In Business, What Is the External Environment?

Enterprise external environment (EnterpriseExternalEnvironment) Enterprise external environment is a general term for the political environment, social environment, technical environment, economic environment, etc. of an enterprise. Corporate strategy re-evaluation must not only evaluate the company's current mission, goals, strategies, and policies, but also analyze the corporate environment to determine the key strategic elements. The enterprise environment includes two parts, the external environment and the internal environment. The external environment of the enterprise is composed of variables that exist outside the organization and are usually not controlled by the senior management of the enterprise in the short term. The internal environment of the enterprise is composed of variables that exist within the organization and are usually not controlled by the senior management of the enterprise in the short term, and specifically include the organizational structure, culture, and resources of the enterprise.

Corporate external environment

Enterprise external environment (EnterpriseExternalEnvironment)

1.

The external environment for corporate development is mainly manifested in competing countries

I. Social environment

The social environment refers to the general elements that have no direct effect on corporate activities and can often have potential impact on corporate decisions. They mainly include the four aspects of technology, economics, culture, politics and law that are connected to the entire corporate environment. There is an interactive relationship between these factors and forces. In the short term, social and cultural forces influence the actions and decisions of enterprises through its role in the claimant group in the enterprise mission environment. In the long run, enterprises can also have an important impact on related claimant groups in the task environment through their own activities.

Mission environment

The task environment refers to the elements and claimant groups that can directly affect or be affected by the main operating activities of the enterprise, such as:

I. Classification of the external environment

The external environment has different degrees of influence on an enterprise.

A. First of all, for a specific enterprise, it always exists in an industry (industry) environment, and this industrial environment directly affects the enterprise's

1. Macro environmental analysis

It is generally believed that there are five types of macro-environmental factors of enterprises, namely political and legal environment, economic environment, social culture and natural environment, and technological environment.

The political and legal environment refers to the political elements and legal systems that restrict and influence enterprises, as well as their operating status. The political environment includes factors such as the country's political system, authority, promulgated guidelines, political groups, and political situation. The legal environment includes factors such as laws, regulations, ordinances made by the state, and national law enforcement agencies. Political and legal factors are the basic conditions for ensuring the production and operation of enterprises.

Economic environment refers to the socio-economic conditions and national economic policies that constitute the survival and development of enterprises, including socio-economic structures, economic systems, development conditions, and macroeconomic policies. The indicators that usually measure the economic environment include gross domestic product, employment levels, price levels, consumer spending allocation scale, balance of payments, and national monetary and fiscal policies such as interest rates, currency supply, government expenditures, and exchange rates. The impact of the economic environment on the production and operation of enterprises is more direct and specific.

The social and cultural environment refers to the formation and change of factors such as the social structure, social customs and habits, beliefs and values, behavior norms, lifestyles, cultural traditions, population size and geographical distribution of an enterprise. The natural environment refers to the natural resources and ecological environment in which an enterprise is located, including development and changes in land, forest, river, ocean, biology, minerals, energy, water, environmental protection, and ecological balance. These factors are related to major business decision-making issues such as the determination of investment direction, product improvement and innovation. The technical environment refers to the collection of scientific and technological elements in the environment of an enterprise and various social phenomena directly related to the elements, including the national scientific and technological system, scientific and technological policies, technological level, and technological development trends. The technological environment affects whether companies can adjust strategic decisions in a timely manner to obtain new competitive advantages.

2.Micro environmental analysis

The micro-environment of an enterprise mainly includes two aspects: industrial environment and market environment. Product life cycle, five types of industry competitiveness, strategic groups within the industry, and key factors for success are important elements of micro-environment analysis. Economic analysis of market demand and competition can deepen the understanding and understanding of the micro-environment. The following is a brief introduction to the industry's life cycle, industrial structure analysis, market structure and competition, market demand status, strategic groups within the industry, and key factors for success.

(1) The life cycle of the industry. In an industry, the operating status of an enterprise depends on the overall development of the industry in which it operates and its competitive position in the industry. A common method for analyzing the status of industrial development is to understand the life cycle stages of the industry. The life cycle stages of an industry can be represented by the product's cycle stages, which are divided into four stages: development, growth, maturity, and decline. Only by knowing the current life cycle stage of an industry can we decide whether an enterprise should take in, maintain or retreat in an industry, make correct new investment decisions, and make a reasonable combination of businesses in multiple industries. Improve overall profitability.

(2) Analysis of industrial structure. According to the basic framework of industrial structure analysis proposed by Professor Porter from the perspective of industrial organization theory-five kinds of competitiveness analysis, the industry can be analyzed from the competition between potential entrants, substitutes, buyers, suppliers and existing competitors The intensity of competition and industry profitability. The entry threat of potential entrants is to reduce market concentration, stimulate competition among existing enterprises, and divide up the original market share. As a product of new technologies and new social needs, alternatives are very serious to the substitution threat to existing industries. However, the long-term coexistence of several alternatives is also common. The competition between alternatives is still value. High product gains competitive advantage. The ability of buyers and suppliers to bargain depends on their respective strengths, such as the degree of seller (buyer) concentration, the degree of product differentiation and asset specificity, the degree of vertical integration, and the degree of information mastery. The competition of existing enterprises in the industry, that is, the competition of enterprises in an industry for market share, usually manifests in the form of price competition, advertising wars, introduction of new products, and enhanced services to consumers.

(3) Market structure and competition. The four classifications of market structure in economics: perfect competition, monopolistic competition, oligopoly, and complete monopoly help to correctly estimate the nature of market competitors. A strictly defined perfect competition market does not exist in real life, but the description of fierce price competition in this market that makes prices tend to marginal costs is common in many consumer goods markets. In the monopolistic competitive market, the differences in products have established fixed customers for enterprises, and allowed them to enjoy some market power over these fixed customers whose prices exceed marginal costs. In the oligopoly market, the decision of an enterprise depends on the choice of other enterprises, and the problem of decision equilibrium under the direct interaction of the behavior of the decision-making subject has received increasing attention. In a completely monopolized market, the actions of monopolistic manufacturers to control the manipulation of prices and output are restricted by antitrust policies because they harm the interests of consumers, but the efforts of enterprises to obtain monopoly power and achieve high profits through innovation also have some reasonableness In the long run, restrictions on monopolies are not good for consumers because they limit competition.

(4) Market demand. Market demand can be analyzed from two perspectives: the determinants of market demand and the price elasticity of demand. Population, purchasing power, and purchasing desire determine the scale of market demand. The factors that manufacturers can grasp are consumer purchasing desires, and product prices, degree of differentiation, promotional methods, consumer preferences, etc. affect purchasing desires. The main factors affecting the price elasticity of product demand are the degree of product substitution, the importance of the product to consumers, the proportion of purchasers' total expenditure on the product, the conversion cost of the buyer's conversion to the alternative, the purchase The level of awareness of the product and the use of complementary products.

Corporate external environment

(5) Strategic groups within the industry. Characterizing all aspects of the strategy of all major competitors in the industry is an important aspect of industry analysis. A strategic group refers to a group of companies that use the same or similar strategies in a certain industry in a certain industry. Strategic group analysis helps companies understand their relative strategic position and the possible competitive effects of changes in corporate strategy. It enables companies to better understand the competition among strategic groups, find competitors, and understand the "movement between strategic groups." Obstacles ", to understand the main focus of corporate competition within the strategic group, predict market changes and discover strategic opportunities.

(6) Key factors for success. As the skills and assets that an enterprise must have to make a profit in a particular market, the key factors for success may be a price advantage, a capital structure or consumption mix, or a vertically integrated industry structure. There are great differences in the key factors of success in different industries. At the same time, the key factors of success will change with the evolution of the product life cycle. Even companies in the same industry may have different focuses on the key factors of success in the industry.