“the external business environment should not be feared but be

8/14/2019 The External Business Environment Should Not Be Feared but Be

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The external business environment should not be feared

but be a source of stimulation for an organisation., a discussion.

Name : Mike Voss Student ID : 02868954

Course : E-Business Subject : Management

Program Specialist : Caroline O`Reilly

Student Signature :______________________ Date : 10 th November 2002


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The external business environment should not be feared but be a source of stimulation

for an organisation.

1. Introduction

I have chosen to discuss the above statement, because I believe that it deals with an aspect of modernmanagement that has been greatly stressed in the recent times, with environmental influences and even

turbulences occurring at a remarkable pace and their consequences for the business world being fairly obvious in

various ways. The largest of such recent events include the tragedy of September 11, the downfall of the mid-

nineties internet start-up businesses and the introduction of a unified currency in most of the EU member states.

To assess the issue, I will first lay out what the external business environment actually consists of, i.e.

how it is understood in general management theory today. Then I will weigh up arguments for and against the

statement, discussing, how the external environment influences managerial activity and whether it does pose a

threat that has to be feared or if it is indeed rather a source for stimulation, therefore to be considered an

opportunity and not an unmasterable difficulty. After this I shall give a conclusion presenting my own opinionthat has arisen from the above argumentation.

2. The External Business Environment in Management Theory

2.1 The Macro Environment

Management Theory differentiates the discussed External Environment into two major fields. On the

one hand, there are the influences of the outside world in general, gathered under the term of the Macro

Environment. This, as Robbins and Coulter call it, General Environment, as opposed to the later mentioned

Specific Environment, embraces general influences, that may affect the organization but whose relevance isnot clear entirely (1). Management Theory distinguishes the following five backgrounds of such influences (2):

International: Influences from organisations or events that take place on a global or at least cross

national level, most commonly used examples being the introduction of the EURO, the

actions of the World Trade Organisation and of course the European single market.

Political-legal: Similar yet distinguished from the later mentioned influences of specific regulators in

the task environment, these influences describe general legal organisational constrains.

A good example would be a trade embargo against a certain state as seen in the Iraq

crisis or the needed approval of a nations parliament to contract a supplier for the

production of a new military transport plane as recently seen in the NATO alliance.Economic: Generally the welfare of the nation or other target groups within which an organisation

operates. Macroeconomic variables such as unemployment, interest rates, inflation and

overall economic performance come into consideration here. It can be observed in many

of the eastern parts of the now united Germany, were unemployment is high, thus

consumer power is low and companies are often reluctant to invest.

Technological: The ability to reach an organisations goals in a technologically feasible way, with the

recent development of the e-commerce markets being the best example, now allowing

business transactions on a global level with the click of a computer mouse.


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Sociocultural: Summarizes the influences of ethical and moral forces that are at work in any society

today. Grave influence of such forces could be seen when people refused to buy

McDonalds products in the late 80s because they disapproved with the companys

activities in Costa Rica, where the land was exploited for the growth of cattle to supply

the fast-food giant with the prime ingredient for its main product range. Another quite

interesting example is the still fast growing pornography industry in California, which

greatly profits from the changing moral of the last century; their merchandise being

unthinkable only fifty years ago, but now accepted as legitimate products by portions of

the society large enough to make it a very profitable market.

Overall, these environmental forces can be conceived as the outside circle (2) or the general setting for the

organisations field of operation.

2.2 The External Task Environment

To stay within the symbolic language that concluded the paragraph above, the External Task

Environment or Specific Environment (1), draws the circle around the organisation much tighter. Rather than

describing the general setting, it focuses on the actual forces that organisational management has to come up

against in its every day life. Many of these originate in the aforementioned Macro Environmental forces, but they

add much more detail to the picture of the business world and are directly relevant to the achievement of an

organisations goals (1). Also, they significantly change for each individual organisation rather than being valid

for every business operating in the earlier described General Environment.

2.2.1 General Approach to the External Task Environment

Regarding the External Task Environment, general management theory states that five main interest

groups need to be taken into consideration (2):

Suppliers or

Distributors:

Providing the organisation with the necessary resources or a network to market a product.

Best examples here include the Honda deal in the US, which tied one sole supplier for all

the mirrors of their cars to their US production. Supply can also mean the availability of

labour. An internet company looking for IT specialists may choose not to invest in a

country that does not have the appropriate number of university graduates to fill all vacant

places with qualified personnel.

Customers: A company aiming to generate revenue needs customers to buy its products in order to

archive its goal. Similarly, non profit organisations like governments or welfare groups

only have a purpose if they can please a set of people as their target group. Customer

satisfaction has a huge impact on the success of an organisation. A good example is the

expectation for a qualified technical hotline that can help customers with their problems or

a recommendable restaurant, which lives on the positive evaluation of its patrons.


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supporting the statement in the article title, because, to come back to Sun Tsus evaluation of armoured contest,

the environmental circumstances can prove very useful, as long as you are aware of the threats and manage to

turn far into near and more generally disadvantage into opportunity.

Certainly the first discussed argument, fielding future uncertainty leading to fearing the environment

rather than taking it as stimulation, holds valid on a theoretical level. However, future uncertainty and itsresulting dynamics in the External Environment is in existence everywhere, no matter how much a manager may

wish for a sterile, easily forecasted environment to operate his business in. Since it is a given fact, managers that

are aware of it may turn its disadvantages into opportunities by simply coming up against it with a better, more

efficient contingency plan than their competitors in the market. Thus, in a rather Darwinistic approach, they may

come out of a crisis that has affected the market sector due to turbulence or other changes in environmental

influences as a beaten but surviving winner, eventually even strong enough to claim portions of the market that

were formerly owned by a competitor. A very good example for such successful planning was the positioning of

companies in the German major contractor market, with players like Holzmann and Hoch-Tief rivalling in an

ever tighter growing market area of construction industry. When Holzmann finally could no longer cope with itsresulting financial difficulties, Hoch-Tief, who had long been less than even rivals with them, were well

positioned to take its market shares that they had so long competed for, simply because they apparently had a

better way of surviving the depression that had diminished their profitable field of activity in the wake of a less

and less favourable growing economical Macro Environment.

The same argument holds in the field of environmental complexity, since an organisation that has an

efficient Information Management System in operation, may easily beat its competitors by quickly assessing any

issues that may arise in any area of business, thus still aiming for the optimum method of reaching their

objective (7) even though they operate in a complex and not totally foreseeable surrounding. A well informed

manager is provided with a variety of possible actions and reactions to his External Environment, ranging fromchanges in strategic positioning like the change of IBMs product focus from personal computers to mainframe

and minicomputers at the end of the 1980s and early 1990s, to mergers, takeovers, acquisitions and alliances as

Vodafone showed with companies in all major telecommunication markets in Europe in the recent years, even up

to not always legal direct influence in outside forces as lobbying or party financing in the political sector as it is

rather popular in the American system, where organisations like the National Rifle Association or representatives

of the energy industry have created an atmosphere of political support for their cause through various action to

influence political forces.

4. Conclusion

Weighing up the pros and cons of whether The external business environment should not be feared but

be a source of stimulation for an organisation, I generally agree with the overall statement. However I would

amend it to not only be feared, because I do believe, that fear as in terms of awareness of the External

Environments dangers, is a managerial skill of utmost importance for the survival in the business world. A

manager is constantly kept at edge and thereby forced to keep his or her organisation flexible to react to the

forces that influence its area of activity and thus is indeed constantly provided with stimulation to keep him or

her vigilant to the surroundings. New opportunities arise everywhere like in the 1990s internet boom, but as

shown by the very few successfully surviving players from that time, like e-bay or Amazon, not only the avail of

new opportunities but also the avoidance of ever present threats make a successfully surviving and eventually

prospering business that is here to stay.


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References

Unless specifically stated otherwise, the author draws his general knowledge from the 2002 Daytime

Management Lecture MG111 by Caroline OReilly, Tipperary Institute, Thurles

(1) Kolter, Philip (1997), Marketing Management: Analysis, Planning, Implementation, and Control. Prentice Hall

(2) Lecture Notes Management MG111 by Caroline O`Reilly, Lectures 3 and 4, based on Griffin,

R.W. (1999), Management 6th edition, Houghton Mifflin Company, USA

(3) Robbins, S.P.; Coulter, M. (1999), Management , 6 th edition, Prentice Hall International Ltd., UK

pp. 96-97

(4) Robbins, S.P.; Coulter, M. (1999), Management , 6 th edition, Prentice Hall International Ltd., UK

p. 79

(5) Sun Tsu, (appr. 500 b.c.), The Art of War , translated from the German book (2001) Wahrhaft siegt,

wer nicht kmpft , 2 nd edition, Piper Verlag GmbH, Germany, pp. 147-148

(6) Drucker, P.F.(1994), Managing in Turbulent Times , new edition, Butterwourth Heinemann Ltd.,

UK, p. 1

(7) Weihrich, H.; Koontz, H. (1994), Management A Global Perspective , 10 th edition, McGraw-Hill

Inc., USA, p. 185

“the external business environment should not be feared but be

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