An Assessment Of Business Environment And Its Impact On Organizational Growth (A Case Study Of Oil Down Stream In Nigeria)

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An Assessment Of Business Environment And Its Impact On Organizational Growth (A Case Study Of Oil Down Stream In Nigeria)


Abstract


Understanding the environment within which the business has to operate is very important for running a business unit successfully at any place. Because, the environmental factors influence almost every aspect of business, be it its nature, its location, the prices of products, the distribution system, or the personnel policies. Hence it is important to learn about the various components of the business environment, which consists of the economic aspect, the socio-cultural aspects, the political framework, the legal aspects and the technological aspects etc.

This research work assess business environment and its impact on organizational growth with special reference to Capital Oil and gas industries Nigeria. The research discussed the concept of business environment, its nature and significance and the various components of the environment.

Three hypotheses were formulated, each of the research hypotheses were all treated and accepted. The data collected were analyzed and the result of analysis revealed some of the fact relating to business environment.

However, the summary of the major finding includes the following:

  1. That business environment plays significant roles in the growth of an organization.
  2. That one of the major determinant of business environment is competitor or competition
  3. That government policy is a determinant of business environment
  4. Business environment is the sum of interrelationship within the business and between the business and society.
  5. The effect of business environment varies from one situation to another
  6. Ability to identify, evaluate and react to environment change will have considerable impact on organizational growth
  7. Business environment do not operate in vacuum. They must be exploited for profitability and or minimized against adverse effect.
  8. Nigeria oil down stream business environment have opened more opportunities for investment.

Chapter One


Introduction

1.1 Background of the Study

Many approaches have been used in the past to explain how organizations operate the classical organic and quantitative schools focus on aspects of organization, which manager could influence directly. The approach has been criticized for being too restrictive and inadequate since these schools failed to account for the varying environmental factors that dictate the fortunes of organization.

For instance, in the past organization focused mainly on profit maximization, however, recent challenges posed by external groups such as government unions and public have created the need for maintaining an equitable working balance among these interest groups. The system and the contingency approaches to management have offered a useful suggestion by emphasizing on the whole organization and the inter relationship of it is parts. The major implication of these schools approach is that an organization must be examined as a whole, including its parts or sub-systems and as a part of the environment around it.

In management, the word ‘environment’ does not necessarily mean physical surrounding, but it is used to describe all those influences that bear upon the individual organization. Since business makes demand on the business, managers in any organization must interact with and respond to environment factors internal and external to their organization. The sum of these interrelationship within the business and between the business and the society is what management partitions called “THE BUSINESS ENVIRONMENT”

Although, managers find it difficult to change most of these forces effectively however, the ability, to evaluate and react to these changes will have considerable impact on organization’s effectiveness. For example, the failure of some manufacturing concerns in Nigeria should not be attributed to government policies only. These companies should also be blamed for their inability to effectively identify, evaluate and react to the changes witnessed in the Nigeria economy since 1980. the need for studying business environment is important considering the fact that business organization do not operate in vacuum and effective management in complex and dynamic society requires the assessment of strengths and weakness of the organization and the opportunities and threats posed by the challenges of the eternal environment. For the survival and growth, orgnisation must adopt to these challenges. In addition, the changes have been classified into three ways namely;

  1. Classification based on the rate of change
  2. Effect of the environment
  3. External of control
1. Classification Based on the Rate of Change

Business environment can be classified by determining the extent to which the environmental factors changes. Environmental influence may be stable over the periods dynamic (i.e change at unpredictable rate). Or turbulent (i.e change at unpredictable rate. Forecasting environment factors in a static and a turbulent environment may be useless considering the fact that environmental factors do not change in the former, while forecasting in the late is unattainable. The manager, therefore, needs to concentrate on effective internal management to attain organization success where it operate within a static environment good planning and decision making in a turbulent environment requires a greater deal of the managers personal characteristics rather than ability to speculate the environmental factors.

B. Effect of the Environment

The environment factors may be opportunities that must be exploited or threats or problem that must be minimized by the organization. An opportunity can be simply referred to as business activities that can be profitable exploits by an organization. The opportunity may be visible or invisible. The environmental influence may open new investment opportunities for the organization i.e new uses and new products. Threats or problems can be regarded as “limiting factors” that is the factors that have negative impact on the success, growth and survival of the organization. An example of environmental impact on the business can be viewed from the structural adjust mental changes in the structure of Nigeria economy through these policies alone contributes to the success of some firms, bank in particular, emergence and growth of oil downstream industry and the failure of some organization.

C. Extent of Control

The environmental forces may be controllable i.e managers can use their managerial skills and experience to change these environmental forces on the other hand, the forces may be in controllable i.e they are beyond the ability of individual managers and managers must consider the environment given and adapt their manager practices to suit the environment.

This business may be defined as a commercial or industrial concern which people have invested money for instance, an enterprisers reward for risking his capital in any business venture is profit. This however, depends on the ability to organize and combine various factors of production at his disposal in the best proportion to attain the best result. Besides, administration is the direction of affairs of others usually through decision making and implementation. It also includes the choice and ways of achieving goals. Hence business administration could he said to the study of manner in which complex and inter-related measure of business organization operates. It can also be regarded as an area of discipline, which has two approaches.

1. Managerial Approach

This has to do with knowing how people who operate business systems inter-relates with one another. The system relates to man. Thus, understanding his reactions to change in environment, what he wants done and the way he goes about it? That is knowing who is responded for the production of goods and services (Human elements) since the concept of business were in adequate in the early 19th century, buffer the industrial and technological innovating and the consequent emergency of large commercial and industrial revolution, the impacts of business went beyond the little existing economic resources. Business thus, became a social institution interacting with other elements of business environment.

2. Functional Approach

The functional approach forces on the consumer as starting point. It is assumes that the consumer makes a significant approach in the inter-play of interrelated network within the organization, which is cable “BUSINESS ADMINISTRATION”.


1.2 Statement of the Problem

In Nigeria today, a lot has been said and written about this concept of business environment. This is because what business did and equally fails to do thereby causing great concerns. In essence, usually the plan mapped out by many organization becomes in exercise in futility because of their failure to recognize these factors:

  1. Lack of co-operation between bosses and subordinates
  2. Lack of recognition of the competitors and competition
  3. Government policy
  4. Lack of recognition of customers attitudes
  5. In adequate and lack of co-operation among shareholders in some organization.

Therefore, the problem of this study is to determine the effect of these factors on the growth of a business in an organization.


1.3 Purpose of the Study

The following are the objectives of the purpose of the study:

  1. To provide a basic understanding of the concept of the business environment
  2. To determine the advantages of the environment on business organization
  3. To highlight the problem of environment before establishing any business organization
  4. To recommend solution to environment problem in a business venture

1.4 Relevant Research Questions

  1. Does the general business environment have effect on the growth of an organization
  2. Do profit maximization have impact on the growth of an organization
  3. Does consumption play a role in the growth of an organization
  4. Do increase in prices at product lead to organizational growth?

1.5 Testable Hypotheses

The project shall on the stated hypothesis relationship or correlation. However, the study would seek to examine the correlation between business environment and organization growth.

The variable of the study are:

  • Dependent variable organization growth
  • Independent variable business environment

These variables shall be tested together. The test of the hypothesis is formulated as follows:

  1. HO: The general business environment have no effect on the growth of an organization
    HI: The general business environment have effect on the growth of an organization
  2. HO: Profit maximization has no impact in the growth of an organization
    HI: Profit maximization has impact in the growth of an organization
  3. HO: Consumption play no role in the growth of an organization
    HI: Consumption has a role to play in the growth of an organization

1.5 Significance of the Study

  1. It will enable the company to defect the environmental hurdles that impede the growth of business, thus putting them in a position to make effective decision
  2. Once environment problem are defected organizational problem will be minimal since decision will be based on such factors
  3. To contribute to behavioural management
  4. To recommend solution the environment problem in a business venture.

1.6 Scope and Limitations of the Study

The study is limited to capital oil and gas industries limited as an example of a down stream oil sector in Nigeria.

The limitation of the study are:

  1. High cost in carrying out the research activities
  2. Lack of capital or fund limits the depth of the study
  3. Limited also affects the depth of the study.

Chapter Five


Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

The prime objective of any organization is to make profit by continuing to be in business and the success of any organization depends mostly on the environment where the organization exists which have impact on the growth of the organization.

The main objective of the research is to determine how business environment of an organization help in the achievement of organization goals.

For the purpose of this study, capital oil and gas industries was used as a case study.

To see that the objectives of the research study are rightly achieved, the researcher reviewed much literature relating to the field of business environment.

Each of the research hypotheses were all treated and accepted. The data collected were analyzed and the result of analysis and tested hypothesis revealed some of the fact relating to business environment.

However, the summary of the major finding includes the following:

  1. That business environment plays significant roles in the growth of an organization.
  2. That one of the major determinant of business environment is competitor or competition
  3. That government policy is a determinant of business environment
  4. Business environment is the sum of interrelationship within the business and between the business and society.
  5. The effect of business environment varies from one situation to answer
  6. Ability to identify, evaluate and react to environment change will have considerable impact on organizational growth
  7. Business environment do not operate in vacuum. They must be exploited for profitability and or minimized against adverse effect.
  8. Nigeria oil down stream business environment have opened more opportunities for investment.

5.2 Conclusion Drawn From the Findings

From the result of data collected and analyzed the following conclusion can be drawn.

  1. That it is possible for an organization to be affected if the business environmental factors are not well considered.
  2. That proper recognition of business environment plays significant roles in the growth of an organization.
  3. In addition, that competitor should be considered while determining business environment
  4. From the above stated points and data analyzed earlier on, it has revealed that effect of business environment is highly significant in the life of capital oil and gas industries Ltd. This means that business environment has great effect in the life of the organization. Upon the whole, we will conclude that “Business Environment” is the most effective instrument that can be used by the organization in order to know the opinion of general public, government shareholders, competitors and others.
  5. Finally, effort should be made by the organization to make cognizance of the people social – cultural environment when starting a business or financing the business.

5.4 Suggestions for Further Study

The research study is aimed at investigating and evaluating the effect of business environment in organizational growth in oil down stream in Nigeria. Effort should be made to carry out further research of this topic on other companies such as.

  • Major oil markets
  • Other non – oil companies in Nigeria
  • Service companies like telecom providers
  • Also further studied can be made on organizational growth outside business environment.

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Frequently Asked Questions


How does the environment affect the growth of an organization?

The environment determines the limits of the organization activities for example, the passing of a new law by government may make certain business in Nigeria either fold-up or join another line of business (Alugbo 2002:1). The environment sources of growth may therefore be internal or external.

What is the significance of business environment in organizational performance?

According to Anyanwu (200 198) significance means the conveyance of meaning to specific people and groves. It is important to know that organization operates within an environment which directly or indirectly affects its result; the importance of business environment to organizational performance cannot be over stated.

What is the impact of environmental factor on the effectiveness of business?

The impact of environmental factor on the effectiveness of business organization. The level of competition so as to know whether the environment is favorable or not. The degree of environmental hostility, the decision of strategic i.e finance, marketing, purchasing, production personnel department etc.

Does a company’s policy affect its organization performance?

The scope of the study covers the impact of environmental factors an organizational performance, there is no significant relationship between the company’s policy as part of internal factor of business environment in relation to its organization performance on ABC transport limited in Imo state.

What are the environmental factors of an organization?

Environmental factors – Environmental factors belongs to the environment external to the organization. They are represented by the factors which are present in the surrounding of the organization and affecting the organization.

What is the impact of Environment on organization?

The impact of environment on organization is manifold. The interaction suggests a relationship between the two. This relationship can be analyzed in three ways. First, the organisation can be thought of as an input-output system.

How do political environmental factors affect business growth?

Business growth depends on the political environmental factors. There always an element of risk associated with these political factors. The risk could be in terms of the type of government in power and its business policies, the perception in matters of foreign investment and how it regulates the market.

How Mega environment affects the overall growth of an organization?

How Mega Environment Affects the Overall Growth of an Organization? Blurit defines mega-environment as one of the segments of the external environment. It reflects the conditions and trends in the societies in which an organization operates.

What is the significance of the business environment to managers?

The significance of the business environment and its perception by managers can be understood if we contemplate the below-mentioned following points: The environment provides numerous opportunities, and it is necessary to identify the opportunities to improve the performance of a business.

What are the advantages of a business environment?

Business environment provides many opportunities to the firms to improve their performance. The firms which are able to scan these opportunities at an early stage get maximum benefit and can leave their competitors behind.

How does the environment affect an organization’s success or failure?

Environmental factors play a major role in determining an organization’s success or failure. Managers should strive to maintain the proper alignment between their organizations and their environment. All organizations have both external and internal environments.

What is organisational environment?

Organizational environment is defined as a set of characteristics which describe the organization and distinguish it from other organizations within a given time period affecting behaviour of the employees therein. These characteristics affect the functional beha­viour of the employees, their trends and motives.

What are the environmental factors that affect the success of business?

It means that the internal environment of a business has many factors that affect or impact the success and the tactics of the organization. There arefive positive impacts of environmental factors on business. They are competition, technology, unique mindset, socio-economic, legal or ethical and political and economy.

How does the environment affect the way businesses conduct themselves?

The physical conditions in the environment also have an impact on how businesses conduct themselves. Environmental factors like climate change, natural disasters and pollution levels can affect the supply chain or increase costs for raw materials.

What is the internal business environment?

Thompson J. and Media D. (2014) states, ‘Internal business environment includes factors within your organization that impact the approach and success of your operations’. It means that the internal environment of a business has many factors that affect or impact the success and the tactics of the organization.

How does the environment affect the success and effectiveness of an organization?

It has been argued that the success and effectiveness of an organization are not determined solely by the abilities and competencies of the employees and management alone, the environment also has profound effect on company operations.

How do new policies and practices affect organizational performance?

Until new policies or practices become established, organizational performance may be affected, often negatively, as employees become accustomed to new ways of performing job tasks or different expectations for personal behavior.

How does the structure of an organization affect its performance?

The structure of organizations affects or models the behaviour of its employees who become products of organizational structures in either a positive or negative manner. Thus, structural deficiencies may affect employee’s behaviour and performance negatively which adversely impacts organizational performance.

How does organizational alignment affect organizational performance?

Organizational Alignment. Organizational structures that are inorganic and less versatile tend to cause miscommunication in the overall strategy of the organization. Miscommunication largely affects the execution of tasks and objectives and the organization’s performance measurements.

Do policy changes affect morale & satisfaction in the workplace?

Employee dissatisfaction and low morale are well-recognized as detrimental to an organization’s performance, and policy changes — especially unpopular changes — can be expected to affect both morale and satisfaction. Policy and practice changes in the workplace are inevitable, but decreased performance as a result does not have to be. 

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