Classification of Business Environment

Business environment in Nigeria and elsewhere may be classified differently depending on what interests the person making such a classification. One approach to such classification is to divide the entire/environment into two groups: that is, those things, factors or variables within the boundaries or premises of the organisation and those outside it. The former is the internal, environment or micro-environment and the latter the external or macro-environment In line with our previous definition of business environment, the internal environment consists of all groups and associations/unions employees as well as individuals (whether humane or otherwise) within the premises of the business organisation that have actual or potential influence on the business survival, growth and development, and that are also affected by the operational activities of the business.

The major components of the micro-environment of a business are the business organisation itself, the employees, the local unions, the shareholders, the tools and utensils, the machines and plants, the buildings and other structures and the materials and supportive materials available. What is meant by the business itself includes the business objectives and ambitions, its policies and strategies that affect various decisions and operations: All these are fundamental to the operations of the business. It can be rightly said that managers have control over their internal environmental variables.

The employees of a business organisation are of different and diverse cadres. These are shop-floor worker, the messengers and receptionist, the clerks and foremen or supervisors up to the sectional heads and other management members. They collectively and severally represent the human machinery in the organisation. The human factor system in the organisation also includes the network of inter-personal and social relationships and patterns of behaviour generally within the premises of the organisation. The shareholders and their influences on the organisation or unions of workers are also included within the auspices of human factor system in the organisation.

On the other hand, the macro-environment of a business consists of groups, individuals and institutions, unions and associations that reside outside the premises of a business and over which the business managers and owners have no control. That is, the components of the macro-environment are outside the control of the business managers The key components of a business external environment are the economic technological, social, political and legal as well as the ecological, systems outside the business organisation premises.

It is often taught by some business managers and administrators that the economic environment is of prime concern only to businesses whose socially approved mission or goal is to provide/produce and distribute goods and services that people need, want and can afford. However, it is also of the highest significance to other types of organised enterprises. A governmental agency, like the Inland Revenue, takes resources usually from tax payers, and provides services desired by the people. A church takes contributions from members and provides them their religion services, social needs and business needs For instance, Olabisi OnabanjoUniversity takes input factors from tax payers, students and others and converts these into educational and research services.

However, the various components of the economic environment of a business include capital and its structure, labour (individuals and their unions), price levels, government fiscal and monetary policies, and customers Almost all kinds of organisation require capital in form of money, machinery, building structures, office equipment like cabinet, typewriters, computers, tools of various kinds, etc. Some organisations provide these for their use while others purchase them. For example, a business may construct and develop its own machinery Cash resources may also be generated within a business. This implies that all business operations are collectively a function of availability and prices of the required capital items.

Labour is another significant input factor from the economic environment into any business The availability, quality or grade calibre and price of manpower dictate the extent to which a business can succeed. For instance, labour operates machine, formulate, implement and evaluate objectives, policies, strategies and programmes for a business. Labour borrows and spends money for, and on behalf of the business Labour performs all managerial functions of organising, planning, motivating, decision making, communicating, forecasting,

directing, leading, etc, for a business. In some economies, there may be abundance of untrained or unskilled labour like in the case of most developing part of the world of which Nigeria is one. In countries like Nigeria, Ghana, Liberia, Hong Kong and even in most Asian countries, skilled labour are in short supply.

It should be recognised that the input side of a business is highly influenced by the general price-level changes. If prices rise up fairly rapidly as happened in Nigeria in the late 20th century as a result of the political turmoil (instability) of the time, the turbulence that emanates in the economic environment on both input and output sides may be significant. During such periods, inflation may upset business performance through its impacts on costs of input factors such as labour. materials, machines, etc.

Following the price level in the economic environment of a business is the government fiscal and monetary policies as another significant input factors Although these may be considered strictly under the political factors, their economic implication on all business enterprises is highly imperative. Government control of credit through fiscal and monetary policies have great implications for all kinds of business. Again, different tax policies affect every aspect of an economy. For instance, taxes affect both the individual and corporate bodies as customers as well as business organisations. Finally, on economic variables, another important factor for the success and survival of any business is customers in their various categories and classifications. To capture customers, the business executive must try to find out what motivates people; That is, what people want and will like to buy Non-business organisations also have customers For instance, Olabisi Onabanjo University has students and alumni to m cater for In the same vein, the Nigerian Army has the territorial integrity to defend according to the Nigerian constitution. After the economic environment, the next major component of a business macro-environment is the technological environment. In fact, this has been regarded by Weihrich and Koontz (1994) in their book “Management; A Global Perspective” on page 61 as the most pervasive factor in business environment.

To Weihrich and Koontz (1994), “it is science that provides knowledge, and it is technology that uses it.” Technology per se relers to the sum total of the knowledge human beings have about ways of doing things. In this respect; technology includes inventions, techniques and vast store of organised knowledge about anything whatsoever. However, the major influence of technology is on ways and manners of doing things. It affects how man design, produce, and market goods and services.

The main significance of technology may be seen in new products, new equipments and machines, new tools and utensils, new materials and services. Some of the advantages of technology include higher productivity or performance, higher standards of living, more leisure time and greater variety of goods and services. For instance, consider the great variety of cars, lorries, etc. now available in Nigeria. However, the benefits of technology must be considered in the light of its associated problems, such as traffic hold-ups, pollution of environment, and loss of privacy through computer applications in industries.

Generally, it is clear that the influence of technology has been wide and pervasive, to the extent that we refer to various developments as revolution. Examples are the industrial revolution of the 18th century and the Information revolution of the latter half of the 20th century. However, man does not always appreciate the precise changes that make up these revolutions.

Weihrich and Koontz (1994) have listed eight categories of such changes as follows:

(a) Increased ability to master time and distance for the movement of freight and passengers;

(b) Increased ability to generate, store, transport and distribute energy;

(c) Increased ability to design new materials and change the properties of others so that they better serve human needs

(d) Mechanisation or automation of physical processes,

(e) Mechanisation and automation of certain mental processes, e.g by a computer,

(f) Extension of human ability to sense things.

(g) Increased understanding of individual and group behaviour and how to deal with it,

(h) Increased understanding of various diseases and their treatments.

The next component of the external environment of a business is the social environment. However, in any classification of environmental variables, having significant influence on business performance, it is always not easy to separate the social, political and ethical components. “The social environment, is composed of the attitudes, desires, expectations, . degree of intelligence and education, . beliefs and customs of people in a given group or society.” (Weihrich and Koontz, 1994: p. 62-63).

On the other hand, the political and legal environments are mainly that complex of laws, regulations and government actions which lead to all kinds of organisations. The ethical environment, which is a significant aspect of social environment includes all generally accepted and practical codes of personal conduct. Although these standards may or may not be codified by laws, for any group to which they may be applied, they in certain cases have virtually the threat of the law.

In the contemporary society, managers and administrators of various enterprises have been challenged for their irresponsiveness to the social attitudes, beliefs and values of particular individuals, groups or communities. However, attitudes and values differ among workers and employers of various grades, bourgeoisie and proletariats, administrators and accountants, doctors and engineers, etc. This diversity makes it problematic and challenging for managers and administrators to design an environment conducive for performance and satisfaction of all at the same time.

The next externality in connection with a business is the political and legal environment. We have already been told that the political and legal environments of a business are closely interconnected with the social environment. For instance, the various legal stipulations have ordinarily been promulgated as the results of social pressures and uproars. However, what has become the permanent feature of nearly all societies is that once passed, laws often stay beyond the life of the socially perceived need for them to be used either as reference cases or precedents.

The political environment, consisting of the attitudes and actions of political and government leaders and legislators, do change according to, the dictates of social demands and beliefs. For instance, government activities affects virtually m every business and every aspect of life in a country. Particularly, government promotes and constrains all kinds of business. This it does by stimulating economic expansion and development, providing assistance, subsidizing selected industrial operations, given tax advantages, encouraging research and development and protecting a business through the use of special tariffs, Finally, government is also the largest customer, that purchase goods and services from many business organisations.

Another role of government is to constrain and regulate business operations. Every business organisation is circumscribed inside a network of laws, regulations and court decisions, This occurs at local, state and a national levels. While some are designed to protect workers and the irunions, others are designed to make contracts of various kinds valid and enforceable, and also to protect property rights. Yet, many others are designed to regulate the activities, actions or behaviour of business managers and their subordinates.

There is relatively little a manager can do in his company without making reference to one legal stipulation or the other. For instance while certain laws guide business registration or formation, others govern business operations, and yet others cover matters which are reasonably incidental to the winding up of a business. All these environmental variables affect the operation and performance of a business.

There are other components of external environment of business which have not been classified into any category for some reasons. The reasons may also be because they cannot be properly discussed under a particular topic, because they overlap with one another or because they serve as intermediaries between one main category and another. Examples of these are the competitors, natural or ecological environment, the demographic environment, the infrastructural environment, the vendors, the marketing intermediaries, and the advertising and public relations consultants.

In actual fact, the overlapping, inter-connecting or intermediate environment of a business provides a link between the business and its external environment. This implies that the intermediate environment is composed of various linking systems and sub-systems that lead to inter-connection between the internal and external environments of the business.

For instance, the vendors are the suppliers of raw materials and product parts. The raw materials and supportive materials are from the external environment into the internal environment. This means that the two environments are linked together by the vendors. In the same vein, the financial institutions like banks and finance houses may provide, or refuse to provide, the needed funds to a business, the distributors and retailers (i. e. the marketing intermediaries) can influence the general price level which may affect the operations of a business. Finally, employment agencies and service organisations like legal advisers, insurance firms, Inland revenue offices, and pension and gratuity units also influence the operations of business organisations in one way or the other.

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