BUSINESS AND ITS ENVIRONMENT

A PAPER PRESENTED BY MR ADEYEYE BRIAN AT THE BASIC BUSINESS TRAINING WORKSHOP FOR 109 PARTICIPANTS FROM JOS NORTH/SOUTH 23^rd FEBRUARY 2011.

The external forces (influences) such as political conditions, social traits e.t.c in which a business operates are outside the control of the business, their effects impose on the managers a need to understand these influences-

A study of the business environment will shade light on the terrain on which the business will operate. It will provide answers to such questions as: are the circumstances right for making the business decisions that are about to be made?

What are the supplies, labour and market situations like? What demand will  they present? What constrains will they impose on the enterprise? What factors offer opportunities to be neutured into and which ones constitute threats to be neutralized or avoided?

However, before we proceed to do this evaluation, we will first of all have to attempt to see what business and environment are.

Business in this context is viewed as an economic performance rendered to others at a price. It has two functions

·       Creating  a market and

·       Innovations which differentiates it from other organizations

Business needs to be innovative to adopt to the dynamic nature of our environment. It is a linkage of input flows (materials, information etc)

On the other hand, environment is the set of all objects, which are influenced or which influence the system of interest. The environment is characterized by

·       Complexity

·       Turbulence

·       Uncertainty

·       And risk.

It is therefore imperative for the entrepreneur to identify and recognize his own relevant environment from the numerous ones. He needs to scrutinize his own business environment on a continuous basis as they offer both opportunities and threats.

He/she should strive to maintain the interaction between his business and the environment.

From our discussions of the two terms above, we now realize that the inputs for our business are derived from the environment and the output consumed by it too. Every reasonable business system is embedded in the environment. So the environment is crucial to as a business individuals and the environment requires our business for it to survive.

The business must therefore learn to develop strategies for responding and adapting to environmental conditions which were not considered at a time when the business was set up otherwise it may find it difficult to survive as time goes on.

CLASSIFICATION OF BUSINESS ENVIRONMENT

 Having clearly understand what business environment is and its features, we will now attempt to make a classification of it as follows;-

·       Physical             Environment

·       Socio – cultural     “

·       Political                    “

·       Economic and

·       Financial                   “

1.    PHYSICAL ENVIRONMENT (TRENDS)

This relates to the Land area, drainage, climate, vegetation and soil type as they affect the source of inputs, conversion of inputs into outputs and business and consumer location.

The important thing is for the entrepreneur to understand which physical factors affect his business and to what extent.

As a result of the favourable physical environment in Nigeria and indeed plateau state; the under listed physical raw materials amongst others are available for establishment of business ventures.

·       Agro – allied;- maize, Irish potatoes, yams,rice,fruits e.t.c

·       Building and road constructions; sand, clay materials, laterites, limestone, timber and wood e.t.c

·       Textiles and leather: starch, dyes, hides and skin.

·       Paper and printing: pulp, ink, starch, printing ink e.t.c

2.    FINANCIAL ENVIRONMENT (TRENDS)

Here too we are looking at the capital investment (buying stock, debtor and creditors), operating capacity, sources and application of funds availability of resources and degree of risks e.t.c

3.    SOCIO – POLITICAL ENVIRONMENT (TRENDS)

As an entrepreneur, you must be familiar with the socio – political history of your environment which might have effects on your business.

Under this heading would be questions about the population shift i.e. what is the split of the population between urban and rural areas between males and females, old and young e.t.c. the  answers would show the size of the potential market for a particular type of product or market.

Also laws and orders which have direct bearing on your business are also imperative here.

Stability of the society is also considered. Stability in this sense means avoidance of sudden upheavals whether by religious, ethnic or class groups arising from some social grievances. In periods of such instability, social breakdowns occur with great consequences for business.

Also considered here are the norms tastes and habits of your target population. In some places eating of pork or consumption of alcohol are either frowned upon or banned. In some areas too certain types of dressings or food are prohibited.

The stability of government (firmness in control) is very necessary. Is there condition for orderliness and social justice. Is there any incentive for small scale business operators.

The answers to the above questions would provide a starting for the entrepreneur e.tc

4.    ECONOMIC ENVIRONMENT (TRENDS)

The entrepreneur should endeavour to be conversant with

·       Over all state of the economy whether it is stable or unstable expanding or declining.

·       National economic policies especially as they affect small and medium enterprises

·       The exchanges. Any decline in the value of the naira would have effect on the cost of imported goods such as spare parts, raw materials e.t.c

Also note the rate of inflation. A high rate of inflation may reduce the purchasing power and add to the cost of materials and supplies.

Ladies and gentlemen, we have analyzed the environment and its impact on our business as entrepreneurs you must be conscious of the goings on within and around your environment as this is where you are prepared to live the rest of your life.

Your environment is the source of your wealth, use it well and you will laugh loud. Your life will change for good if you choose the right environment, work hard and be upright. Start now please’

Remember it is when you stick your neck out that you will keep your head above the waters.

Thank you and God bless.