Business External and Micro Economic Environment

This essay explores the internal and external audit of business environment, with a focus on Nokia. It discusses the importance of auditing the internal and external environment, and examines how Nokia can gain insights into the micro economic environment. The essay also includes a SWOT analysis and a PESTLE analysis of Nokia's business environment.

Business external and
micro economic
environment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Internal audit................................................................................................................................1
External audit...............................................................................................................................4
How they can gain insights into Micro Economic environment..................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment is collection of citizens, institutions and factors that may as well as
may not be controlled by organisations. Few forces that are part of business environment are
market conditions, government, suppliers, media, conditions of economy, technologies and
multiple companies (Ablaev, 2015). It presents opportunities and threats for all businesses.
Organisational managers properly analyses and evaluates the external and internal environment
so that they can frame relevant strategies or plans to react on the forces. The understand external
and micro economic environment, Nokia is selected that is consumer electronics organisation
established in 1865. it is one of the contributor within mobile telephone industry that has
provided assistance in developing GSM, 3G as well as LTE Standards. The essay examines how
and why Mobile Phone Company needs to audit their internal as well as external business
environment. It further covers how they can gain insights for micro economic environment.
MAIN BODY
Internal audit
Organisational overview: Nokia is one of the Finnish multinational telecommunication,
consumer electronics as well as information technology company that was founded by Eduard
Polón, fredrick Idestam along with Leo Mechelin in the year 1865. the headquarters of the entity
are located at Espoo, Finland (Nokia, 2019). Nokia contributes greatly in mobile telephone
industry and is considered as largest worldwide vendor of smartphones as well as mobile phones.
It continues its operations as major patent licensor in context to various mobile phone vendors.
The company accounts for exporting 21% of mobile handsets and devices to other countries.
Internal environment is also known as micro environment that is composition of
various elements that resides within boundaries of the entity which can affect as well as can be
affected through activities, choices along win decisions of management. The elements within
internal environment are work processes, management practices, corporate culture, stakeholders,
internal resources, manpower and business policies. All these elements directly or indirectly
impacts the working of company. At same time, organisational authorities have full control over
all these factors. The institutions that do not consider elements of internal environment while
structuring strategies or plans ends up with drastic circumstances. In context to Nokia, internal
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environment elements are employees, suppliers, media, distribution channels, customers and
resources.
Needs to audit internal business environment
Auditing internal business environment is very important for all companies as it helps in
monitoring as well as assuring that all the assets had been secured as well as safeguarded
properly against threats (Boasson and Wettestad, 2016). In addition, auditing helps in verifying
that all the processes reflects documented procedures with policies in prompt manner. In context
to Nokia, internal auditing is needed to gain objective insights, identifying strengths along with
opportunities so that they can overcome pertaining threats and weaknesses, evaluating
risks,assessing controls and ensuring compliances with all the governed legislative regulations.
Tools for auditing internal business environment
To audit internal business environment, various tools are provided with different
practitioners. The more analysis as well as measurement tools used in incorporating audits, the
more is helps in learning to make all organisational activities more successfully. The internal
environment of Nokia can be audited through SWOT Analysis.
SWOT Analysis
This type of analysis is strategic tool which evaluates the strengths, opportunities, threat
and weaknesses for assessing business along with developing plans to move forward. This
concept plays essential role in conducting effective auditing and developing awareness for
factors that are residing internally. For Nokia SWOT Analysis is underneath:
Strength Weaknesses
 Nokia have strong brand name under
which they provide high quality
products and user friendly mobile
accessories.
 The company has excellent history
behind as well as is one of largest
smartphone addition to mobile phones
within mobile telephone industry.
 The organisation has diverse portfolio
of mobile phones and high resale value
 Nokia reacts slow fro taking any
initiatives in order to become more
competitive as well as do not consider
competition from small entities within
such field.
 The another weaknesses of Nokia is that
it is has low sensitivity towards any
changes in industry due to which they
fails to respond for new dynamism to
user expectations (Bowles and Whynes,
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in comparison to other mobile phone
entities.
 The company has formulated strong
knowledge base in which they
provides wide range of mobiles to
market and takes customer feedback
time to time.
2015).
 The company sells traditional designed
smartphones because of which they are
unable to attract new market segments.
 Nokia usually manufactures as well as
sells low performing mobiles due to
which they lacks in offering quality sale
services.
Opportunity Threat
 Nokia has diverse opportunities to
attain growth and expansion. The
smart phone industry is ever growing
that provides big opportunities to the
company so to have large and wide
market to sell its products and
services.
 By adopting the Android operating
system despite of Symbian provide
Nokia the more success than
competitors.
 The company has suitable chances to
enhance expansion of existing
distribution channel at distinct industry
across the globe (Harrison, 2017).
 Demand of Nokia's smartphones are at
edge. With this, company can develop
it segment within underdeveloped
countries too by providing them well
designed as well as styled sets.
 Nokia have strong existing and
emerging competitors including Xiaomi,
Oppo, Samsung, Apple and many more
that results in declining sales of its
mobile phones (Rugman and Eden,
2017).
 In present era, Cheap and wide range
models of mobile phones are in trend.
To sustain in market, Nokia needs to
modify its policies to manufacture
mobile phones as per the going trend
that will create hurdles in working
effectively in existing market.
 Nokia faces lawsuits threat in various
market due to legislative changes
regarding product standards.
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External audit
External environment is also named as macro environment that is composition of
numerous factors that resides outside organisational reach but have huge impacts on workings
and operations of company. It composes all outside factors which directly impacts the company
and its operations to great extent. By considering external environment, owners of company
takes suitable adjustment decisions for their policies and plans so to make them adaptable with
the influencing environment (Dopfer and Potts, 2015). In relevance to Nokia, elements within
external environment are legislations, current economic situations, technological advancements,
political systems, environmental frameworks and social demands.
Needs to audit external business environment
Auditing external environment of business is needed for observing, studying as well as
assessing factors of risks and controlling them at accurate duration. In relevance with Nokia,
external environment auditing is needed for understanding dynamics within political systems,
consumer perceptions, legislative governance, technological advancements, economic activities
and environmental aspects. By auditing external environment, managers of business gains
credibility, improves their internal systems as well as control various errors so to achieve goals
successfully.
Tools for auditing external business environment
For auditing external environment of company, professionals have devised certain
frameworks or tools. Some of the strategic auditing tools are PESTLE analysis and Porters Five
Force analyse that helps businessmen to properly analyse external factors and make decisions fro
future in prompt manner. The managers of Nokia uses Porters five force and PESTLE analysis
for auditing its external environment.
PESTLE analysis
It is one of strategic tool that provides understanding about changes in market, direction
of operations and scanning environment (Hillary, 2017). With this tool, marketers of Nokia
analyses and monitor all the factors presenting externally which impacts the business at huge
level. It includes six dimensions which provides detailed information about each factor. PESTLE
Analysis of Nokia is as follows:
Political: Factors concerned with the ways government intervenes in business are
political factors. It includes tariffs, political stability, taxation policies and environmental
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legislations. The political environment of Finland is good and political systems takes less
involvement in any international political disputes. The political system of such country makes
effective relations with other nations and invite them to make investment in mobile industry that
impacts positively of Nokia as the company can enjoy the growth in accordance with pertaining
industry. At same time, political regulations associated with manufacturing, imports, exports as
well as trade barriers are needed to be fulfilled fro setting industrialized plant through overseas
entities that impacts negatively on Nokia's practices and strategies for business expansion in
distinct nations. Various new political domains that resides in this contemporary world also
impacts directly or indirectly on the company in distinct manner.
Economical: The dimensions concerned with economy of a country are said to economic
factors. It covers dimensions like economic growth, business cycle changes, interest rates
addition to exchange rates (Huggins, 2018). All these factors affects the ways business operates
within economy and makes decision. In context to Finland, it has highly industrialised as well as
free market economy. While operating activities in different nations, Nokia analyses the
economic factors such as taxes, interest rates, demand and buying power of population that
targetted so that they can control production and improves its venture position that impact
positively on its productivity as it manufacturers mobile phones after considering all the
economic factors. The company has suffered downfall of product values with increased turmoil
within entire Europe due to which it has to do great ramifications which impacted negatively on
its operations.
Social: It involves cultural aspects, population growth rate, safety emphasis, age
distribution, health consciousness and career attitudes. The preferences of population of Finland
changes with the trends. Nokia by putting their best efforts to operate activities with pertaining
trends so to satisfy the emerging preferences about cellular products and devices that impacts
positively on its sales volume and brand image in the market. In contrary, there are some
companies that are providing new facilities such as software applications in their mobile phones
that shifts the customers preferences to other cellular companies which impacts negatively on
Nokia. To gain customer base, the company has to make various changes within its norms along
with setting new benchmarks so that they can achieve recognition from the population.
Technological: Factors part of technological aspects including technological incentives,
technological changing rates and automation (Na, 2016). Finland has advanced technological
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environment in which new technologies are welcomed and more investment are made to develop
the existing technologies within mobile industry. Nokia manufactures mobile phones that have
highest innovation level and focuses more on adopting new state of art technologies for attract
huge customers across world that impacts positively on its workings. At same time, to adapt
latest technological advancement trends as well as bringing technological revolution needs more
investment which results in decreasing profit reserves of the company.
Legal: Dimensions of legal frameworks like employment law, discrimination act,
electronic transaction act and intellectual property acts are legal factors (Tarp, 2017). The
political authorities of Finland have governed various laws in mobile sector that are mandatory to
be followed by all the companies so to accomplish operations successfully. Nokia while
performing manufacturing, distribution and selling its products protect its rights by
implementing laws related to trademark, patent and copyright so that its designs and innovations
are not taken by competitors that impacts positively on the company. At same time, while setting
manufacturing plants in distinct nations, Nokia abides all set regulations by different political
systems.
Environmental: Aspects of ecological addition to standards are part of environmental
factors. Country like Finland basically believes on facilitating nature conservation and for this
the political parties of such country have banned various commodities that are used while
manufacturing mobile and smart phones. For instance, resources like brominated flame
retardants, calcium as well as lead that releases toxins and pollute environment are banned in
Finland. As Nokia manufactures mobile phones and other devices by restricting utilisation of the
banned resources impacts in positive manner on its image. Through this, it provides ecological
products that helps in gaining recognition from political authorities of distinct nations through it
gains subsidies also to install manufacturing plants addition to promoting business
internationally.
Porters five force tool
The strategic tool is primarily used for identification addition to analyses of forces that
plays key role in shaping all the companies and industry (Nowakowska-Grunt and Brzozowska,
2016). By using the tool, companies understand strength of existing positioning as well as
strength of future strategy. It assist managers in looking towards strengths of five forces which
affects competition. At Nokia, Porter's five force tool is used for auditing the industry structure
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so to determine corporate strategies. The Porter's five forces in context to Nokia is audited
underneath:
New entrant threat: Within mobile industry, threat of new entrant is quite high due to
ample reasons. One of the reason is that technology required for producing latest mobile phone
generation is very advance that creates hurdles for new entrants in order to differentiate them.
The other reason is to enter in the mobile industry, a company has to spend money on research,
development, marketing and technology for becoming an established player. As Nokia is among
the established entity that has captured major market shares that makes difficulties for the new
entrants in grabbing attention of existing customers. In present era, this threat is quite high for
Nokia as market is developing and companies gains financial resources from various available
sources that increases threat for the entity.
Bargaining power of suppliers: The whole mobile industry relies on suppliers so to get
raw materials in terms of hardware and software (Orford, 2017). Huge suppliers are present in
such industry that willingly supplies the required parts and components to manufacture a smart
phone. In context to Nokia, it makes relationships with multiple type of suppliers so to get
products at low rates. In case, when one supplier enhances their pricing structure then the
company shifts to other suppliers to get the desired resources. The company holds significant
shares within mobile industry that makes it more attractive for suppliers. Due to this, no
hardware suppliers bargain with Nokia as to maintain the relation with such purchaser. For
software requirements, the company has made alliance with Microsoft that puts bargaining
power at end. Hence, bargaining power of suppliers for Nokia is moderate and it helps in
grabbing resources at low prices.
Bargaining power of buyer: Growth and development in mobile industry is quite
extensive that provides buyers with wide choices. Within such industry, there are wide choices
available with buyers that provides them more powers. There are various entities that offers
similar products as Nokia offers in the market that depicts that the bargaining power with buyers
is high as customers seeks best valuables for the money they pay. The company do not provide
its mobiles directly to the customers as it relies on intermediaries, carrier stores along with
electronic shops that also offers wide options to customers as per their interest that makes
difficulty for selected company to influence its sales (Rabellotti, 2016).
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Threat of substitute: Smartphones and mobiles are everyday essentials in present era
that customers find hard to replace with other substitute as they needs mobiles to constantly
contact with their family and others while away from homes. The only substitute available in
place of mobile phones of Nokia are home telephones which cannot be carried by consumers at
all places. Hence, threat of substitution is very low for mobile phones of Nokia.
Competitive rivalry: The competition level is extremely high in mobile industry as huge
players are present that have invested heavily to retain market shares. Nokia has kept slow move
within smart phone market due to which it is expected that its shares will fall. Key players in this
industry are Apple, HTC, Motorola and many more. Existence of all these players creates
competition for Nokia. Although, no such differences are found in mobile phones and devices
that are manufactured by all the companies, yet differences are made in context to applications
addition to services offers (Rodríguez-Gutiérrez, Moreno and Tejada, 2015). Nokia competes
with all the players and always work for innovations an uniqueness among the mobile phones.
How they can gain insights into Micro Economic environment
Micro Economic environment includes factors like distribution chains, market size,
demand, competitors and suppliers associated in specific industry. Nokia works in consumer
electronic industry that is also known as mobile industry or telecommunication industry that
generates turnover of 3.5 billion euros.
For gaining insights for micro economic industry, Administrative of Nokia can use
various research methods, observational tools addition to survey techniques. In addition, they can
also use statistics, journals together with magazines that include relevant information concerned
with micro economic industry of pertaining sector (Storey 2016). Other than this, various private
universities or institutions conducts primary research so to analyse information for business
strategies, suppliers activities, demand-supply of mobile phones and market preferences can also
help Nokia to gain insights for micro economic environment.
CONCLUSION
As per above discussion, it has been concluded that analysis of the external and internal
business environment is significant for a company as it helps in tapping necessary resources,
assist in planning, improves performance, assist to cope with changes and identifying business
opportunities. All organisations depends on the environment that resides externally or internally.
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Factors on internal business environment are manageable but factors of external business
environment are uncontrolled and unmanageable by organisational authorities. The ways in
which internal environment is audited is by using SWOT Analysis and the ways in which mobile
phone company audits external environment are Porter's five force tool and PESTLE analysis
tool. To gain information for the concept of micro economic industry, company can use journals
and other mechanisms having detailed information about the pertaining industry.
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REFERENCES
Books and Journals:
Ablaev, I., 2015. Innovation clusters in the Russian economy: economic essence, concepts,
approaches. Procedia Economics and Finance. 24. pp.3-12.
Boasson, E. L. and Wettestad, J., 2016. EU climate policy: Industry, policy interaction and
external environment. Routledge.
Bowles, R. and Whynes, D., 2015. Macroeconomic planning. Routledge.
Dopfer, K. and Potts, J., 2015. The general theory of economic evolution. Routledge.
Harrison, A. J., 2017. Economics and land use planning. Routledge.
Hillary, R., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Huggins, R., 2018. The business of networks: Inter-firm interaction, institutional policy and the
TEC experiment. Routledge.
Na, N., 2016. The economic theory of ‘managerial’capitalism. Springer.
Nowakowska-Grunt, J. and Brzozowska, A., 2016, April. Small Business Management In
Relationships Of Micro And Macro Environment. In Proceedings of International
Academic Conferences (No. 3506026). International Institute of Social and Economic
Sciences.
Orford, S., 2017. Valuing the built environment: GIS and house price analysis. Routledge.
Rabellotti, R., 2016. External economies and cooperation in industrial districts: a comparison of
Italy and Mexico. Springer.
Rodríguez-Gutiérrez, M. J., Moreno, P. and Tejada, P., 2015. Entrepreneurial orientation and
performance of SMEs in the services industry. Journal of Organizational Change
Management. 28(2). pp.194-212.
Rugman, A. M. and Eden, L., 2017. Multinationals and transfer pricing. Routledge.
Storey, D. J., 2016. Understanding the small business sector. Routledge.
Tarp, F. ed., 2017. Growth, Structural Transformation, and Rural Change in Viet Nam: A Rising
Dragon on the Move. Oxford University Press.
Yang, X. and Ng, Y. K., 2015. Specialization and economic organization: A new classical
microeconomic framework (Vol. 215). Elsevier.
Online:
Nokia. 2019. [Online]. Available through: <https://www.nokia.com/>
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