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Session 15: External Business Environment - Coggle Diagram
Session 15: External Business Environment
Political Factors
Actions of government and political events.
Major events could affect entire markets, not just individual firms.
Can affect only one part of the economy.
Economic Factors
Macroeconomics
National and international economic situation in which a business operates.
Can cover policies set by governments in their attempts to steer an economy, affecting tax rates, VAT and exchange rates.
Microeconomics
Includes all factors that are particular to a firm operating in its own market.
Social/Cultural Factors
Concerns social attitudes and values.
Include attitudes towards working conditions and length of working day, equal opportunities for different groups of people etc...
Includes social trends such as average age of population, seeking employment whilst raising children ...
Technological Factors
Recent times have seen rapid technological change.
Huge impact on how we produce and sell goods, and how businesses operate.
Created new opportunities for businesses
E.g. Info tech enables rapid comms and enables working from home, whilst travelling or in another country.
Online retailing has enabled firms to reach global markets.
Environmental Factors
Become an important topic of late.
Government names and shames large polluters and firms are now seeking a greener approach.
Looking for ways to minimise negative effects on environment.
Cleaner technologies, better waste management, recycling, or greener products.
Can create extra costs but a positive greener brand image.
Legal Factors
Firms affected by legal frameworks in which they operate.
E.g. industrial relations legislation, product safety standards, regulations in privatised industries etc...
Ethical Factors
More pressure now to adopt more socially responsible attitudes towards business.
Corporate Social Responsibility (CSR) is major concern.
Working conditions
Safety and quality of products.
Truthful advertising.
Environment.
Concern for local residents.
Analysis Methods
PEST
Political
Economic
Social
Technological
STEEPLE
Social
Technological
Economic
Environmental
Political
Legal
Ethical
Both used to shape business strategies.
Important for businesses to be able to adapt to changes in their environments (internal and external)
Globalisation & Changing Environment
International trade has grown fast. Many companies now see the world as their market.
World economy is much more integrated and interdependent.
STEEPLE analysis on globalisation
Social:
Growing influence of Western consumerist culture.
Technological:
Communication revolution, easier to communicate to more customers, suppliers and subsidiaries around the world.
Economic:
Globalisation of markets and production.
Markets have become more competitive.
Domestic firms face more competition from abroad.
Convergence of countries.
Environmental/Ethical:
Fossil fuels
Depletion of fish stocks.
Pollution
Deforestation
Decline in biodiversity.
Human rights.
Employment conditions.
Political/Legal:
Trading blocs.
Barriers to trade.
Movements of international finance.
Growing influence of international bodies (World Trade Organisation).
Political power of individual countries to influence global events.
Labour Shortages and Immigration
Key question is does the domestic labour market have the right 'needs' for migrant workers?
High controversy around role of migrants play in meeting skills needs and reducing labour and skills shortages.
Employers claim there is a need and they say domestic workers will not or cannot do it.
Claims reflect employers preference for recruiting cheap and exploitable migrant labour, over improving working and employment conditions.
UK Immigration policy aims to link admission of migrant workers to the skills shortage by...
'Shortage occupation route' - admits migrants who are offered a job that is on the shortage occupation list. Job must be skilled, in shortage and sensible to respond to with immigration labour.
'Resident labour market test route' - employers must advertise job in UK/EU for minimum 4 weeks and migrants must have right education and wage in the UK.
'Intra-company transfers' - employees of an international company with at least 12 months experience transfer to a job in the UK branch.
Its hard to measure the concept of skills and shortages.
No universally accepted definition of a labour or skills shortage.
Economic approach says to use price mechanism to restore equilibrium.
Where demand and supply of labour are determined by price of labour, most shortages are temporary and eventually eliminated by rising wages that increase supply and demand.
In real life, labour markets do not work like this and rely on how quick prices clear labour markets, and the sudden increases or decreases in labour supply.
Skills is a vague term.
Some skills have credentials.
What determines if a skill is 'low-skilled' or 'skilled' is constantly changing.
Soft skills are important in sectors that rely on social performance.
May be necessary for a job.
Can also refer to attributes and characteristics.
A demand for soft skills can easily change into a demand for personal characteristics.
'Fuzziness' of a skill is exacerbated by it application to demeanour, accent, style and physical appearance (Warhurst and Nickson, 2007).
Any discussion of skills shortage needs to be aware that employees play an important role in defining attributes that are 'needed' to do jobs.
Why do employers prefer migrant workers?
Diverse labour market makes employers picky with which labour they hire.
Can develop a preference for migrant workers over domestic workers based on migrants' perceived superior characteristics and attributes. (Waldinger and Lichter, 2003).
Can develop preference to migrants attached to their immigration status. Have different rights and restrictions depending on their status.
Migrants can have lower expectations about wages and employment conditions.
Employers are aware of economic and other trade-offs that new migrants are willing to make by tolerating wages and employment conditions that are poor by standard of their host country.
Might be prepared to accept jobs whose skill requirements are below their actual skills and qualifications.
Employers have a preference for 'self-regulating' and ' self-sustaining' labour supply (Rodriguez, 2004). Employers can use migrant networks to control and regulate the flow of labour.
Alternatives to immigration
Increasing wages and working conditions.
Changing to a less labour intensive production process.
Relocating to countries where labour costs are lower.
Switch to production of less-intensive commodities and services.
Employ migrant workers