizes.

2. Integrative Growth Strategy

In this strategy the company identifies opportunities to build or acquire business-related
business today. This strategy consists of:
1) Upstream Integration Strategy (above)
The company may purchase one or more of its suppliers to gain greater profit or
control.
2) Integration Strategy to Downstream (downward)
Companies can buy some of the lower-level companies in the distribution channels,
especially if the business is very profitable.
3) Horizontal Integration Strategy
The company buys one or more competitors, if this is not prohibited by the
government.

3. Diversification Growth Strategies

The company identifies opportunities to add exciting businesses that are not related to the
company's current business. This strategy consists of:
1) Concentric Diversification Strategy
Companies can search for new products that have technological and marketing
synergies with existing product lines, even though the product is intended for
different customers.
2) Horizontal Diversification Strategy
Companies can look for new products that can attract customers today even though
the technology is not related to existing product lines.
3) Conglomeration Diversification Strategy

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 In this last alternative, companies can look for new businesses that are not related to
current technology, products or markets.

Globalization and National Resilience

Globalization as a Challenge, in general, globalization is triggered or caused by the rapid
progress of the Triple T revolution.
The Triple '' T '' Revolution refers to the rapid advances in telecommunication information
technology (mobile telephone, satellite and internet), transportation and trade (trade
liberalization). The impact of globalization in trade is that every country must compete in
improving the quality of its industrial products.
Trade: a free trade where products of a country may freely enter and trade in other
countries.
The benefits of economic globalization:
- Global production can be improved;
- An increase in the prosperity of a society in a country can be achieved;
- The market can be expanded for domestic products;
- More capital can be earned; meluaskan
- Technological developments can be made;
- Additional capital for economic development can be generated.
The disadvantages of economic globalization:
- Inhibits the growth of the industrial sector;
- Exacerbates the balance of payments;
- Destabilizes the financial sector due to the flow of overseas investment into the
stock market;
- Creates a negative impact on long-term economic growth. (memperburuk)
Other phenomena of globalization:
- It undermines the morality, character and ethics of a nation, especially amongst the
younger generation;
- Hedonistic lifestyles and consumptive trends create greed and lead to individualistic
traits and attitudes;
- The emergence of political phenomena oriented to power and violence makes it
difficult to enforce laws;
• Soceities become hostile, intolerant of criticism and tend to be anarchic.

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National Resilience
National resilience is the ability to develop national powers of all kinds and forms to deal
with threats, challenges, obstacles and disturbances (that come from within and without,
directly or indirectly) to the State from economic, political, socio-cultural, educational and
other aspects.
The dimensions or measurement of resilience in the National Economic Field involve:
- The ability / independence to maintain national economic stability
- The resilience of the economic system to the influence of the external economic
system
- The competitiveness capability
- The margin of safety for poverty and economic growth rates
- The competitive advantage of national economic products
- The health of the business climate
- The availability of national goods and services
- The level of national economic integrity regarding the global economy

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