Chapter 2: Environments of business Area of Study 1: Large-scale Organisations in Context

Stakeholders in LSO’s Stakeholder: individual or group that has a direct or vested interest in the activities of an organisation Shareholders Directors Managers Employees Trade Unions Customers Suppliers Creditors/Banks Community Government Competitors

Three levels of the organisational environment 1. Internal Environment 2. Operating Environment 3. Macro Environment

Internal Environment Owners/Shareholders Pressures and forces from within the organisation Management has a fair degree of certainty and control over these pressures Individual shareholders will find it difficult to influence a company Can attend meetings and vote at AGMs May wish companies to become more environmentally sustainable

Internal Environment continued… Board of directors and managementEmployees Work to manage corporate risk and eliminate poor corporate conduct Must adhere to corporate governance, social rsponsibility, ethical and honest behaviour Seek to work in a non- discriminatory and ethical workplace that provides workplace flexibility options, equal employment opportunities etc. Organisations want to be regarded as having best practice regarding providing for employees – makes them the employer of choice

Internal Environment continued… Organisational StructureCorporate Culture Recent moves such as downsizing has placed greater emphasis on use of teams and empowerment of workers Created opportunities for non-core activities to be outsourced Evolves over time and can reflect the personality of the original founder Reflects the shared values, beliefs and expectations of employees Must incorporate flexibility and adaptability into their culture to remain dynamic and responsive

Operating Environment Customers Factors directly interact with the business and its operations Can provide both opportunities and threats to a business relating to its success and ability to be competitive Pose potential uncertainty to the profitability and ongoing success Customers are now more discerning and educated in their consumer choices May look at the social responsibility and ethical nature of an organisation

Operating Environment continued… CompetitorsSuppliers Must monitor competitor’s products or services Can gain an edge over competitors by offering inducements and incentive programs Any provider of input into a business’ operations Businesses must ensure a steady, reliable flow of needed inputs at the lowest possible cost

Operating Environment continued… Trade UnionsLobby/pressure groups Represent workers and act on their behalf to negotiate with management on issues such as wages, working conditions etc. Organisations can cooperate with trade unions and work towards mutual organisational goals Attempt to influence the actions of organisations Can be environmental issues, worker conditions, ethical production Can cause organisations to lose brand value overnight

Operating Environment continued… Financial InstitutionsRegulatory bodies Deregulation of financial industries means more competition Need to keep up to date with interest rates, loan arrangements, credit facilities and electronic banking All three levels of government place pressure on businesses Need to interact with bodies such as ATO, ASIC and ACCC, OHS etc Stated with which the business must comply

Macro Environment Economic forces Factors that can influence the operation and performance of an organisation The organisation has no control Business cycle is the pattern of grown and decline in the economy and goes in cycles (periods of growth followed by downturns) Level of impact by these changes is based on the type of business – in a downturn sales industries suffer

Macro Environment continued… Government forces Federal and state governments both affect the operations of businesses Monetary policy – Federal government and RBA set target interest rate which affects the rate charged by banks. High interest rates slow down consumer spending Budgetary policy – governments revenue raising and spending activities Government spending on certain industries Taxation policies Microeconomic Reform – changes made in the internal business environment of a country, placing emphasis on improving efficiency, e.g. privatisation, deregulation

Macro Environment continued… Legal forces Technological developmental forces Businesses must comply with legislation Laws are set in place to guide, protect, and control businesses and consumers Some examples include: fair trading, business licensing, workers compensation, anti- discrimination and so on. Can result in criminal charges or civil suits where monetary damages are imposed Organisations need to be responsive to advantages offered by technology Assist a business to lower costs, improve quality, become environmentally responsible and deliver goods and services more quickly Activity 2.8 question 1

Macro Environment continued… Globalisation forcesPolitical forces Organisations cannot ignore foreign competition Some companies merge to deal with this and remain competitive in a shrinking world Affect the general stability in the country If operating internationally political environment in that country needs to be considered

Macro Environment continued… Social and cultural forcesEnvironmental forces Must be aware of and respond to changing conditions in society Pick three to write down as examples Under increasing pressure to take care of the environment Either self-regulatory or government mandated measures are put in place Ensure organisations now work from sustainable buildings