Business environment
A business environment illustrates the sum of all the factors, forces, and institutions that are beyond an individual business enterprise’s control but which significantly impact the growth and functioning of individual enterprises. Initially, the business environment was supposed to consist of only external influencing forces. However, in the case of modern scenarios, business actions and policies are considered to be affected by internal factors as well.
External factors are the factors affecting not only the particular business but also the whole market. These factors can be generalized as economic, political, technological, and socio-cultural. Economic factors represent the economic conditions of a region and country. Political (and legal) factors consist of rules, laws, regulations, and policies a company has to adhere to. Technological factors imply the advances in technology that has to be monitored if a company wants to keep a competitive advantage. Finally, socio-cultural factors concern human relationships, such as customs, beliefs, traditions, morals, values, and views in society as a whole.
In the meantime, internal factors of the business environment include the enterprise’s vision and value system, management structure, human resources, and assets. The former stands for the overall picture of what a business aims to achieve, whereas the value system sets the adopted rules and values for the vision’s achievement. Management structure refers to the organizational hierarchy and relationships between various functional areas. Human resources are the company’s employees; their competencies, skills, attitudes, commitment, and morale play a key role in business performance. Last but not least are the enterprise’s tangible and intangible assets that cover everything that the enterprise owns – from land and buildings to research, development, and technological capabilities.
Market segmentation
Market segmentation represents a marketing strategy that implies dividing consumers into a set of groups in a way to make certain products or product lines appeal to their interests. Different consumers’ perception of the value contained in specific products and services allows companies to strategically target consumer groups in order to maximize sales and profit. Based on homogeneity, distinction, and reaction, companies usually divide the market into the following segments: demographic, firmographic, behavioral, and psychographic.
Demographic segmentation assumes that individuals with the same demographic have similar needs and defines consumer groups by age, gender, race, income, education, occupation, or physical location. In a similar fashion, firmographic segmentation evaluates organizations present on the market in terms of their number of employees, customers, offices, or annual revenue. Relying on market data and customers’ decision-making, behavioral segmentation focuses on customers’ previous interactions with particular products or services. Finally, psychographic segmentation attempts to classify customers regarding their personality, lifestyle, interests, and opinions.
SWOT analysis
SWOT analysis is a framework designed to evaluate a company’s competitive market position and accordingly develop business strategies. The SWOT abbreviation stands for strengths, weaknesses, opportunities, and threats. In other words, the framework aims to assess internal and external factors influencing the company, as well as its potential, both current and future. As a result, SWOT analysis facilitates a realistic, factual, and data-driven overview of a company and its industry.
Among the advantages of the SWOT approach is its cost-efficiency. It takes little to no resources and only requires a specific business’ background knowledge to conduct the test. Another SWOT advantage is that it highlights the most important factors affecting the company. Ultimately, SWOT deepens the understanding of a company, allows to address weaknesses, prematurely spot threats and opportunities, and capitalize on strengths while developing the general strategy. Nevertheless, the framework has its limitations, namely subjectivity and excessive generalization. Regarding the former, the degree of the market’s uncertainty and ambiguity makes categorization into strengths, weaknesses, opportunities, and threats intensely subjective. As for the latter, SWOT is appropriate at the stage of planning; however, it struggles to address more complex issues. Viewing the circumstances in a simple SWOT manner might make businesses overlook essential connections and features.
Budget
A company’s budget is a spending outline for its activities based on income and expenses over a specified period of time. In general, it is compiled and re-evaluated continuously and on a periodic basis. It identifies the company’s available capital, estimates its expenditures, and helps it predict revenue. Due to the information and knowledge this approach provides, budgeting can offer numerous benefits to companies and other actors, such as individuals, groups, or governments. First of all, budgeting allows companies to plan for business success. Thoroughly structured planning enables efficient resource allocation to increase profits and returns on investments, simultaneously reducing costs. Secondly, it helps monitor the company’s performance in various fields. Thirdly, budgeting often prematurely indicates problems that might occur in the future, such as insufficient financing or cash flow difficulties. Fourthly, conducting the budget allows for more confident decision-making, as the decisions will be based on a solid background. Ultimately, it serves as a tool to achieve the company’s goals and objectives.
Tangible and intangible goods, performance objectives
Tangible goods are products described as physical assets that are usually handed to the customer after their purchase. These types of products play a central role in retail sales. On the contrary, an intangible good is a product without a physical nature. It should not be confused with service since the latter is not an object but labor or activity. The most common intangible goods types are digital products, patents, and licenses. Many intangible goods are currently available in online shops and on the internet.
There are five basic operations performance objectives: quality, speed, dependability, flexibility, and cost. The quality of operations significantly affects customer satisfaction since it can be described as conformance to their expectations and standards. Quality can be evaluated in various ways depending on the type of business. Speed stands for the elapsed time after the customer requested a product and its actual receipt or delivery. It also impacts customer satisfaction because the faster the customer receives the product, the more likely they will repurchase it. Operational dependability explains how timely the delivery of a certain product or service is. It can be judged only after the respective delivery to the customer. The objective of flexibility implies the operation’s ability to change or adapt to certain situations. It can relate to product or service flexibility (introduction of new ones), mix flexibility (a range of products), volume flexibility (different quantities of products), and delivery flexibility (changeable timing). Finally, the cost objective emphasizes the relationship between the product’s production cost and the final price (lower the cost, lower the price).
Motivation
Motivation is the process that triggers, guides, and sustains behaviors oriented toward a specific goal; namely, it can be considered the driving force behind any human actions. In the business context, motivation is about how a company can encourage staff to commit to their job fully. The motivated staff genuinely care about the work outcome and overall success of a company and, thus, work better.
Maslow developed a pyramidal five-level hierarchy of human needs that urges a person to act. The most basic physiological needs that are required for human survival are situated at the bottom (food, water, rest, clothing, shelter, good health, and reproduction). When these are fulfilled, safety needs come into play (protection from violence, emotional well-being and stability, financial security). On a third level, there are love and belonging needs that relate to various human interactions, including friendship, family, and love interest. The fourth level refers to ego-driven needs, self-esteem, and self-respect. Finally, self-actualization needs are the last needs in a row of motivating factors. They include skills development, education, care for others, and long-term goals.
HRM
Human resource management (HRM) implies the process of hiring, recruiting, deploying, and managing employees in an organization, often simply referred to as human resources. The HR department is typically responsible for developing, executing, and monitoring policies that regard workers and their relationships with an organization. In this context, HRM represents a management approach that considers employees as business assets (human capital). Analogically to other business assets, the HRM goal is to use employees effectively, reduce the risk and maximize return on investment.
HRM planning and decision-making are subject to various factors, namely staffing issues, job features, talent management, career development opportunities, and the company’s long-term strategic goals. Staffing issues concern the selection and recruitment of the right people for the right positions. Adherence to a staffing plan increases the company’s intangible value and ultimately contributes to its performance. In the meantime, job analysis and design ensure that those right positions are available in the first place. Talent management usually involves practices of talent recognition and retention. Proper talent management provides companies with a sustainable competitive advantage in the market. As one of the retention features, career planning and development aims to align employee professional development activities to business strategies to achieve business objectives. Consequently, when personal and business goals align, the company can attend to its strategic goals.