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The environment of business

Chapter 2 :
Organizational boundaries
Organizational boundaries

Understanding and environments Multiple organizational environment

Economic growth
Aggregate output & standard of living, GDP & GNP,

the Environment of Business Economic environment Economic stability Inflation, unemployment

Global economy in 21st century

Product & service technology

Technological environment
Business process technology

Political-legal environment

Customer preferences and taste

Sociocultural environment
Ethical compliance and responsible business behavior

Redrawing corporate boundaries

Business environment
Presented by : Anna Riana Putriya Emerging challenges and opportunities Outsourcing, Viral marketing,
in the environmet of business Business process management

Organizational Boundaries Dimensions of the External Environment

That which separates the organization from its

External Environments
All businesses —regardless of their size, location or mission—
operate within a larger external environment.

ECONOMIC ENVIRONMENT Key Goals of Economic System

• Economic Growth • Economic Stability

– Aggregate Output and – Inflation
Standard of Living
– Gross Domestic – Unemployment
Conditions of the economic system Product (GDP) & Gross • Recessions and
in which an organization operates National Product Depressions
• Purchasing Power
• Global economy in 21st
Parity century
– Productivity
– Balance of Trade
– National Debt

Aggregate Output and Standard of Living Gross Domestic Product

• GDP, or gross domestic product,

product, is the total value of all
• Business cycle is a pattern of short-
short-term ups and downs goods and services produced within
(expansions and contractions) in an economy
a given period by a national economy
through domestic factors of production
• Aggregate output is the total quantity of goods and services
produced by an economic system during a given period

• Standard of living is the total quantity and quality of goods • GNP, or gross national product,
product, is the total value of all
and services that a country’
country’s citizens can purchase with the
goods and services produced by a national economy
currency used in their economic system
within a given period regardless of
where the factors of production are located

What Is Purchasing Power Parity? What Is Productivity?

Principle that exchange rates are set so that the prices Measure of economic growth that compares
of similar products in different countries how much a system produces with the
are about the same resources needed to produce it

What Is Balance of Trade? What Is Stability?

Economic value of all the products that a country
exports minus the economic value of imported products
Condition in an economic system
in which the amount of money available
and the quantity of goods and services produced
are growing at about the same rate
What Is National Debt?
Amount of money that a government owes its creditors

What Is Inflation? Recessions and Depressions
Occurrence of widespread price increases throughout an economic
• Recession is a period during which aggregate output,
as measured by real GDP, declines

• Depression is a particularly severe and long-

What Is Unemployment?
Level of joblessness among people actively seeking work in an
economic system

The Global Economy in the 21st Century TECHNOLOGY

Major forces driving the economy:

– The information revolution will continue to enhance
productivity across all economic sectors. All the ways by which firms create value for their
– New technological breakthroughs will create entirely new
– Increasing globalization will create much larger
markets while fostering tougher competition among
global businesses.

Product and Service Technologies Business Process Technologies

Business process technologies are used not so much to create

Technologies employed for creating products products as to improve a firm’
firm’s performance of internal
—both physical goods and services—
services— operations.
for customers – Enterprise Resource Planning, or ERP,
ERP, is a large-
information system for organizing and managing a
firm’s processes across product lines, departments and
geographic locations

ERP Applications POLITICAL-

Conditions reflecting
the relationship between business
and government

SOCIOCULTURAL ENVIRONMENT Customer Preferences and Tastes

Conditions including the customs, mores, values

and demographic characteristics of the society in • Customer preferences and tastes vary both across and within
which an organization functions national boundaries.
• Consumer preferences can vary widely within the same
• Consumer preferences and tastes change over time.

Emerging Challenges and Opportunities in the Business


• Redrawing Corporate Boundaries • Outsourcing is the strategy of paying suppliers and

distributors to perform certain business processes or to provide
– Core competencies are the skills and resources needed materials or services
with which an organization competes best
and creates the most value for owners • Viral marketing is a strategy of using the Internet and word-
• Disruption management is a method by of-
of-mouth marketing to spread product information
which some organizations are responding
to crises in their environments • Business process management is an approach by which firms
move away from department-
department-oriented organization and toward
process-oriented team structures that cut across old
departmental boundaries