BUS 102 INTRODUCTION TO BUSINESS II LECTURE NOTES

BUS 102: INTRODUCTION TO BUSINESS II LECTURE NOTES (PROF. ADEYEYE, MR. CASSIUS OGAR AND MRS UDEZE)

1. THE CONCEPT OF ORGANIZATION • • Organization is defined by Robbins (in Abba et al. , 2004) as a consciously coordinated social entity, with a relatively identifiable boundary that functions on a relatively continuous basis to achieve a common goal, or set of objectives. Key words are: Consciously coordinated – implying existence of management. Social entity – means that the unit is made up of individuals or group of persons who interact with each other. Relatively identifiable boundary – in order to distinguish members from non-members. Relatively continuous basis – means that individual members remain bound together until they leave the organization. To achieve common goals – implies that individuals are unable to achieve the goals efficiently working individually. From the above, we define business organization as a structured unit of persons or groups for the purpose of pursuing legal, profit-oriented economic activity undertaken to provide, at a risk of loss, goods and services required to satisfy human needs.

THE CONCEPT OF BUSINESS ENVIRONMENT • • • The Encyclopedic edition of Lexicon Webster dictionary defines environment as all the physical, social and cultural factors and conditions influencing the existence or development of an organism or assemblage of organisms. Hicks and Gullett(1981) identify elements of the environment to include persons, physical resources and climate, attitudes and laws. Business environment can thus be defined as the totality of all physical, socioeconomic, cultural, religious and legal factors and conditions surrounding a particular business organization.

2. THE INTERDEPENDENCE OF BUSINESS ORGANIZATION AND ITS ENVIRONMENT • • An organization exists in its environment. It impacts and is impacted by the environment under constantly changing condition. The success or failure of an organization depends on its ability to continually adapt to its changing environment. Environmental factors affect the organization in two ways: They set limits by creating barriers to business operations. They also provide opportunities and challenges for organizations, supplying productive inputs for business operations. The various roles played by environmental factors are discussed in the next section. On a reciprocal basis, business organization processes inputs supplied by its environment to produce outputs in form of goods and services required by the environment. By the system of feedback, acceptability of the output is relayed back to the organization, which must continually adapt to the changing requirement of the environment, if it must continue to exist. The interdependent relationship is schematically shown below.

ENVIRONMENT Input- Resources, Opportunities and Limits Business organization Feedback- Reactions of the environment on organization’s output determine future input Interdependence of organization and environment Output of Organization must meet the requirements of Environment

3. MODELS OF RELATIONSHIPS BETWEEN ORGANIZATIONS AND THEIR ENVIRONMENT: THE EXTERNAL ENVIRONMENT • • Environmental factors that affect business organizations are usually classified into two: The external and internal factors. The external factors are the macro elements largely beyond the control of the organization. They include (1) Demographic factors, (2) Natural factors, (3) Economic factors, (4) Socio-cultural factors, (5) Technological factors and (6) Political and legal factors. The following diagram shows the organization and its external environment. Natural factors Economic factors ENVIRONMENT Demographic factors Political And legal factors Business organization Socio. Cultural factors ENVIRONMENT Technological factors THE EXTERNAL ENVIRONMRNT OF ORGANIZATION

THE EXTERNAL ENVIRONMENT CONTD. • • • 1. Demographic factors: Changes in population and its characteristics affect business organizations. Changes in age distribution or mix of workforce will affect environmental input of human resources, as well as organization’s products and marketing orientation. 2. Natural factors: Physical features, climatic conditions, natural resources and ecological issues impose serious limitations on business operations. Organizations, through corporate social responsibility projects seek to mitigate the impact of these factors. 3. Economic factors: Changes in market forces including demand for organization’s products and services, inflationary forces, changes in interest and exchange rates and other macro economic variables directly impact on business operations. 4. Socio-cultural factors: People’s culture, religion, attitudes and ethical values determine the acceptability of an organization’s products and services. Organizations accordingly strive to adapt to changing socio-cultural forces. 5. Technological factors: Changes in technology determine obsolescence and acceptability of organization’s products and services. Organizations that fail to respond to changing technology soon cease to exist. 6. Political and legal factors: Laws, rules and regulations made by political class and enforced by the judiciary determine permissible business activities and regulate standards and environmental conditions for business organizations.

4. THE INTERNAL ENVIRONMENT • • • Internal environmental factors relate to those elements that exist within the organization, or can be largely influenced through effective management. These include: (1) Organizational resources (human and material), (2) Suppliers, (3) Customers and Competitors. 1. Organizational resources: Organizations are made up of human and non-human resources. Human resources consist of persons at management and operative functional levels. Effective and efficient human resource management strive to integrate individual objectives with corporate objectives for healthy growth of the organization. Ineffective human resource management leads to various forms of industrial disharmony, which disrupt business operations. The quality of non-human organizational resources, which include office and residential accommodation, plant, furniture and equipment, affect operational efficiency of the organization. 2. Suppliers: Ability to effectively manage the supplier-organization interface is critical requirement for timely delivery of quality inputs, which otherwise will adversely affect business performance. 3. Customers: Customer satisfaction is a critical success factor and organization’s responsiveness to changing customer requirements is important determinant of the success or failure of that organization. 4. Competitors: Organizations map out strategies to effectively maintain or expand their market share under competitive environment. Strategies may include cooperation, benchmarking or manipulation in price, product mix or advertising.

5. STRATEGIES FOR MANAGEMENT OF THE INTERFACE BETWEEN BUSINESS ORGANIZATIONS AND THEIR RELEVANT ENVIRONMENT • • . Different environmental factors have varying impact on organizations. Similarly, organizations have varying degrees of controllability on different environmental factors. . The strategy that can be effective in managing the interface between business organizations and their environment depends on the degree to which the relevant environmental factors are controllable. In all cases, effective management is required, which begins with strategic planning. To effectively respond to changing environmental factors, an organization should: 1. Conduct environmental scanning to determine which factors affect its business. 2. Determine its strategic posture or profile, i. e. its actual relationship with the identified environmental factors. . 3. Forecast future changes in the relevant environmental variables. 4. Develop strategic plan that will enable it cope with the changing environmental forces.

STRATEGIES FOR MANAGEMENT OF THE INTERFACE BETWEEN BUSIBESS ORGANIZATIONS AND THEIR RELEVANT ENVIRONMENT CONTD. • • Depending on the nature of the environmental factors, the following strategies can be useful in managing the interface between business organizations and their relevant environments: (a) Total adaptation, where the factors cannot be changed, e. g. age-long cultural or religious practices. (b) Use of corporate social responsibility projects to influence public opinion. (c) Lobbying of political institutions for favourable changes in policy and regulatory specifications. (d) Use of other legitimate means to achieve desired results, such as peaceful demonstration. As earlier stated, effective management is required in all cases.