Introduction
Business environment is an element that will affect all the activities of an organization.
Besides, it will bring firms both opportunities and threats because of its uncertainties.
Business environment is uncertain, complex & dynamics; organization should apply more
flexibility & discontinuity ways to manage them. A firm cannot control the environment
because it is unpredictable in its direction and speed of change, such as interest rates, rate
of inflation and exchange rate.
Business environment can classifies in two categories that are internal environment and
external environment. Internal factors close to the company that have a direct impact on
the organizations strategy, these factors include employee, customer, suppliers,
shareholder, banker etc. External environment comprises those factors and trends outside
the organization that might have an influence upon an organization and its future. Many
external factors can have an effect upon an organization – from changes in government
legislation to the entry of new competition into a market.
All businesses and organizations operate in a changing world and are subject to forces that
are more powerful than they are, and which are beyond their control. Any business strategy
needs to take account of all these forces so that opportunities and threats can be identified
and the organization can navigate its way to success by matching its internal strengths to
external opportunities.
There are many ways and techniques that a firm can adopt to assess the external
environmental forces. The most common and popular techniques are the PEST analysis
and Industry Analysis
Pest Analysis
It is useful to consider as a starting point, what environmental influences have been
particularly important in the past, and the extent to which there are changes occurring,
which may make any of these more or less significant in the future, for the organization
and its competitors.
PEST analysis (a mnemonic for Political, Economic, Social and Technological factors) is
the most frequently used tool to consider the impact of the general environment. It
provides a broad framework for considering a wide range of potential factors in order to
summarise the most important influences of the general environment. Beside, it can
evaluate the potential impact of these influences, while the opportunities and threats to be
faced. Is positive or negative.
Each of the four headings can be broken down further to suggest more detailed
consideration of particular factors and changes that might influence the organization both
currently and in the future. Whilst varying dependent upon the particular context, the list
