An Assessment Of Business Environment And Its Impact On Organizational Growth

Project and Seminar Material for Business Administration and Management BAM

An Assessment Of Business Environment And Its Impact On Organizational Growth

Chapter One


1.1 Background To The Study

The present day business environment is marked by different dynamic features such as global competition, information technology, quality service revolution and corporate social responsibility which are compelling managers to rethink and reshape their approach to their various operation responsibilities. Due to this paradigm shift, new firms are emerging that are more responsive to both their internal and external environments (Luthans, 2005). The internal factors exist within the operational base of an organization and directly affect the different aspect of business. These internal factors include firms Mission, resistance to change, poor quality staff, lapses in internal control, bad resource/financial management, operational weaknesses, high staff turnover and over-leveraging while the external factors include government regulation, economic recession, political turmoil, low cost competitors, changes in customer behavior, environmental/ health issues, technological changes, natural disasters, change in input supply, changes in macro-economic variables and terrorist attacks. Hence, it is important for a business to keep a pace with the various changes in the environment in order to survive in the long run.

Basically a business environment should help to even bring a business up to survival at least to a great extent. Business environments have the potential to either help a business grow or declines. This is so because sometimes the policies and forces by these environmental factors at different points can be of benefit to helping the business grow and at sometimes they may hit a business hard and make them fall out of operations. Basically it could be a government policy, or interest rate on capital or the nature of competition in the market or the level of technological sophistication compared to that which the company operates on.

The Nigerian business environment is such that has peculiar difference from conventional business environments. Generally the Nigerian business environment is a kind that should have a different study to it. This is so because the environment has potentials to either support the growth of business or not.

According to Adebayo et al. (2005) business environment can be broadly categorized into internal and external environment with the former comprising variables or factors within the control and manipulation of the firm to attain set objective while the latter encompasses factors that are outside the control and manipulation of the firm. Hence, firm must develop a plan that will help it to cope with the various environmental forces (Oluremi and Gbenga, 2011). Similarly, the nature of business environment are said to be classified as dynamic, stable and unstable which often help a firm in the selection of appropriate strategies (Ibidun and Ogundele, 2013). Adeoye (2012) opined that in order for business to cope with the dynamic and rapidly changing business environment, there is a need to develop and implement appropriate strategies that would safeguard their operations and yield the desired results. Similarly, Ogundele (2005) added that a firm perception of the nature of the business environment is a function of its size and industry. Business survival is the ability of a firm to continuously be in operation despite various challenges i.e. the managerial process of directing the affairs of a firm regularly on a going concern basis and meets the needs of all stakeholders (Akindele et al., 2012). Dun and Bradstreet (2009) viewed business failures as a situation where a business go into bankruptcy or cease operations which results in losses and failure to meet its various financial commitment to creditors. In order to survive, firms always keep a close tab on the various activities that determine their continuity. Adeoye (2012) submitted that the present form of complexities facing firms include leadership styles, changes, uncertainty, conflict, culture, technology, structure, competitive market, profitability and workplace motivation. Hence, firms must develop a strategically plan and tactical procedure that is appropriate and adaptive to the present business environment that will aid its optimum resources utilization and attainment of set goals.

Burns (2001) opined that small scale business cannot be characterized as only scaled down versions of large firms since they show a number of fundamental differences which can be explained through absence of economies of scale and scope which amongst others is also caused by less provision of factors of production. Thus, Ciano (2011) opined that there are four determining factors in any transformation initiative for any business entity. This includes duration of time between reviews of milestones; the project team’s performance integrity which is the ability to complete the initiative on time that depends on members’ skills and traits relative to the project’s requirements; the commitment to change of the top management and employees affected by the change display and the effort over and above the usual work that the change initiative demands of employees. Alexander (2000) observed that the dynamic and rapidly changing business environment in which most businesses operate has made business environment to have significant impact on organizational survival and performance. This implies that the external environment is complex and constantly changing and its significant characteristic is competition. The recognition of the presence of an intense competition often compel the need to seek more information about customers for the purpose of evaluation and to use such information to their advantage thus enabling competition to drive business organizations to look for their customers in order to understand better ways to meet their needs, wants, and thereby enhances organizational performance (Azhar, 2008).

Relevance between theory and practice that occurs has prompted experts and researchers to indent research related to general business management and strategic management in particular. A number of researchers have proposed various models of strategic management. Strategic management model proposed by Wright, Kroll and Parnell (1996) contains five basic framework, namely: (1) opportunities and external threats that include macro environment and industry; (2) The internal environment that includes the company’s resources, the organization’s mission and goals; (3) Formula strategies include koporasi level, business unit level and functional level; (4) Implementation of the strategy which includes organizational structure, leadership, authority, and organizational culture; and (5) that includes the strategic control process and performance. Fundamental understanding into key points in this model is the formulation of a strategy that is divided into phases of corporate, business unit and functional levels. Furthermore, Wheelen and Hunger (2010) outlines the strategy formulation directly in the elaboration of a more operational level, namely the mission, goals, strategies, and policies. As for the implementation of the strategy outlined in the degree program, budget, and procedures. In a pragmatic model of the strategic management of Wheelen and Hunger looks easier to understand and easier to implement, although from the aspect of leadership, structure, and culture look less highlighted in the model they put forward.

1.2 Statement Of The Problem

The economic situation in Nigeria at some point has been hinted to be unfavorable for business activities. This could be true to some extent but the fact is that the present economic status of the country has some hope for the conduct of business. Even though the importations of some capital goods are left in the hands of particular individuals, it still has a fair day on the common business man. Some economic factors affecting the Nigerian business environment include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm’s cost of capital and therefore the extent to which a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. Economic policies also go a long way to affect the conduct of activities in the Nigerian business environment. Sometimes the policy on tax or trade can affect the conduct of business. For example Aliko Dangote is the only person in charge of the importation of some goods in Nigeria. This affects other business men and makes the Nigerian business environment less conducive for business persons.

1.3 Objective Of The Study

The main objective of this study is to assess the impact of business environment on organizational growth, specifically the study intends to:

  1. Discover the factors that determine organization growth
  2. Find out the factors that hinders organizational growth in Nigeria
  3. Find out the impact of business environment on the growth of organization in Nigeria.
  4. Proffer solution on to the problems that hinders organization growth in Nigeria

1.4 Research Questions

The following research questions was formulated to guide the research so as to arrive at a valid conclusion:

  1. What are the factors that determine organization growth?

An Assessment Of Business Environment And Its Impact On Organizational Growth

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An Assessment Of Business Environment And Its Impact On Organizational Growth


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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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