business environment lecture 1 rahat kazmi

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Course: BTEC HNC Business/Similar/New Managers Module : Business Environment Lecture 1 – Introduction Prepared by: Rahat Kazmi Follow him on Twitter: twitter.com/srahatkazmi Join Facebook Fan’s page : facebook.com/TrainingConsultant Visit the website: www.softskillsexperts.com

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Page 1: Business environment lecture 1   Rahat Kazmi

Course:BTECHNCBusiness/Similar/NewManagersModule:BusinessEnvironment

Lecture1– Introduction

Preparedby:RahatKazmi

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Page 2: Business environment lecture 1   Rahat Kazmi

BusinessEnvironmentPartA• Organisationsandtheirobjectives• Responsibilitiesoforganisations• Consumerprotection• PeopleintheworkplacePartB• Resourceissuesandeconomicsystems• Marketdemand• Marketsupplyandprice• Productionandcosts• MarkettypesandmarketforcesPartC• InternationaltradeandtheEuropeandimension

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Page 3: Business environment lecture 1   Rahat Kazmi

PartA:BusinessEnvironment-OrganisationsandtheirobjectivesToday’slectureon:-1. Thesizeandtypesoforganisations2. Thenatureofthepublicandprivatesectors3. Thenatureoftheprimary,secondaryand

tertiarysectors4. Businessmissionsandobjectives5. Stakeholderexpectations

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Page 4: Business environment lecture 1   Rahat Kazmi

Thesizeandtypesoforganisations

• Whatisanorganisation?Keywordsplease...

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Page 5: Business environment lecture 1   Rahat Kazmi

ABusinessOrganisation• Existstoprovidegoodsandservicesusuallyataprofit• Profitmaynotbethesoleaimofthebusinessorganisation

• U.K.– privatesector,growninrecentyearsduetostateowner=dcompaniesbecomingprivatised

• Businessorganisationscanrangeinsize,fromtheonemanbusinesstoplc’semployinglargenumbersofstaff

• ‘Asocialarrangementforthecontrolledperformanceofcollectivegoals’(Buchanan&Hucynski,2003)

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Page 6: Business environment lecture 1   Rahat Kazmi

Thesizeandtypesoforganisations• “Anorganisationisanarrangementofpeoplepursuingcommongoals,achievingresultsandstandardsofperformance.”(BPP,2010,P.g.4)

• Asocial unit ofpeoplethatis structured andmanagedtomeeta need ortopursuecollective goals.Allorganizationshavea management structure thatdetermines relationships betweenthedifferent activities andthe members,andsubdividesand assigns roles, responsibilities,and authority tocarryoutdifferent tasks.Organizationsare open systems--theyaffectandareaffectedbytheir environment.

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Page 7: Business environment lecture 1   Rahat Kazmi

Productsandservices

• AbusinessiscreatedtoPROVIDEeitherorbothofthefollowing...

• PRODUCTS – couldbemanufacturedandproducedbythecompany.Couldbepurchasedfrommanufacturersandsoldtotheenduser.Giveanexample...

• SERVICES – providesservicesthataresoldtotheenduserorcouldactasathirdpartymiddlemantosellservices.Examples?

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Page 8: Business environment lecture 1   Rahat Kazmi

Characteristicsofabusiness

• Ownership - publicorprivate• Control – bytheowners;bythoseworkingonbehalfoftheowners;indirectlybygovernmentsponsors

• Activity– whattheydo• Profitandnon-profit orientation• Legalstatus– Ltd/Soletrader/Plc/partnerships• Size – staff,branches,sales,customersetc.• Sourcesoffinance– loans,funding,shareissuesetc.• Technology– usagelevels

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Page 9: Business environment lecture 1   Rahat Kazmi

Characteristicsofabusiness

Whataffectsbusinessandhowtheyoperate?Keywordsplease...

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Page 10: Business environment lecture 1   Rahat Kazmi

Theorganisation

newsweather

Stockmarket

Politicalforces

Demographicandculturalforces

Internationalforces

Customers

DistributorsGovernment

Unions

Suppliers

competitors

Environmentalforces

Economicforces

Technologicalforces

Thebusinessenvironment

Page 11: Business environment lecture 1   Rahat Kazmi

Legalformsofbusinessorganisations

• Limitedcompanies• Soletraders• Partnerships• Cooperatives

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Page 12: Business environment lecture 1   Rahat Kazmi

ClassActivity

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Page 13: Business environment lecture 1   Rahat Kazmi

Limitedcompanies

• Mustbeincorporatedwhenformed• Treatedasaseparateentity• Capableofowningproperty,employingpeople,makingcontracts,suingorbeingsued

• Continuityofsuccession• Ifthecompany/corporationfails,itsmembersareonlyliableforalimitedamountofthecompany’sdebtlimitedtothenominalvalueofitsshares(Parliament,1850’s)

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Page 14: Business environment lecture 1   Rahat Kazmi

LimitedCompanies

• CompaniesAct,1985,amended• Intendedtominimiserisk…Towho?

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Page 15: Business environment lecture 1   Rahat Kazmi

LimitedCompanies– Public&Private

• Twotypesoflimitedcompany:-1. PublicLimitedCompanies2. PrivateLimitedCompanies

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Page 16: Business environment lecture 1   Rahat Kazmi

PublicLimitedCompanies

• MemorandumofAssociationANDArticlesofAssociationmustbefiledbeforeitcanbeIncorporated

• Muststatethatitsharesareavailabletobepurchasedbythepublic

• Musthaveatleast2membersandonedirector

• Mustobtainacertificateoftradingfromtheregistrarofcompanies

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Page 17: Business environment lecture 1   Rahat Kazmi

PrivateLimitedCompanies

• MemorandumofAssociationANDArticlesofAssociationmustbefiledbeforeitcanbeIncorporated

• Maynotofferitssharestothepublic• Mayevenrestrictthetransferofsharesinternally• Nameofthecompanymustendwiththewords‘Limited’orLtd’

• Musthaveatleast2membersandonedirector• CanbegintradingstraightawayafterregisteredundertheCompaniesAct

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Page 18: Business environment lecture 1   Rahat Kazmi

DisadvantagesofLimitedLiability

• Liability islimited– difficultforsmallercompaniestogetfundingorborrow

• Banksmaybeunabletorecoverfundsborrowedifbusinessfails

• Legalproceduresareextensivewhensettingupacompany

• ProceduresforpublishingvariousfinancialaccountsoftheCompanyareextensive

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Page 19: Business environment lecture 1   Rahat Kazmi

CompanyDirectors

• ActasagentstotheCompany• Appointedbyshareholdersandmemberstoachievecompanygoals

• Dutytoacthonestly• DutytoactinthebestinterestoftheCompany• Dutytoavoidpossibleconflictsofinterest• ShouldnotmakeapersonalprofitfromtheDirectorshipotherthanthesalaryandfees

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Page 20: Business environment lecture 1   Rahat Kazmi

SizeofthebusinessCanmean..• Numberofemployees• Volumeofoutput• Volumeofsales• Assets• Profitsearned• networth• SMEs• Nationalandmulti-national

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Page 21: Business environment lecture 1   Rahat Kazmi

SoleTraders

• Simplestformofbusiness– onepersoninthebusiness,alone.

• Setuprequirementsandminimal• OWNERFULLYLIABLEFORANYDEBTSASTHEOWNERISTHEBUSINESS

• AllprofitsareliabletoincometaxratherthanCorporationTax

• NoformalaccountsarepublishedFollowhimonTwitter:twitter.com/srahatkazmi JoinFacebookFan’spage: facebook.com/TrainingConsultantVisitthewebsite: www.softskillsexperts.com

Page 22: Business environment lecture 1   Rahat Kazmi

SoleTrader- Advantages

1. Formalitiesforstartingupareminimal2. Completeautonomytorunthebusinessas

theindividualwishes3. Profitsbelongtothetrader4. Variousbusinessexpensesareallowable

againstincometax5. Nopublicdisclosureofaccounts

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Page 23: Business environment lecture 1   Rahat Kazmi

SoleTrader- Disadvantages

• TraderisSOLELYresponsiblefordebtsofthebusiness

• Thetraderastheownersandmanagerofthebusinessisresponsibleforallaspectsofthebusiness(marketing,productdevelopment,sales,finance,etc.)

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Page 24: Business environment lecture 1   Rahat Kazmi

Partnerships

• Apartnershipexistswhenmorethan2butlessthan20peopleagreetocarryoutabusinesstogether

• PartnershipAct,1890• Legalitiesareminimal• AdvisedtohaveaformalpartnershipsetupbyaSolicitor

• Membersofapartnershiparetheownersofallpropertyandareliableforitscontracts

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Page 25: Business environment lecture 1   Rahat Kazmi

Partnerships

• Fullyresponsibleformeetingthedebtsofthecompany

• Partnersnotautomaticallyentitlestoasalary• Partnersareentitledtotheirpropershareoftheprofits

• Manyagreesalariedpartnerships• Somepartnershipconverttolimitedliabilitycompaniesduetoperceivedbenefits

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Page 26: Business environment lecture 1   Rahat Kazmi

Partnerships– Advantages

• Fewformalitieswhensettinguppartnerships• Sharingofknowledgeandexperience• Sharingofthemanagementofthebusiness• Noobligationstopublishaccounts• Sharingofprofitsofthebusiness

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Page 27: Business environment lecture 1   Rahat Kazmi

Partnership- Disadvantages

• Sharingoflossofthecompany• Eachpartnerliableforthedebtsofthepartnershipevenifitiscausedbytheotherpartners

• Riskthatpartnersmaynotbeabletoworktogetherpersonally

• Deathwillautomaticallydissolveapartnership• Bankruptcywillautomaticallydissolvethepartnership

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Page 28: Business environment lecture 1   Rahat Kazmi

CooperativeEnterprises

• Smallgroupsofpeoplewhowanttosetupabusinessalongexplicitlydemocraticlinesandwiththebenefitoflimitedliability

• FeaturedinBritishbusinessforover100years• Profitsofthebusinessgivenbacktothecustomer/consumerindividendsbasedontheamountofpurchasesoveraperiodoftime

• Individualscanbenefitnotonlyainvestors,butalsoasemployeese.g.JohnLewis

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Page 29: Business environment lecture 1   Rahat Kazmi

CooperativeEnterprises

• EncouragedbyU.K.governmentandbytheCooperativeDevelopmentAgencyestablishedin1978

• LEGISLATION– Industrial&ProvidentSocietiesAct,1965

• TheactstatedthatinsteadofMemorandumsandArticlesofAssociation,cooperativesshallhaveasetofrulesapprovedbytheRegistrarofFriendlySocieties

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Page 30: Business environment lecture 1   Rahat Kazmi

Industrial&ProvidentSocietiesAct(1965)– RulesandPrinciples• Eachmembermusthaveequalcontrolonthe‘oneperson,onevote’principle

• Membersmustbenefitprimarilyfromtheirparticipationinthebusiness

• Interestonloansorsharecapitalistobelimited• Surplus/profitistobesharedbetweenmembersnproportiontotheircontributionstothecooperative

• Surplus/profitcanberetainedbythecompany• Membershipmustbeopentoallwhoqualify

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Page 31: Business environment lecture 1   Rahat Kazmi

Industrial&ProvidentSocietiesAct,(1965)– RulesandPrinciples

• Theprincipleoflimitedliabilityappliedtoallmembersofthecooperative

• Thecooperativemustberegistered• Toberegistered,thecooperativemusthaveaminimumof7members

• Namesomecooperatives…

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Page 32: Business environment lecture 1   Rahat Kazmi

Cooperatives- Advantages

• Theopportunityforgenuinepoolingofthecapitalbetweenagroupofpeople

• Encouragesactivecollaborationbetweenall• Enablesdecisionstobemadedemocratically• Providesrewardsonanequitablebasis• Ifregistered,provideslimitedliability

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Page 33: Business environment lecture 1   Rahat Kazmi

Cooperatives- Disadvantages

• Lesslikelihoodofalevelofprofitabilityandgrowth

• Relationshipscandeteriorate,especiallywhensomeareseentobemakingsmallercontributions

• Democraticdecisionmakingcantakealotoftimebeforeactionistaken

• Membersnottrulydedicatedcancauseproblems

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Page 34: Business environment lecture 1   Rahat Kazmi

Largeorganisations

Advantages?Explain...• Resources• Greaterdivisionofwork(Fayol/Taylor)• Careerprospects• Experts• Economiesofscale• Continuityofgoodsandservices

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Page 35: Business environment lecture 1   Rahat Kazmi

Largeorganisations

Disadvantages?Explain...• Hierarchy• Diversified• Lotsofmaintenanceneeded• Coordinationproblems• Policycontrolissues• Tasksnotmotivating

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Page 36: Business environment lecture 1   Rahat Kazmi

Internaleconomiesofscale

1. Specializationoflabour(Taylor)2. Divisionoflabour3. Specializedmachinery4. Dimensionaleconomies– volumeoutputv

sizeofequipmentneededtoprocesstheoutput

5. Buyingeconomies6. Stockholdings

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Page 37: Business environment lecture 1   Rahat Kazmi

Advantagesofasmallbusiness

a) Competitiveb) Risktakersc) Betterinternalrelationshipsd) Specialistse) Localmarketsf) Expertconsultantsg) Suppliers/sub-contractorstolargerfirmsh) Largescaleproduction/servicingnotrequired

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Page 38: Business environment lecture 1   Rahat Kazmi

Whytheeconomyhaschangedrecently

• De-industrialisation• Tradedeficit– importsgreaterthatexports• Shiftinoutputbetweensectors– northseaoilandgas

• AgricultureintheUKissmall– madcowdisease/footandmouth

• Declineinthesecondarysector,riseinthetertiarysectorcauseddecline

• Demandsshiftfromgoodstoservices• Declineinmanufacturing

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Page 39: Business environment lecture 1   Rahat Kazmi

Consequencesofchange• Risingexchangerate– expensivetoexport,importingis

cheaper• Failedbusinesses• Diminishedmanufacturingindustry• Worldmarketconditions• Ethicaltradingissues• Overseascompetition• Technologicalprocess• Sunriseindustries– technicalcompanies• ReductionofSunsetindustries– steelworkers,shipbuilding

etc.• Unemployment/reducedconsumerspendingpowers

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Page 40: Business environment lecture 1   Rahat Kazmi

• ‘describes theorganizations basicfunction insociety,intermsoftheproductsandservices itproducesforitscitizens’.{Mintzberg}.

• missionstatements:whatarethey?(formalstatementsofanorganisation’smission).

• itshouldbebrief,flexibletoaccommodatechangeanddistinctive.

2.0}MISSION.

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Page 41: Business environment lecture 1   Rahat Kazmi

Øpurpose.Østrategy.Øpoliciesandstandardsofbehaviour.Øvalues.

Elementsofamission.

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Page 42: Business environment lecture 1   Rahat Kazmi

• Mission(Re-cap):- “describes theorganisation’s basicfunctioninsociety,intermoftheproductsandservicesitproducesforitsclients”.{Mintzberg}.

• Elementsofmission:-• Purpose:-Whydoesthecompanyexist?Isittodowithshareholders?Otherstakeholders?Highergoals?

Mission

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Page 43: Business environment lecture 1   Rahat Kazmi

q corporategovernance.q stakeholders.q businessethics.q culturalcontext.

Influencestomissionstatements.

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Page 44: Business environment lecture 1   Rahat Kazmi

ØBeingusedmerelyforPRØUsedtomakesenseofsomethingthathasalreadybeendonebyanorganization

ØIgnoringmissioninpursuitoforganization’sactivities.

ØToomuchof‘buzzwords’e.g.‘Tobethegreatest-------’

Whatmightgowrongwithamission?

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Page 45: Business environment lecture 1   Rahat Kazmi

ClassActivity2

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Page 46: Business environment lecture 1   Rahat Kazmi

• Values:- 1}The‘culturalgluethatenablestheorganisationtofunctionasaunity’.2}Valuescanincludeprinciplesofbusiness.

• - commitmenttosuppliersandstaff.• - Socialpolicye.g.onnon-discriminationorecology.• - Commitmenttocustomers.• 3}Loyaltyandcommitment,toemployees.• 4}Guidanceforbehaviour;- asenseofcommonpurpose

Values

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Page 47: Business environment lecture 1   Rahat Kazmi

- Discussthedifferencebetweenavisionandamission.Giveanexampleforeachfromanorganization(s)ofyourchoice.ExamplesofeffectiveVision statementsinclude:Alzheimer'sAssociation:"OurVision isaworldwithout Alzheimer'sdisease.“

Microsoft:"Empowerpeoplethroughgreatsoftwareanytime,anyplace,andonanydevice.“

AMission statement:Definesthepresentstateorpurpose ofanorganization;Answersthreequestions aboutwhyanorganizationexists-WHATitdoes;WHOitdoes itfor;andHOWitdoeswhatitdoes.ExamplesofeffectiveMissionstatementsinclude:Nissan:"Nissanprovidesuniqueandinnovativeautomotiveproductsandservicesthatdeliversuperior,measurablevaluestoallstakeholdersinalliancewithRenault."

Activity

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Page 48: Business environment lecture 1   Rahat Kazmi

§ mission:- agoodoneshouldnormallybeabouthereandnow,visionoftenisn’t.

§ vision:- usuallyvaguehencemayfailtoinspireandmotivatestaff.

§ onceavisionhasbeenachieved,whathappensnext?Itmayceasetohaveanyvalueunlessre-invented.

Discussthedifferencebetweenvisionandmission;guide.

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Page 49: Business environment lecture 1   Rahat Kazmi

vprofitabilityvgrowthvcashflowvr.o.c.e.vriskvqualityvaddedvaluevrevenue

corporateobjectives

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Page 50: Business environment lecture 1   Rahat Kazmi

• Mintzberg(1997)hasdefinedgoalsasbeing‘theintentionsbehinddecisionsoractions,thestatesofmindthatdriveindividualsorcollectivesofindividualscalledorganizationstodowhattheydo’

• Goalscaneitherbeoperationalornon-operationalExampleofoperationalgoal:anorganizationsellingIPad4mayhaveagoal‘toincreasemarketshareinWestLondonby3%’(operationalgoalexpressedasanobjectiveandthereforemeasurable).

Exampleofnon-operationalgoal:areligiousorganizationmayhaveagoalto‘helppeopleknowthetruth’(non-quantifiable)

Whatisagoal?

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Page 51: Business environment lecture 1   Rahat Kazmi

• AnobviousobjectiveonyourcurrentcareerpathistoachieveyourBTECFirst.Precise,measurabletargetswillhelpyoudothis.Youwillhavetoconcentrateondoingyourbestasyouachieveoneunitatatime.YoushouldsetthesegoalsusingSMARTobjectives.

•Specific – youneedaclearstatementaboutwhatyouwilldo.Usually,itisquantified,whichmeansithasanumberinit.For• example:‘CompleteBEAssignmentin8weeks.’

SMARTObjectives:

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Page 52: Business environment lecture 1   Rahat Kazmi

SMARTObjectives:

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Page 53: Business environment lecture 1   Rahat Kazmi

ClassActivity

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Page 54: Business environment lecture 1   Rahat Kazmi

• BppLearningMedia(2010)BusinessEssentials;SupportingHND/HNCandFoundationDegrees,BusinessEnvironment,2nd edition,Chap.1,pp.4-41

• BppLearningmedia (2010)CIMProfessionalCertificateinMarketingStudyText;AssessingTheMarketingEnvironment2nd edition,TheContextofOrganizations,Chap.1,pp.2-20

• BuchannanandHuczynski,A. (2003)OrganizationBehaviour;AnIntroductory text,4th Edition,Chap.1,pp.10-45

• Gilligan,C.andWilson,R.M.S(2009)StrategicMarketingPlanning2nd edition;wheredowewanttobe?Strategicdirectionandstrategyformulation.Chap.8,pp.297-336

• Hamel,G.andPrahalad,C.K.(1994)Competing fortheFuture:BreakthroughStrategiesforSeizingControlofYourIndustryandCreatingtheMarketsofTomorrow.Boston,MA:HarvardBusinessSchoolPress

• Johnson, G.andScholes,K.A.(2002)ExploringCorporateStrategy,2nd editionpp.239

• Mintzberg, H.(1987)CraftingStrategy,HarvardBusinessReview,65(4),pp.66-75• Mintzberg, H.(1994)TheRiseandFallofStrategicPlanning.HemelHempstead:

Prentice-HallInternational

References

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Page 55: Business environment lecture 1   Rahat Kazmi

NextLecture

• Knowhowtoidentifyinternal,connectedandexternalorganization

• stakeholders.• Beabletoidentifyandmapdifferentandoftenconflicting

• Stakeholderinterestsandinfluencetotheorganization.

• Beabletoexplainstakeholderpower-influencematrix

• Beabletodiscuss responsibilitiesoforganisations

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