1. a. Define the external envirnoment and choose a specific industry or public s
ID: 421508 • Letter: 1
Question
1. a. Define the external envirnoment and choose a specific industry or public sector organization (for example, automobile, fashion, construction, fast food, etc.) and describe how each element of the external environment is likely to affect firms in that industry. b. Is it possible for managers n business firms or public sector organizations to control the elements in the external environment, or do they simply have to react to changes that are beyond their control? Give examples that support your conclusion.
Explanation / Answer
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(A) External environment refers to the unpredictable changes in the business environment such as political factor, social factor, Technological factor and legal factor.
The most suitable example is the controversial case of the soft drink company i.e (Pepsico) that faced a lot of criticism when the company advertised the slogan of “Come Alive” then the people of a particular region misinterpreted the word ”come alive”, assuming coming out of graves, and also the company faced a lot of criticism regarding the quality of their products. In 2003, The center for science and environment of India claimed that the water which PepsiCo was using for making beverages and their cola products contained pesticides and harmful toxins which can cause stomach cancer which hampered the sales of the company and there was no demand for the Pepsi cola products in that country. This shows how the external forces can hamper the sales and the reputation of a company. Pepsico suffered a huge loss in terms of sales and the reputation of the company was socially affected.
In this case Pepsico was affected by the external factors such as social and legal factors.
A company or a corporation has to make sure that their functioning doesn't harm the environment to the point of degradation. It is the responsibility of the business to invest a small part of their earning into the benefit of the environment. To identify their social responsibility, a business can analyze the effects of their business on the environment and take effective measures to either prevent it or at least help curb the damage while actively trying to reverse it.
(B) The managers can resolve these issues by regular scanning of the business environment which is a must for every business/company as ignorance about the business environment can hamper the revenue of an organization. This, combined with research relating to competition and market trend the business operates in. This would require a complete restructuring process which would take a considerable amount of time and planning combined with analytics from the market, finances, and laws. Following such steps, a company can monetize their gain and maximize their financial gains. It should, however, be noted that all the businesses should carry the same value of responsibility and should contribute to the environment and the society as an active cause and sometimes the managers have to Deal with factors which are beyond their control such as the political factors. Example - Pepsi cola was banned by the government for sometime in India when the concerned department detected the presence of pesticides in their soft drinks. In this case, the company was helpless and couldn’t resume their business activities even though the company denied such allegation.
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