Effect of External Organizational Environment on New Zealand Business - Case Study Example

Effect of External Organizational Environment on New Zealand Business in 2012 Insert name Institution Introduction The external organizational environment is an influential element when running a business. The business management team should consider it and consider the factors that influence the external organizational environment. These factors include suppliers, customers, technological factors, legal factors and competitors among others (De Cieri, 2003). These elements have the power to influence the business and they should be studied and understood to ensure that they are working for the success of the business and not against it. For instance, the business needs to establish a good relationship with its suppliers to ensure good quality and timely deliveries. The technology that the business is using should be to date to ensure that they produce goods or offer services cost effectively and of high quality. The paper discusses the external organizational environment of the New Zealand business in 2012 (Huang & Liu, 2006). It is introduced by establishing an explanation on the external organizational environment and its categorization into task environment and general environment. Business success requires both the individual and the environment. These factors are beyond the control of individual business organization and have a huge impact on the operation of the business (Keleman, 2003). The business environment in New Zealand as well as in other countries is dynamic in that it keeps on changing in terms of the various elements. These changes include technological improvement, shift in the preferences of the consumer and changes in the competition in the market which can either be new entrants or exit from the industry. External Organizational Environment The external environment consists of institutions from the outside the organization and forces which have an actual or potential impact or interest on the ability of the organization to achieve its pre-determined objectives (Kohli & Jaworski, 1990). These external forces include competitive forces, technological forces, political forces, and legal forces among others. These factors have a potential to affect the organization and have an indirect influence on the business. External factors are categorized into the general environment and the task environment (Worthington & Britton, 2003). Task Environment The task environment is known as the microenvironment and operating environment as the forces in this category has a direct bearing on the running and operations of the business. The task environment is closer to the business and has a direct influence on its basic organization and performance. The task environment consists of suppliers, customers and competitors. The customer acquires goods and/or services from the business. They play a key role for the success of the business. The task environment factors do not have the same effect in different industries. The microenvironment factors are discussed below (Gomez-Mejia, 2004). 1. Suppliers Suppliers provide resources and services used to produce outputs within the business. Many businesses are using the strategy of using fewer suppliers and trying to have a good relationship with them. The business should have reliable sources of supply to ensure the smooth functioning of the business operations (Huang & Liu, 2006). 2. Competitors Competitors refer to the other businesses in the industry which provides the same goods or services. The businesses in the industry are faced with same competitive needs which are specific to each industry. Competitors not only include those businesses which are producing the same products or offering the same services but also those firms which are competing for the income of the consumers. The primary task of the business in competing with these other business is to deliver what the consumer wants to ensure that they choose the business’s products over others (De Cieri, 2003). 3. Customers The major aim and task of the business is to create and sustain its customers for a long period of time. The existence of the business solely depends on the availability of the customers and no customer’s means there will be no business. Therefore, customers are an important consideration to make when managing a business. Mechanisms and strategies should be put in place to ensure the sustainability of the customers. 4. Marketing Intermediaries These include the middlemen for instance agents and merchants who help the business to find customers or close sales with them. The marketing intermediaries act as a link between the company and the final consumers (Bannock, 2003). 5. Labor Market The labor market refers to the people in the environment who can be hired as part of the human resource of the businesses. These exclude those who are already employed by the business. The labor market has influences on the business as it has power to set wages among others. The five forces model of competition is a key analytical tool which can be used by businesses to determine the status of its task environment. The forces included are the following; firms in other industries offering substitute products, suppliers, buyers, potential new entrants and competitive pressure from businesses in the same industry. The business should identify the parties in each of the cases; evaluate the pressure from each force, and the overall pressure from all the five forces. This analysis should be used to determine, whether the collective strength from all the forces are conducive for the success and profitability of the business (Keleman, 2003). General Environment The general environment involves the outer layer of the external environment. It is also known as the macro-environment and the remote environment. Generally, the general environment includes those task environment factors that are more uncontrollable by the business. In this case, the adaptability of the business to the business environment is the factor that will ensure its success (Worthington & Britton, 2003). The dimensions of the general environment represent influence on the business over time and are not involved with the day to day activities of the business. The dimension for the general environment includes international, technological, economic, natural, and socio-cultural and the legal-political factors (Keleman, 2003). 1. Economic Environment The economic environment refers to the aggregate nature of the economic system in the country the business is operating from. It also includes the business cycles, socio-economic infrastructure etc. The business should consider the economic environment as this will have a direct impact on its operation. For instance a business which export or imports its products will have to consider the foreign exchange rates of the country. 2. Social Environment The social dimension of a business environment includes such elements such as mobility of labor, customs and values, and cost structure among others. These factors will determine the culture in the business environment and the mobility of the labor. The social element factors in the value system of the society which will have an impact on the functioning and operations of the business (Huang & Liu, 2006). 3. Political Environment Political organizations, the ideology of the government, philosophy of the political party and nature of bureaucracy and its influence of primary groups are some of the elements to consider. The political environment has an influence on the business as it has the power to influence the policies and laws made in the business environment (De Cieri, 2003). 4. Legal Environment These include the adaptability and flexibility of the law as well as other legal rules which govern the business environment. These include court rulings and decisions which will have an effect on the running of the business. The government policies and intervention will also influence the running of the business. These include tax policies and other interventional programmes (Jackson, 2002). 5. Technical Environment The technological development in a country is major influence to the success of the business. The technology a business chooses to adopt will have a major influence on the type and quality of goods and services it will produce. The type and quality of plant and equipment used will also be a major factor to look at. The technological investment that a business takes on, will be influenced by the technological environment in which the business is operating (Keleman, 2003). Consistency in the use of the technology and the effects that the technology has on the market and industry the business is operating in. Technology can help in production of quality goods, which will ensure consumer loyalty and help the business to diversify its product (Kohli & Jaworski, 1990). Business in New Zealand New Zealand is made up of two main islands, the North and the South Island, Stewart Island and other smaller islands. New Zealand holds the proud reputation of being one of the least corrupt nations for conducting business. The legal system in the country is based on the English common law system. The principal regulators include the following: 1. The Overseas Investment Office- this is responsible for administration of the foreign investment policy according to the relevant overseas investments laws. 2. The Financial Markets Authority and the Reserve Bank of New Zealand- they regulate the financial markets, services, investment, and insurance among others. 3. The Commerce Commission- it enforce anti-trust and consumer protection legislation. The monetary policy in New Zealand is operated by the Reserve Bank of New Zealand which formulates and implements the policy in a move to achieve and maintain the stability of the prices. It aims at keeping the inflation at 1-3%.There are no restrictions on the flow or earnings of New Zealand business to overseas investors. The financiers in New Zealand include ASB Bank Limited, ANZ National Bank Limited and Westpac New Zealand Limited among others. The legal factors which will affect business include the contract law whereby the government has little regulation on contracting; the different parties are free to contract on their own terms. In February 2011, the Statistics New Zealand reported that there were just over 470,000 businesses in the country. This according to Statistics New Zealand is a decrease of 0.6% from the year 2010. This is the second consecutive annual decrease in the number of businesses recorded, though it’s smaller than the 1.5% decrease recorded between February 2009 and 2010. This is an illustration of the small change of the number of businesses between 2010 and 2011 whereby the country exhibited a mixed economic activity and uncertainty. This mixed economic activity and uncertainty was also exhibited by the wider global business environment. There was a 9.1% decrease in the number of business start-ups and a 7.9% decrease in the number of business closing. The statistics also showed that four out of five businesses started survived their first year in operation and this figure has remained stable over time (De Cieri, 2003). Auckland was the only region which showed an increase in the number of business location demonstrating a marginal 0.5%. These figures are likely to replicate in the year 2012 with slight changes in the figures shown in year 2011. Conclusion The business environment in New Zealand will be affected by various factors. Business before commencing should consider these factors to ensure that the business is operating within the elements in a way that is beneficial to it. They should put strategies and mechanism that interact and interrelate with its business environment properly. The external business environment comprises of the task environment and the general environment (Jones & George, 1998). The external business environment comprises of those factors which are beyond the control of the business management but which have an influence to the business. Business environment in New Zealand will be determined by the several factors such as the technological factors, the legal factors, consumers, suppliers, political factors among others (Walker, 2004). The business environment is very dynamic and the success of the business will be influenced on how well it adapts to the various factors which are outside its control. The business is forced to adapt as it does not have control over the external business environment. In New Zealand, the business environment will be affected in 2012 by changes such as a change in the technological knowhow, political system of the country, changes in the preferences of the consumers, and policies put across by the government among others (Needle, 2004). References Bannock, G. E. (2003). The Penguin Dictionary of Economics. 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