1.
The External Environment
·
Organizations
are open systems
o
affected
by, and in turn affect, their external environments
o
all
relevant forces outside a firm’s boundaries
§ relevant - factors to which managers must pay attention
§ organizational boundaries - that which separates the organization
from its environment
§ competitive environment - immediate environment surrounding a firm
2.
Economic Environment
·
Business
Cycle
o
Patterns
of short term
ups and down
expansions and contractions) in an economy
·
Aggregate
Output
o
Total
quantity of goods and services produced by an economic system
during a given period
o
Aggregate
Output:
a. Standard of Living
§ Total quantity and quality of goods and services
that a country’s citizerns can purchase with the currency used in their
country
b.Gross Domestic Product (GDP)
§ Total value of
all goods and services produced within a
given period by a national economy through domestic factors of production
§ Real GDP Ã (GDP calculated to account for changes in
currency values and price changes)
§ Nominal GDP Ã (GDP measured in current dollars or with all
components valued at current prices)
c. Gross National Product (GNP)
§ Total value of
all goods and services produced by a
national economy within a given period regardless where the factors of
production are located
d.
Purchasing
Power Parity
§ Principle that exchange rates are set so that the
prices of similar products in different countries are about the same
e. Productivity
§ Measure of economic growth that compares how much a
system produces with the resources needed to produce it
f. Balance of trade
§ Economic value of all products a country exports minus
the economic value of all products it imports
g.National Debt
§ Amount of money that a government owes its
creditors
3.
Economic Stability
a.
Stability
o
Condition
in an economic system in which the amount of money available and the
quantity of goods and services produced are growing at about the same
rate
b.
Inflation
o
Occurrence
of widespread price increases throughout an economic system
o
Inflation
rate = (change in price Index/Initial Price Index) X 100
c.
Consumer
Price Index (CPI)
o
Measure
of prices of typical products purchased by consumers living in urban areas
d.
Unemployment
o
Measure
of prices of typical products purchased by consumers living in urban areas
e. Recession
o
Period
during which aggregate output, as measured by real GDP, declines
f. Depression
o
Particularly
severe and long lasting recession
g. Fiscal Policies
o
Government
economic policies that determine how the government collects and spends its
revenues
h. Monetary Policies
o
Government
economic policies that determine the size of a nations monetary supply
i.
Stabilization
Policies
o
Government
policy, embracing both fiscal and monetary policies whose goal is to smooth out
fluctuations in output and unemployment and to stabilize prices
4.
Technological Environment
a.
Technology
o
All
the ways in which firms create value for constituents
b.
Product/Service
Technologies
o
Technologies
employed for creating products (goods and services) for customers
c.
Business
Process Technologies-
o
Enterprise
Resource Planning
i.
Large
scale information system for organizing and managing a firm’s processes across product lines, departments and geographic
locations
5.
Political-Legal Environment
a.
Political-Legal
Environment
o
Condition
reflecting the relationship between business and government, usually in the
form of government regulation
b.
Regulation
o
Defines
Relationship Between Government & Business
c.
Government
o
Pro
vs. Anti-Business Sentiment
6.
Sociocultural Environment
a.
Sociocultural
Environment
o
Conditions
including the customs, mores, values and demographic characteristics of the
society in which an organization functions
b.
Customer
Preferences/Tastes- Vary
o
International
o
National
c.
Ethical
Compliance & Responsible Behavior
o
Enron
o
Arthur
Andersen
7.
Business Environment
a.
Redrawing
Corporate Boundaries - Core Competencies
o
Core
Competencies
i.
Skills
and resources with which an organization competes best and creates the most
values for owners
b.
Challenges/Opportunities
o
Outsourcing
i.
Strategy
of paying suppliers and distributors to perform certain business processes or
to provide needed materials or resources
o
Vertical
Integration
i.
Strategy
of owning the means by which an organization produces goods or services
o
Viral
Marketing
i.
Strategy
of using the internet and word of mouth marketing to spread product information
o
Process
i.
Any
activity that adds value to some input by transforming it into an output for a
customer (whether internal or external)
o
Business
Process Management
i.
Approach
by which firms move away from
department-oriented organization and toward process oriented team structures
that cut across old departmental boundaries
o
Post-9/11
i.
The
government should be security concern
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