The main difficulty in the study of changes in business environment is that the environment itself is changing at ‘an increasing rate and towards increasing complexity. To promote or facilitate our understanding of such changes that are taking place, it is necessary to study the main features or characteristics of business environment in Nigeria.
Earlier organisational philosophers and theorists have classified business environments into four types according to certain features. These are placid randomised environment, placid clustered environment, disturbed reactive environment and turbulent field environment. In the placid randomised environment, business goals and noxiants (i.e. good and bad opportunities and problems) are relatively changing and they are also randomly distributed. This type of business environment corresponds to Herbert Simon’s ides of a surface over which an organism can move. Most of this surface is bared but at isolated widely scattered points.
In this type of environment, there will be no inter-connection between business units, no division of labour while each business unit works alone independent of any other business unit for its growth and survival. A critical property of business response under randomised environment is that there is no distinction between tactic and strategy. The implication of this absence of distinction between tactic and strategy is that the optimal strategy is just the simple tactic of attempting to do one’s best on a purely local basis. Moreover, the best tactic be can learned only by trial and error, and only for a particular class of local environmental variances. While business units under this condition can exist adaptively as single and indeed quite small units. This becomes progressively more difficult in other types of environment where an element of uncertainties is involved.
Placid clustered environment is more complicated and complex when compared to the placid randomised condition, but it is still a placid environment. In placid clustered environment, business goals and noxiants are not randomly distributed but hanged together in some ways.
The environment corresponds to the economists imperfect competition, and the clustering enables some parts to take on roles as the other parts. The environmental parts may develop collections among themselves especially between suppliers and users. The new feature of the responses of business units to placid clustered environment is the emergence of strategy as distinct from tactic. Survival becomes critically milked with what an organisation knows of its environment.
If an organisation attempts to deal tactically with its environmental variance as it occurs, it has to know its environment very well. This is because to pursue a goal under its nose may lead the organisation in to the parts of the field that are full of danger while avoidance of an immediate difficulty may lead it away from potentially rewarding areas. In the clustered environment, the relevant objective or goal is that of optimal location; some positions being discernable as potentially richer than others. To reach these richer positions requires concentration of resources, subordination to the main plan and development of a distinctive competence in reaching the strategic objective. Business units under this environment therefore tend to grow in size and to become hierarchical with tendency toward centralised control and co-ordination.
Disturbed-reactive environment, on its part may be compared with economists Oligopolistic market. It is an environment in which there is more than one business unit of the same kind. The environment is dynamic rather than static, and the existence of a number of similar business unit know becomes the dominant characteristics of the environment.
Each business unit does not simply have to take account of the others when they meet at random but have also to consider the fact that what is now can also be known to the others. The part of the environment to which the business unit wishes to move itself in the long run is also the part to which the others seek to move. Knowing this, each business unit will wish to improve its own chance by hindering the others, and each will know that the others must not only wish to do likewise but also know that each of them knows this.
For instance, competitors seek to improve their chances by hindering each other, each knowing that the others are playing the same game. It now becomes necessary to define business objective in term not so much of location as of power or capacity to move more or less at will: that is, to achieve flexibility and control. Also, co-ordination becomes decentralised and premium is placed on quality and speed of decisions at various peripheral points.
Finally, the turbulent field environment is more complex than all others previously discussed. The dynamic processes which create significance variances for the component business organisations arise from the field itself unlike the disturbed-reactive environment. The dynamic properties arise not only from the meat interaction and interrelationship of the component organisations but also from the field itself. The “ground” is in motion and everything is in a stage of flux.
The ground is in motion because of the increasing reliance on research and development to achieve the capacity to meet competitive challenges and changes in customers’ need. This leads to a situation in which a change gradient is continuously present in the environment field.
The next reason why the ground is in motion is due to the deepening inter-dependence between the economic and other facets of the society. This means that economic organisations or business units are increasingly affected by government regulations and legislation.
This is followed by the fact that the growth in size and scope of business units to meet the disturbed-reactive environment condition is so large that their actions are so persistent and strong enough to induce turbulency in the environment. For business organisations, this trend means a broad input in their area of relevant uncertainties. The consequence which flow from their actions emanate in ways that become increasingly unpredictable and lines of actions that are strongly pursued may be affected by the emergent field process.
Environmental Data: Nature and Collection
Strategic decision of any business, whatever the scale, is based on data available about the strengths and weaknesses of the business. This implies that strategic decision of a business must reflect data about environment, threats and opportunities of the business. Consequently, for a strategic decision to be desirable, it has to be accompanied by environmental appraisal both internally and externally.
Internal appraisal contains collection and analysis of data on management of the business, position of the business in the industry, finance of the business, production or manufacturing processes, marketing and distribution processes as well as employees of the organisation. The data on management of the business would cover the business organisation structure, the quality of planning and decision making and data handling, as well as information retrieval system.
Others are the business acumen and flair of the organisation, the system effectiveness and cost control, the method and speed of opportunities identification, the skill of personnel and the management of human relations.
The position of the business in the industry relates to the strengths and weaknesses of the business in terms of size and bargaining power with customers, suppliers and employees, the business reputation in the industry, its flexibility and adaptability. The issues of interest on the finance of the business including the determination of whether the annual profit of the firm is fluctuating or otherwise, the ratio of the company’s loan capital to equity capital, the cash flow, tax advantage and disadvantage, etc. In production facilities, the business owner or manager needs to consider variables such as business equipments, location of company offices and factory plants, the production technology and transport services and strategies, etc.
Marketing and distribution data consists of marketing capabilities. This covers items such as the consideration of whether the company has many, or few customers, the loyalty of distributors to the company, the effectiveness of the company’s advertising and promotion programmes, the effectiveness and efficiency of the sales force and the efficiency of goods and services delivery system. It also covers information or data on suitability or performance of products. This helps to determine whether the product line is too wide or too narrow, and to know whether the company product is compared favourably or otherwise with those of the competitors. Also included here is the effectiveness and strategies of distribution channels.
Finally, the company needs to know something about the weaknesses and strengths of its employees, their number and quality in terms of experience, education and practical exposure, development and satisfaction. Issues of research and development activities also need to be considered. This involves identifying prospects for innovation, and corporate development or expansion of the business. On the other hand, external appraisal of business environment has to do with analysis of the competitors, the government, and political actions and policies, the economic situation in the country, the social system, the technological system, the consumers, the ecological system, the financial institutions, the media organisations and the suppliers.
However, there are specific methods for collecting environmental data for business decision making. The major approaches are the use of Quick Environmental Scanning Techniques (QUEST), the use of outside experts, consultants, market researchers, trained experts, trade associations, research institutions and deliberate opportunity identification. QUEST is necessary because structural difference has introduced differences of decision among business managers concerning goals and time perspectives and relationship. Business managers look at problems and opportunities as well as strengths and weaknesses from their own departmental point of view. QUEST is therefore a technique, of collect in data and information whereby managers are brought together and list all the changes which they perceive in their environment.
The four basic stage of QUEST are preparation, development of planning, scenario development, and strategic option identification strategies. The preparation stage is where printed questionnaires are circulated to relevant senior level managers. Reports are then received based on information from their analysis. Development planning stage is where executives brain-storming is used to define the business mission together by the managers. The purpose here is to define business common purpose. The scenario development stage is where managers will conduct an informal debate among themselves and the debate is based on the scenario suggested by the report of the brain-storming stage. Time factors or fun-time events are arranged in their emerging sequence. For instance, price of raw material to fall, employment opportunity to rise etc. This information may be provided for five years in order of sequence. The last stage, the strategic option and identification, is, where decisions are made for dealing with expected threats and opportunities.
However, the main advantages of the QUEST include the fact that it develops sense of shared and collective understanding among managers and it promotes a coordinated view of problems and opportunity. Other merits of the QUEST include the fact that it build up sense of commitment to strategic planning, emphasises team approach
in solving problems and it focuses managers attention on strategic areas. Finally, it is systematic, inexpensive and good for obtaining both qualitative and quantitative data.