Report on Firm Concepts and Macro Environmental Factors

This report comprehensively analyzes the concept of the firm, exploring various influencing factors, different types of firms, and their objectives such as profit maximization, sales maximization, and survival. It delves into the internal aspects of a firm, including management approaches like classical, human relations, systems, and contingency approaches, along with organizational structures and their evolution. The report then examines the macro environment, dissecting political, economic, demographic, social, cultural, and technological factors that impact businesses. It covers political debates, economic indicators (GDP, GNP, inflation, interest rates, etc.), and demographic changes affecting business. Furthermore, it explores the technological environment, including technology adoption, supply chain management, and the digital organization. The report concludes with a discussion on monitoring environmental changes, utilizing tools such as PESTLE/PEST, the five forces model, and SWOT/TOWS analysis to provide strategic insights for businesses.

Topic 2: The concept of the Firm..............................................................1
Influencing factors......................................................................................1
Private and public sector organizations......................................................2
Types of firms..............................................................................................3
Sole trader..................................................................................................3
Partnerships................................................................................................4
Limited Liability Partnerships......................................................................5
Private Limited Companies.........................................................................6
Public Limited Companies...........................................................................6
Co-operatives..............................................................................................7
Charities and Social Enterprises..................................................................9
Social Enterprises........................................................................................9
Community Interest Companies.................................................................9
Joint Ventures...........................................................................................10
Multinational Corporations.......................................................................11
Profit Maximization...................................................................................11
Maximizing Sales.......................................................................................12
Maximizing Revenue.................................................................................12
Survival......................................................................................................12
Profit Satisficing........................................................................................12
Social and Ethical Responsibility...............................................................13
Topic 3: Inside the firm...........................................................................14
Management.............................................................................................14
The classical approach..............................................................................15
The human relations.................................................................................15
The systems approach..............................................................................16
The contingency approach........................................................................17
Organizational structures - Definition.......................................................17
Organizational structures - Size................................................................17
Organizational structures - Why...............................................................17
Organizational structures - Formal relationships......................................18
Line relationships......................................................................................18
Staff relationships.....................................................................................18
Functional relationships............................................................................18
Lateral or peer relationships.....................................................................18
Organizational structures - Type...............................................................19
Influencing factors....................................................................................19
Decisions made about the basis for the structure....................................19
Hierarchical structure...............................................................................19
Functional structures................................................................................20
Product based structures..........................................................................20
Area based structures...............................................................................21
Matrix structures......................................................................................21
Divisional structure...................................................................................22

Project team.............................................................................................22
Changing approaches to organizational structure....................................23
Virtual organiztion....................................................................................23
Structural change......................................................................................23
Aspect of functional management............................................................23
Human resource management (HRM)......................................................23
Marketing function...................................................................................24
Topic 4: Macro environment - Political
Politics.......................................................................................................26
What has politics got to do with business?...............................................26
The interdependence of business and government..................................27
Government..............................................................................................27
Regulation.................................................................................................28
Taxation..................................................................................................28
Public services.........................................................................................28
Government as customer........................................................................28
Managing the economy..........................................................................29
The international dimension...................................................................29
Political debate.......................................................................................29
Left and right...........................................................................................29
Conservatism, Liberalism, Socialism........................................................29
Political risk.............................................................................................30
Topic 5: Macro Environment - Economic
Economic indicator..................................................................................32
Gross Domestic Product (GDP)................................................................32
Gross National Product (GNP).................................................................33
Balance of Payments (BOP).....................................................................33
Employment rate....................................................................................33
Inflation...................................................................................................33
Consumer Prices Index............................................................................34
Interest rate............................................................................................34
Exchange rate..........................................................................................34
National debt..........................................................................................34
Debt ratio................................................................................................34
Business cycles........................................................................................34
The role of government..........................................................................35
Economic targets.....................................................................................35
Policy tools..............................................................................................35
Fiscal policy.............................................................................................35
Monetary policy......................................................................................36
Economic environemtn forces and business behaviour..........................37
Interest rate changes..............................................................................37
Exchange rate changes............................................................................37
Topic 6: Macro environment - Demographic, Social and cultural

The demographic environment of business............................................39
The size of the population.......................................................................39
The age and sex distribution of the population......................................39
Ethnicity and geographical distribution..................................................40
Population change - The birth rate.........................................................41
Population change - The death rate........................................................41
Population change - Net migration.........................................................41
Demographic change and business.........................................................41
Social class...............................................................................................43
Lifestyles.................................................................................................43
Other social influences............................................................................45
Culture....................................................................................................45
Culture - National cultures......................................................................46
Power distance........................................................................................46
Uncertainty avoidance............................................................................46
Individualism...........................................................................................46
Masculinity..............................................................................................46
Long-term orientation.............................................................................46
Culture - Sub-cultures.............................................................................47
Application: market segmentation..........................................................47
Topic 7: Macro environment - Technological
Technology..............................................................................................50
Technological environment.....................................................................50
Technology: interactions with other environmental forces....................51
Knowledge economy...............................................................................51
Immigration with entrepreneurial activity..............................................51
Technology change: creativity and entrepreneurship............................52
Invention...............................................................................................52
Innovation.............................................................................................52
Entrepreneurship..................................................................................52
Corporate Entrepreneurship.................................................................52
Technology adoption lifecycle model....................................................52
Technological diffusion..........................................................................52
Technology transfer..............................................................................52
The learning organization......................................................................53
Technology management......................................................................53
Supply chain..........................................................................................54
Value chain............................................................................................54
Value.....................................................................................................54
Added-Value..........................................................................................54
Value equation......................................................................................54
Digital organization...............................................................................55
E-Business (EB)............................................................................................55
E-Commerce...........................................................................................55

Employment and the nature of work...................................................55
Strategic use of technology: opportunity and threat...........................55
Organizational performance.................................................................56
Competitive advantage........................................................................56
Operational effectiveness.....................................................................56
Competitive strategy............................................................................57
Positioning............................................................................................57
Organization’s resources......................................................................57
Resource based view theory.................................................................57
Tangible/Intangible resource................................................................57
Protecting technology/ Intellectual property (IP).................................58
Topic 8: Monitoring change
The need to monitor change................................................................59
Environmental analysis.........................................................................59
Strategic management.........................................................................59
Environmental scanning.......................................................................60
PESTLE/ PEST analysis...........................................................................60
Five-forces model of competition.........................................................60
Current competition.............................................................................62
Potential competition (threat of new entry)........................................62
The power of buyers.............................................................................63
The power of suppliers.........................................................................63
SWOT/ TOWS analysis..........................................................................63