The Fundamental Concepts in Business Environment

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Table of Contents

Business environment
Market segmentation
SWOT analysis
Budget
The benefits of budgeting
Tangible and intangible goods, performance objectives
The performance objectives in operations management
Motivation
HRM

Business environment

The business environment includes all factors that directly or indirectly affect the launching and performance of a particular business. It implies human resources, government, legislation, corporate culture and mission establishment. Moreover, there are external and internal business environments, each of which has its own characteristics. The external environment includes all external aspects that affect the business and in turn, has micro- and macro-factors. The micro-factors include customers, suppliers, investors, intermediaries, employees and other items directly affecting the business. Macro-aspects are formulated by items that have an indirect impact on the company, such as legal, social, cultural, or political facets.

External and internal business environments

Speaking about external and internal business environments in more detail, one can distinguish separate types. The four internal business environments include core mission and goals, corporate culture, human resources, and technology capabilities. The mission and goals are important aspects as it formulates motivation and a plan of action, and the corporate culture is a factor of discipline. Human resources directly affect the efficiency of work, and technological capabilities determine the degree of activity and efficiency of performance. The external four business environments include such essential items as customers that directly affect profits. Further, the government creates a legal and social climate for business, and the country’s economy determines financial opportunities. Finally, competitiveness refers to the degree of freedom of action or the need for development.

Market segmentation

Market segmentation allows one to more efficiently allocate business resources, such as marketing, finance, and production. This process involves dividing consumers, both current and potential, into separate groups. These customer groups are created depending on similar preferences, habits, hobbies, and other information about customers. Market segmentation is one of the most important marketing tasks because it promotes efficient production separation. An example would be the division of soda into sugar and sugar-free items. Depending on preferences in a certain territory, production will be adjusted to the optimal balance, which will help to avoid unsold products.

Types of market segmentation

There are four most important types of market segmentation. Geographic segmentation involves dividing an area into specific geographic units. It is formulated by region, state, city, district, neighborhood, and others, depending on the country and geographical features. Further, demographic segmentation provides division under such lines as gender, age, family size, type of employment, nationality, religion, and education. Psychographic segmentation involves taking into account the personality, interests, lifestyle, and values of the client. Finally, operational segmentation determines the volume of goods required, technology, and customer status.

SWOT analysis

SWOT analysis is a strategic analytical method to identify positive and negative aspects of a business or any other factor. As a rule, it is an effective method of analyzing business and business environments. Therefore, it implies S – strengths, W – weaknesses, O – opportunities, and T – threats of business activity or environment. It is also worth noting that the internal environment of the business, thus, those that can be influenced, includes strengths and weaknesses. In turn, the external environment, which can affect the business and is not (or very difficult) to control, includes opportunities and threats.

SWOT analysis: advantages and limitations

Speaking about the strengths of SWOT analysis, it is worth noting that this method does not require a narrow-profile education. In other words, one does not have to spend time and financial resources on finding specialized personnel to carry out the analysis. In addition, SWOT analysis is a flexible and versatile method that can be customized for any type of research. The disadvantages are the general nature of the results of the analysis, thus, for more accurate indicators, it is necessary to carry out additional special procedures. Moreover, it is worth remembering that SWOT analysis visualizes indicators of a static nature. Therefore, this analysis is not suitable for obtaining a vision of the situation in dynamics, which is often an important aspect.

Budget

The budget is a developed plan of the subject (organization, family, individual) which contains information about financial performance. These indicators include earnings, profits, costs, potential profits or expenses, and other aspects. The budget is set for a certain period, and in organizations, the budget is usually set for one year. It means that the company calculates and plans estimated profits and expenses for a given period. In addition, for each business sector or type of company, the indicators of the budget plan will be different. There are three main types of the budget such as state budget, organization budget, and personal or family budget.

The benefits of budgeting

The main advantage of budgeting is a way to effectively control the implementation of the plans and tasks of the state, organization, or individual. Further, the budget allows one to analyze and identify effective and ineffective management strategies. In addition, on the basis of this analysis, one has the opportunity to develop strategies based on effective from past periods, thus, the most profitable ones. The budget lets one timely adjust strategies or development decisions, which can save one from losses and bankruptcy. Moreover, it is a method of additional staff motivation. Finally, budgeting promotes additional coordination between employees and departments of the company.

Tangible and intangible goods, performance objectives

Tangible goods include items that can be weighed, touched, seen, moved, or measured. The most popular examples of such products are cars, clothes, appliances, plants, books, and other material objects. In turn, intangible goods include those that cannot be subjected to the abovementioned physical impacts. For example, music, movies, computer games or games on consoles, applications, and other intangible objects. Moreover, more and more examples of such commodities have appeared recently, such as NFT units. Such objects can only exist in the form of a virtual or intangible entity.

The performance objectives in operations management

The five performance objectives in operations management include flexibility, cost, quality, speed, and dependability. Flexibility includes the ability of a company or business to change the main parameters of its activities, depending on the need. For example, for a restaurant, it may involve the opening of new outlets or the introduction of a new menu. Cost refers to the ratio between the expenses of producing a product or delivering a service and the final price of the product or service. Quality refers to the degree to which customer expectations match the product or service received. Speed includes the period of time it takes for a customer to receive a service or product after a request. Finally, dependability implies performing or receiving goods or services at a specific time when it is necessary for the client.

Motivation

Motivation is a set of psycho-physiological processes that induce an individual to certain actions. Motivation is an important aspect of business, both for management and employees. It is worth noting that motivation is a unique object for each person. For example, a monetary reward can serve as a strong motivation for one, however, the financial aspect cannot be significant for another person. There is internal motivation, which is the result of the action itself and is not related to external factors. In turn, external motivation is the result of actions in relation to the subject and is not related to the type of activity of the subject.

Maslow’s hierarchy of needs

Abraham Maslow, after analyzing the various needs of people, was able to divide them into five main categories. The social need includes companionship, caring, being part of a team or family, appreciation of others and oneself by others, and the need to be accepted by others. Physiological needs include hunger, thirst, and other instinctive aspects of human life. Further, there is a need for security, such as the comfort and permanence of the current existence and living conditions. Spiritual needs include self-knowledge, development, self-identification, and self-expression. Finally, the need for self-esteem, or ego, includes the necessity to achieve success and respect from others and promotion.

HRM

Human resources management is an important aspect of a company or business activity. It implies processes for managing and improving procedures related to human resources. Basically, HRM includes four main processes, namely recruiting, workflow, training, and rewards. There are many factors that affect HRM, however, one can identify five of the most important that directly affect the efficiency of the process.

Factors that affect on HRM decisions

For example, the socio-cultural aspect includes the attitudes, beliefs, and expectations of the social environment that indicate the main theses of the subjects of the HRM. National income determines the intensity of desire and interest in a particular area, depending on the direction of the business. The degree of labor demand determines the HRM strategies to be undertaken under certain conditions. The demographic features of the population formulate the basic workforce base and methods of human resources. Finally, technological capabilities determine the degree of efficiency of HRM processes.

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