Unit 3 The Enterprise Environment

1. Unit 3 The Enterprise Environment The Economic Context

2. Market Structures • Perfect competition • Or Pure Competition; • Characterized bymany customers and many suppliers of an identical product.

3. Characteristics of Perfect Competition • Many buyers and sellers • No buyer or seller can control the price • A homogenous product • Substitute • Sufficient knowledge • Perfect information • Free entry • Freedom enter or quit from a market

4. Any example of perfect competition?

5. Imperfect competition • The characteristics of imperfect competition

6. monopoly • Definition: only one firm supplies a product; • Which is given more attention to when markets are monopolies? • Why do so many companies want to be monopolies?

7. True or False • Monopoly is characterized by a lack of competition; • Monopolies will set a lower price and a higher level of output than would be set under perfect competition. • Monopoly prevents innovation.

8. Oligopoly • Definition: it is characterized by a few, dominant suppliers. • A high degree of interdependencies among suppliers. • Question: • What must suppliers do in order to keep an identical product at a high price?

9. Economic Structures • Capitalist economy system • Market economy • Freedom to own and profit; • Justified profit motive; • Reinforcement by law of private property; • Belief in the worth of the individual. Question: What are individuals free to do under capitalism?

10. Marxist economy system • Command economy • Equal share and ownership of productive goods; • Profit being evil; • Central planning; • Question: How are goods produced and distributed under Marxist economy?

11. Socialist economy system • Mixture of the previous two systems; • *no economy is pure. • Questions: • Which two economic systems are in sharp contrast? • What economic system lays special emphasis on the value of the individual? • What kind of economic system do you think China is now under?

12. The Entrepreneurial Environment • What is the entrepreneurial environment? • What is entrepreneurship? • What countries do not encourage entrepreneurship?

13. Three factors that encourage entrepreneurship • The possibility of exercising monopoly power • Risk taking • Intrinsic rewards of innovation

14. Questions: • What is the difference between innovation and invention? • Why are entrepreneurs are forced to keep searching new ideas and keep innovating? • Why must managers be aware of the various laws and regulations of the countries that they do business in?

15. The External Environment

16. Why • No organization in a vacuum; • The forces outside could be a double-edge sword;

17. External organizational environment: • All elements existing outside and with the potential to affect the organization.

18. Two layer of external environment • General environment • Task environment (specific environment)

19. General environment • the forces outside organization’s boundaries that can impact it indirectly; • Task environment (specific environment) • The forces closer to the organization that impact it directly;

20. External environment General environment economic international suppliers Labor market organization demographic legal-political customers competitors Task environment sociocultural technological

21. The general environment It includes : • international • technological • sociocultural • economic • legal-political • Population condition

22. General Environment The General Environment • General environmental trends and events • Little ability to predict them • Even less ability to control them • Can vary across industries Demographic Sociocultural Political/Legal Technological Economic Global (International)

23. International dimension • Globalization • Think internationally

24. General Environment Global Segment • Increasing global trade • Currency exchange rates • Emergence of the Indian and Chinese economies • Trade agreements among regional blocs (NAFTA, EU, ASEAN) • Creation of WTO (decreasing tariffs/free trade in services) Demographic Sociocultural Political/Legal Technological Economic Global (International)

25. Managing in a Global Environment • Challenges • Coping with the sudden appearance of new competitors • Acknowledging cultural, political, and economic differences • Dealing with increased uncertainty, fear, and anxiety • Adapting to changes in the global environment

26. Technological Dimension • It includes scientific and technological advancements • Latest advancement of technology • Computer • Internet • video cameras • digital products • ATM • mobile phone

27. General Environment Technological Segment • Genetic engineering • Emergence of Internet technology • Computer-aided design/computer-aided manufacturing systems (CAD/CAM) • Research in synthetic and exotic materials • Pollution/global warming • Miniaturization of computing technologies • Wireless technology Demographic Sociocultural Political/Legal Technological Economic Global

28. What impact has technology brought to business life? • SOHO • PAPERLESS OFFICE

29. Sociocultural dimension • Demographic characteristics • Norms • Customs • Values • Geographical distribution • Population density • Age • education levels

30. General Environment Sociocultural Segment • More women in the workforce • Increase in temporary workers • Greater concern for fitness • Greater concern for environment • Postponement of family formation Demographic Sociocultural Political/Legal Technological Economic Global

31. General Environment Demographic Segment • Aging population • Rising affluence • Changes in ethnic composition • Geographic distribution of population • Greater disparities in income levels Demographic Sociocultural Political/Legal Technological Economic Global

32. The Cultural Environment • National Culture • The values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important. • May have more influence on an organization than the organization culture.

33. Economic Dimension • Macro level • Taxation • Government spending • General demand, • Interest rates • Exchange rates • Micro level • Merger and acquisition

34. General Environment Economic Segment • Interest rates • Unemployment • Consumer Price index • Trends in GDP • Changes in stock market valuations Demographic Sociocultural Political/Legal Technological Economic Global

35. The Economic Environment • Economic Systems • Market economy • An economy in which resources are primarily owned and controlled by the private sector. • Command economy • An economy in which all economic decisions are planned by a central government. • Monetary and Financial Factors • Currency exchange rates • Inflation rates • Diverse tax policies

36. Legal-political Government do everything just for their goals including influencing the behaviors of enterprise through law and politics. Such as • consumer protection legislation • product safety requirements • import and export restriction • environment protection agency • Pressure groups

37. The Legal Environment • Stability or instability of legal and political systems • Legal procedures are established and followed • Fair and honest elections held on a regular basis • Differences in the laws of various nations • Effects on business activities • Effects on delivery of products and services

38. Try to analyze the external environment of GDPU • As a manager, how the external environment will influence his work?

39. How the Environment Affects Managers • Environmental Uncertainty • The extent to which managers have knowledge of and are able to predict change their organization’s external environment is affected by: • Complexity of the environment: the number of components in an organization’s external environment. • Degree of change in environmental components: how dynamic or stable the external environment is.

40. Task environment

41. Review • Try to analyze the external environment of GDPU • As a manager, how the external environment will influence his work?

42. How the Environment Affects Managers • Environmental Uncertainty • The extent to which managers have knowledge of and are able to predict change their organization’s external environment is affected by: • Complexity of the environment: the number of components in an organization’s external environment. • Degree of change in environmental components: how dynamic or stable the external environment is.

43. Task Environment • It includes those sectors that have a direct working relationship with the organization. • Forces from suppliers, distributors, customers ,competitors and the labor market. • It refers the choices, actions and outcomes a given user has for a given task.

44. Customers • Definition: Those people and organization who acquire goods or service from the organization are customers. • Key words: frequent; purchase; relationship maintaining; future; • The receiver

45. Broadly speaking, customers can be divided into two main groups. • Internal customers : People who work with you. • External customers: People who work outside your business.

46. Internal customers : • Fellow workers • Supervisors • Managers • Trainees • Cleaners • Part time staff

47. External customers: • Customers • Suppliers • Designers • Service providers • Contractors • Sales representatives • Delivery personnel

48. The determiner • Terms: • Customer needs and satisfaction; • Customer service • Customer relationship management; • What are the relations between the organization and customers?

49. Competitors • Definition • others: Seller of a product or service whose product or service can be used to fill or satisfy a consumer need (real or imagined) in a market where other sellers offer products that will also fill or satisfy the same need.

50. Relation between competitors • Consequence of high level of competition • Low price • Little profit • Cooperation