Chapte

r 2
The Dynamic Environment
 Discusses the dynamic environment of the BGS
relationship, especially its volatility and unpredictability.
 Examines various factors that shape pervasive
environmental changes including historical, inequality,
population growth, technology, globalization, the
emergence of nation states, ideologies, leadership, and
random occurrences.
 Analyzes the seven (7) key environments of the BGS
relationship – economic, technological, government, legal,
cultural, natural, and internal.
 Dynamic Environment
 What is the dynamic environment?

 Environmental changes taking place in businesses

suggest that the nature and scope of activities will
always be dynamic. Changes are driven by the
emerging needs of customers, owners, and regulators.

 For example, changing customer demands for Walmart

to stop selling ammunition and guns; and stricter
controls imposed by regulators to ensure compliance
with existing laws.
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 Dynamic Environment
 Constantly changing conditions also suggest that BGS
environments will be volatile and unpredictable because
of diverse factors (economic, political, social,
environmental, technological).

 Historical factors demonstrate that BGS environments

are always dynamic as they respond to external and
internal pressures (business response to crisis,
government’s response, society’s response may be quite
different because of their different goals and objectives,
e.g. BERT programme in Barbados to facilitate IMF loan
(2018).
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 Dynamic Environment
 The first major historical factor to affect the growth of
business was the Industrial Revolution which
transformed simple agrarian economies and societies
during the 18th century into complex industrial
economies and urban societies.

 Such changes required land, labour, capital, markets,

natural resources, transportation, ideas, ideology,
and technology (industrialization by invitation).

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 Dynamic Environment
 Industrialization led to the creation of great wealth
in both developed and developing countries and this
resulted in increased economic growth and
development in the 19th, 20th, and 21st centuries.
 However, industrialization also created increased
income inequality, thus increasing gaps between rich
and poor (e.g. South Africa, with the highest income
inequality in the world, empowerment of blacks by
providing shares (2018); Yellow Vest movement in
France protested against government policies which
created income and social disparities (2018-19).
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 Dynamic Environment
 Thus, although industrialization significantly
increases the accumulation of wealth, it fails to
address its uneven distribution.

 This is one of the main reasons for government

intervention, i.e to ensure a minimum level of social
protection for those persons who can least afford.
Hence, we get references about social welfare or the
welfare state, i.e. the role of government as it relates
to the effective management of its resources.

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 Dynamic Environment
 Population growth is another major factor that
influences the dynamic environment because initially
economic growth stimulated population growth, but it
is now a brake on development as a result of declining
fertility and ageing populations (i.e. note the population
policies and migration trends across the globe,
especially in China and India).

 However, despite its relative decline, population

growth is projected to increase in Africa by 127%, Asia
and North America by 42%, and Latin America by 48%.
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 Dynamic Environment
 In terms of ageing populations, it is expected by 2050
that approximately 37% of the world’s population
will be elderly.

 These global dynamics will certainly have serious

implications for the world of work, (i.e. new working
environments, adequate working population to make
requisite pension contributions, need for new skills to
keep pace with new technologies, etc.).

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 Dynamic Environment
 Technology is another factor that has impacted the
dynamic environment of business over the centuries.

 It has significantly transformed the progress of

human civilization over time and in every generation
there are new inventions that impact the way people
live and work, i.e. transportation, medicine, the
internet, cell phones, climate change, the green
economy, the blue economy, etc.

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 Dynamic Environment
 Globalization is yet another factor that has impacted
the dynamic environment of business, especially in
terms of economic, political, social, military,
scientific, technological, and environmental
interdependence.

 The significant growth of transnational corporations

(TNCs) and multinational corporations (MNCs) are
the manifestation of the power of globalization to
influence the business environment all over the
world.
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 Dynamic Environment
 The governance responsibilities of the nation-state
present many challenges for TNC and MNCs,
especially in the areas of international law, trade,
investment, finance and technology.

 Dominant ideologies also play a major role in

influencing the dynamic environment of business
activities, e.g. the Industrial Revolution, capitalism,
socialism, democracy, the Protestant ethic, religion,
industrial relations, competition, etc.

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 Dynamic Environment
 The role of leadership has played and continues to play a
significant role in shaping and influencing the dynamic
environment in which businesses operate (e.g. J.P. Morgan,
J.D. Rockefeller, Henry Ford, Bill Gates, Jack Ma, Mark
Zuckerberg).

 The power and influence of leaders as a historical force has

been at the forefront of political changes (e.g. Nelson
Madiba Mandela, Mao Tse Tung, Fidel Castro, Martin
Luther King, Malcolm X, Kwame Ture, Errol Barrow, Dr.
Eric Williams, Michael Manley, Forbes Burnham, etc.).

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 Dynamic Environment
 There are two opposing views on this perspective,
one is that leaders ride the waves of history, and the
second is that they change history rather than being
pushed by it.

 The notion of chance has been identified as another

factor that influences the dynamics of the business
environment, i.e. the notion of being in the right place
at the right time.

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 Seven Key Environments of
Business
 The economic environment consists of forces that
influence market operations, including economic
activity, FDI flows, trade flows, commodity prices,
interest rates, currency fluctuations, wages,
competition, technology change, and government
policies.

 The technological environment impacts businesses

as a result of new scientific discoveries, inventions,
patents, and creative technologies.

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 Seven Key Environments of
Business
 The government environment, including functions,
rules and regulations, simultaneously encourages
and constrains business operations, i.e. the ease of
doing business is affected by the work ethic, the level
of productivity, and the level of competitiveness (See
the 12 pillars of the Global Competitiveness Index,
Global Competitiveness Report 2019).

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 Seven Key Environments of
Business
 The legal environment influences business and
government activities because all must comply with the
requisite legislation, rules, regulations, procedures, and
processes, i.e. to ensure that the law is in the public’s
interest/public interest law (i.e. judicial review, FOI,
Integrity Laws, etc.)
 The cultural environment has to be considered by
businesses because they have to determine how cultural
norms, attitudes, behaviours, and practices impact their
operations, e.g. why business conducted in the USA is
very different from China, India, or Barbados.

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 Seven Key Environments of
Business
 The natural environment has been impacted by
business, sometimes in negative ways, to the
detriment of our ecosystems and natural resources,
 Climate change and natural disasters;
 Deforestation in the Amazon and Ituri Forest in DR
Congo;
 Plastics in the oceans; and
 Industrial waste pollution (2019).

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 Seven Key Environments of
Business
 The internal environment comprises owners, boards
of directors, managers, and employees.

 Government regulations limit the decisions of

managers who are also influenced by external
stakeholders.

 Boards of directors are gaining more independence as

a result of financial regulations designed to protect
shareholders from dishonest managers.

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 Seven Key Environments of
Business
 Employees are losing power because of globalization
of labour markets.

 External groups are eroding shareholder power by

demanding better corporate governance (CG) and
greater corporate social responsibility (CSR) from
businesses.

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 Concluding Observations
 The business environment is continuously evolving
and this has profound implications for management
practice.

 The dynamic interface between historical forces and

current environment factors illustrate how businesses
have adapted and continue to adapt to changing
conditions.

 The forces of history and environment are mutually

reinforcing in shaping and influencing society.
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