Changing Business Environment - Analysis and Impacts

This paper analyses the contemporary changes in the business environment and their effects on organisations and the roles of managers. It also evaluates the major findings and research gaps in the field. The main drivers of change in business environment include globalisation, strong competition, transformation of the enterprises, industrial economies, changing demands of the customers, social responsibility and the changing nature of contemporary workforce. Managers have an active role to play in the whole process. Subject: Business, Course Code: BUS101, Course Name: Introduction to Business, College/University: Not mentioned

Running head: CHANGING BUSINESS ENVIRONMENT
CHANGING BUSINESS ENVIRONMENT
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1CHANGING BUSINESS ENVIRONMENT
Table of Contents
Introduction................................................................................................................................1
Body...........................................................................................................................................1
Literature Review.......................................................................................................................1
Concept of Business environment..........................................................................................1
Contemporary Changes in the business environment............................................................3
Effects of changing business environment on organisation and the roles of managers.........4
Evaluation of the major findings............................................................................................5
Research gaps.........................................................................................................................6
Conclusion..................................................................................................................................6
References:.................................................................................................................................8

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Introduction
Change is an inevitable part of human life and is also a vital part of business life.
Change allows the businesses in adapting its environment and at the same time, improve the
market position (Kirval & Suner, 2017). With the emergence of continuous innovations and
disruptive technologies in the business world, the business environment in the modern era is
rapidly changing. The turbulent business environment of today is characterised by inability
and uncertainty of predicting the future and this is highly challenging. Change signifies the
willingness of the affected parties to function and embrace in a well-established order as well
as their commitment towards effecting and implementing the changes (Leung, 2014). It is
also to mention that a business environment constitutes of everything that have the potential
of influencing the decision making process of a business and it can be both internal and
external. This paper shall elaborate on presenting a brief analysis of the topic of “changing
business environment”. The ways in which the business environment is changing, the way it
is effecting the business and the final outcomes of the same shall be highlighted in this essay,
analysing the different scholarly and academic articles and research reports.
Body
Literature Review
Concept of Business environment
According to Andersson, Forsgren and Holm (2015), business environment refers to
the sum total of all the factors that are external to the business firm and which have a great
influence in their operations and functioning. It is to note that business environment
comprises of all the forces and factors like that of suppliers, customers, government,
competitors, and political, technological, cultural, legal and social trends. These are the

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factors that influence the function of a firm or an organisation and at the same time, effects
how they work. For instance, change in regulatory taxes by the governmental bodies could
make the customers buy or expend less. In this case, businesses need to re-establish its
product prices for surviving the change. Even though the company or the business had
absolutely no involvement in the process of initiation of the change, it still need adapting to it
for surviving or using the opportunity for making profit.
As opined by Savrul, Incekara and Sener (2014), business environment usually assists
the businesses in the process of identification of opportunities and threats present for it in the
market while tapping the useful resources, identifying the negative trends for the business,
helping in planning, managing and improving the overall growth, development, performance
and profitability of the company. Furthermore, it is to mention that business environment is
one of the most vital aspects of a business. For being aware of the ongoing changes, business
environment helps the businesses in adopting these changes as well as use them as business
opportunities. With the same, according to Churet and Eccles (2014), business environment
presents several threats and opportunities for business. It all depends on the effectiveness of a
manager to identify and evaluate the environment and also to react to all these external
forces. Also, it enables the business in tapping the useful resources that are required for the
business in tracking them and converting them into services and goods (Chen et al., 2014).
Business environment also helps in coping with the changes, be it in terms of customer
requirements, technological changes, new governmental policies and emerging trends.
Contemporary Changes in the business environment
The need for effective and successful change within organisations and businesses
have been argued by several theorists as being a very difficult task (Fernandez & Rainey,
2017). Along with this, follows a view-point that majority of the businesses need to consider

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the organisational change as a vital competency. In the modern economic environment,
majority of the businesses are either recovering or have recovered from the very recent
recession (Urry, 2015). It is very important for the organisational managers to have an
understanding of what is important for effectively managing change and quickly overcoming
the resistance and barriers to change. As per Maier et al. (2014), the contemporary business
environments are highly dynamic and competitive. The major drivers of changing business
environment include globalisation, strong competition, transformation of the enterprises,
industrial economies, changing demands of the customers, social responsibility and the
changing nature of contemporary workforce Mikalef and Pateli (2017). For all these drivers,
business today are required to give strong and immediate response by means of introducing
strategic systems, giving continuous improvement efforts like improved productivity, JIT
(Just-in-time) operation, improved decision making, innovation, total quality management,
information and knowledge, customer service and change management. Also, often
businesses engage in making business alliances and reengineering the business process like
making reduction in the cycle time, marketing time, taking customer-focused approach, ERP
etc. The fact that it is changing at a fast rate, there are several changes in the modern concepts
that the different field of sectors need to adhere to. For example, in the accounting sector, the
accounting controls are required to be developed for coping up with the changes. This is why,
the companies need to develop some reliable and logical business strategies and must use
different tools for management accounting for supporting the planning, control and the
decision making process (Stark, 2015). Practices have demonstrated that the organisational
managers in several cases have failed to anticipate and respond to the change and in majority
of the cases, it is seen that managers have simply unnoticed the change within the business
environments. There are several researches that have claimed that managers could be aware
of the changes in their industries. However, they fail in interpreting these changes in correct

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manner. Also, often it is seen that they have underestimated the vitality of the changes and
that they might wait too long for responding and might also opt out not to respond at all.
Effects of changing business environment on organisation and the roles of managers
Change is always constant and continuous in business environment. Economy
fluctuates on a daily basis and this often led the businesses to bring changes in the way in
which they operate. New competitors enter into the marketplace, and many others leave.
With the same, according to Thornton et al. (2014), the change in the weather patterns on a
regular basis along with the occurrence of natural disasters could force significant change in
the business environment as could the political events, the adaption and rejection of the
political laws or rules and the emergence of wars. Furthermore, the advances in the field of
innovation, products and technologies, population shifts result in change in the business
environment. There are a total of two different categories of the environmental forces that
impact the performance of the business and they are- the internal environmental forces and
the external environmental forces (Prajogo, 2015). The internal are the ones that influence the
company as a separate entity. On the other hand, the forces that influence the business unit
and the other enterprises that are operating within same environment are called external
environment. These are external to the company and they cannot be controlled effectively by
the organisational managers. Businesses today are also forced for changing internally when
any of their key employees leave or gets sick. As already mentioned, business environment is
made up of both the internal and external elements. The internal elements include cash flows,
organisational culture, physical assets etc. On the other hand, the external elements include
competition, politics, laws, technology, trends and media. Any kind of changes in any of
these factors could influence significantly the overall organisational function and operations
(Fernandez & Rainey, 2017). Researches have shown that the organisational managers in

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majority of the cases fail to anticipate and respond to the change and in majority of the cases,
it is seen that managers have simply unnoticed the change within the business environments.
However, no matter whether change is abrupt or increases over the passage of time,
the business leaders and owners should revisit the strategic plans of the companies on a daily
basis (Ranangen & Zobel, 2014). Strategic planning is very critical for the business growth
and success, the strategic planning involves mission and vision and knowing when and how a
business needs to adapt to change. It is to note that according to Chen, Wen and Li (2017),
strategic planning is a blueprint of where a company or a business is now and the action plan
of where it is heading. Hence, gaining a deep understanding of the strengths, weaknesses,
opportunities and threats of the business (SWOT Analysis), could help in determining the
goals and objectives of a company as well as the strategies required for attaining those goals
and objectives. One of the most vital objectives for a business is that of change management
(Ho, 2014). The systematic approach for preparing an organisation for growth and for
creating processes, which could effectively deal with the changes in the business
environment. With the same, gaining a good understanding of the political, economic, social,
technological, legal and environmental (PESTLE analysis) environment for the organisation
and how all these factors influence the business is key to strategic planning. According to
Teece, Peteraf and Leih (2015), for any business to develop, growth and innovate, change
should be managed effectively and must be implemented and executed with ensuring
continuous and constant communication in between the staffs and the managers so that each
and everyone feel empowered and are part of the process of change.
Evaluation of the major findings
Change in social, technological, environmental, legal, political and economic
environment always influence the business growth and success. From the above analysis it is

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clear that change in business environment impact the organisational processes and functions
significantly. Business environment is made up of both the internal and external elements.
The internal elements include cash flows, organisational culture, physical assets etc. On the
other hand, the external elements include competition, politics, laws, technology, trends and
media. Any kind of changes in any of these factors could influence significantly the overall
organisational function and operations. The main drivers of change in business environment
are globalisation, strong competition, transformation of the enterprises, industrial economies,
changing demands of the customers, social responsibility and the changing nature of
contemporary workforce. Managers have an active role to play in the whole process. They
need to identify and evaluate the environment and also to react to all these external forces.
Also, it enables the business in tapping the useful resources that are required for the business
in tracking them and converting them into services and goods. Many have failed to anticipate
and respond to the change and in majority of the cases, it is seen that managers have simply
unnoticed the change within the business environments.
Research gaps
The main gaps in these researches is that the data collection process is not reliable. No
real life company or a specific industry is targeted in order to analyse the scenario. They have
not relied on any kind of questionnaire for generating relevant data to depend upon. The main
focus on the research was mainly on the facts and figures that are gathered by the qualitative
research and the studies of different researchers in the field.
Conclusion
Hence, from the above analysis it is to conclude that business environment are the
factors that impact the historical, psychological factors and the government attitudes. It also
regard the international factors, foreign exchanges and the different marketing approaches.

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The main relationship in between the business and the environment is mutual and also, it is to
mention that the business environment exerts much pressure on the organisation and the
business as businesses highly depend upon the environment for the supply of their inputs and
for absorbing their output. Furthermore, the influence of the environment depends on a total
of two important forced that the company needs to respond to and they are- a) scarce material
and financial resources, b) information gathering. All these forced create a strong uncertainty
and that is, the shortage of data and information for anticipating the availability of the
resource and the external changes.

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