Understanding Business Environments and Factors

External Environment

External Environment: All events outside a company that have the potential to influence or affect it.

Environmental Change

Environmental Change: The rate at which a company’s general and specific environments change.

  • Stable Environments: An environment in which the rate of change is slow.
  • Dynamic Environment: An environment in which the rate of change is fast.

Punctuated Equilibrium Theory

Punctuated Equilibrium Theory: A theory in which companies go through long, simple periods of stability, followed by short periods of dynamic, fundamental change (revolution), and return to stability.

Environmental Complexity

Environmental Complexity: The number of external factors in the environment that affect organizations.

  • Simple Environment: An environment with few environmental factors.
  • Complex Environment: An environment with many environmental factors.

Resource Scarcity

Resource Scarcity: The abundance or shortage of critical organizational resources in an organization’s external environment.

Uncertainty

Uncertainty: The extent to which managers can understand or predict which environmental changes and trends will affect their businesses.

General and Specific Environments

General Environment

General Environment: The economic, technological, sociocultural, and political trends that indirectly affect all organizations.

Specific Environment

Specific Environment: The customers, competitors, suppliers, industry regulations, and advocacy groups that are unique to an industry and directly affect how a company does business.

Business Confidence Indices

Business Confidence Indices: Indices that show managers’ level of confidence about future business growth.

Key Concepts and Definitions

Technology

Technology: The knowledge, tools, and techniques used to transform input into output.

Supplier and Buyer Dependence

  • Supplier Dependence: The degree to which a company relies on a supplier.
  • Buyer Dependence: The degree to which a supplier relies on a buyer because of the importance of that buyer to the supplier and the difficulty of finding other buyers.

Opportunistic Behavior

Opportunistic Behavior: Not defined as mutually beneficial in the original text. It generally refers to one party benefiting at the expense of another. A correct definition would be: A transaction in which one party in the relationship benefits at the expense of the other.

The original document seems to confuse this with Relationship Behavior:

Relationship Behavior: The establishment of mutually beneficial, long-term exchanges between buyers and suppliers.

Industry Regulations

Industry Regulations: Regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions.

Advocacy Groups

Advocacy Groups: Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions.

Advocacy Group Tactics

  • Public Communications: An advocacy group tactic that relies on voluntary participation by the news media and the advertising industry to get the advocacy group’s message out.
  • Media Advocacy: An advocacy group tactic that involves framing issues as public issues.
  • Product Boycott: An advocacy group tactic that involves protesting a company’s actions by convincing consumers not to purchase its products.

Cognitive Maps

Cognitive Maps: Graphic descriptions of how managers believe environmental factors relate to possible organizational actions.

Internal Environment

Internal Environment: The events and trends inside an organization that affect management, employees, and culture.

Organizational Culture

Organizational Culture: The values, beliefs, and attitudes shared by the members of an organization.

Organizational Stories

Organizational Stories: Stories told by members to make sense of events and changes in an organization, to emphasize culturally consistent decisions.

Company Vision

Company Vision: The purpose of a company’s existence.

Cultural Change Techniques

  • Behavioral Addition: The process of having managers and employees perform new behaviors that are central to and symbolic of the new organizational culture.
  • Behavioral Substitution: The process of having managers and employees perform new behaviors in place of another.
  • Visible Artifacts: Visible signs of an organization’s culture, such as office layout, dress code, and company benefits and perks.