Business Environment

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Introduction

Business Environment included the actors and forces outside the organization that influence management’s stability to develop and maintain successful transactions with its target customers and stakeholders. The objective is to establish the importance of analyzing the types of environmental forces. The environmental forces are political-legal forces, economic forces, socio-cultural forces and technological forces. In other words, these forces (PEST) strongly affect the way of business is conducted and present opportunities and threats to an organization.

Environmental scanning is defined as an analysis and evaluation of internal conditions and external data and factors that affect the organization. Organizations scan the environment in order to understand the external forces of change so that they may develop effective responses which secure or improve their position in the future. They scan in order to avoid surprises, identify threats and opportunities, gain competitive advantage, and improve long-term & short-term planning (Sutton, 1988).

PEST analysis is concerned with the key external environmental influences on a business. Identifying PEST influences is a useful way of summarising the external environment in which a business operates. However, it must be followed up by consideration of how a business should respond to these influences.

Four Environmental Forces
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Political-Legal Forces

Political-legal forces are changes in the way politicians shape laws and subsequently, the opportunities and threats to an organization. Political forces included government regulations and legal issues and define both formal and informal rules that must operate by a firm. These forces are shown as per below:

Example
Singapore government has encouraged public and private sectors contribute to the growth of e-Government by introducing eCitizen Helper 3P Partnership (People- Private-Public), (Government of Singapore 2005). This joint program provides the public with the means to adopt e-Services. This strategy reflects capacity of Singapore in human capital development and capacity building. The government knows how to motivate and mobilize all stakeholders to participate in e-Services.

Economical Forces

Economic forces included the general economic conditions and trends of the economic cycle. These forces affect the purchasing power of potential customers and the firm’s cost of capital. The following are some examples of economic factors:

Example
Singapore has implemented radical economic policies to assist SMEs to tap the schemes and benefits that await them by adopting e-commerce initiatives” (Ravindran 2003). The Singapore Quality Class helps to identify businesses that have the potential to expand internationally. Government also provide incentives to these enterprises to encourage and assist them in order to reach overseas markets.

Social-cultural Forces

Social-cultural forces are influences and trends originating in a country’s human relationships, cultural values and lifestyle. The social factors that affect customer needs and the size of potential markets such as:

Example
The social strengths of Singapore have been demonstrated by an educational system that produces a well-educated workforce to attract foreign direct investment (FDI). Not only developing its own pool of local talents, Singapore also recruits foreign talents to work in the country.

Technological forces

Technological forces are new developments in methods for transforming resources into goods and services. Technology can improve products quality, reduce costs and lead to innovation. Technological factor that lower the entry barriers and reduce minimum efficient production levels includes:

Example
Singapore has a high-tech based economy. Well-prepared infrastructure and the latest technology contribute to the rapid...
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