THE UNIVERSITY OF ZAMBIA

INTRODUCTION TO PROJECT MANAGEMENT

 

PROJECTS IN THE BUSINESS ENVIRONMENT

Module 7
 Introduction
• Welcome to Module 7 of Introduction to
Project Management Course
• In this Module, We shall define what a
Business is and what the Environment is
• We shall look at the Business Environment in
Relation to Project Management
• Lets begin
 What is Business?
• You may be aware of the term business in your everyday
life activity. Most of the Zambians today live in
neighbourhoods where at the every corner there is a
kiosk we call ‘Katemba in local language’, and you see
these people who run kiosks as individuals doing
business. Why would you think that? Maybe it is
because they are in it to make profit, or make a living.
What does that tell you about what business is, then?
• According to business gurus, Business may be
understood as the organized efforts of enterprise to
supply consumers with goods and services for a profit. (
http://www.pondiuni.edu.in).
 What is business?

• You can now see from your understand that the individual in
your neighborhood running the Kiosk might actually be in
business, especially if the kiosk is;
1. Organised effort of the enterprise
2. Supply consumers goods and services
3. Intends to make profit
• Just because the business your neighbour is running is small,
that does not disqualify it to be called a business. Just because
she is selling fritters, that does not disqualify it to be a business
• This is because Businesses vary in size, as measured by the
number of employees or by sales volume. But, all businesses
share the same purpose: to earn profits.
 What is business?
• Well, the purpose of going into business goes
beyond earning profit. These are some of the few
areas why people or organizations get into
business:
•  It is an important institution in society.
– Be it for the supply of goods and services
– Creation of job opportunities
– Offer of better quality of life
– Contributing to the economic growth of the
country.
 Nature Of Business

• If there is any single word that you can best describe today’s
business, is change.
• Modern business is dynamic.
• These changes in the markets makes the companies spend
substantially on what we call Research and Development (R
& D) to survive in the market.
• Mass production and mass marketing are the norms
followed by business enterprises.
• With the new age of digital marketing and growth of social
media, because of the internet, businesses have to think
broad to survive.
Today’s business is characterized by diversification

1. Concentric Diversification - This refers to the process of adding new,

but related products or services for the current market. For example,
imagine that neighbour with the Katemba. If he adds Brown Sugar,
when he is already offering white sugar, we can say that he is
‘Concentric diversifying’ for he is adding a new product ‘Brown sugar’
which is related to white sugar to his current customers, you.
2. Horizontal Diversification – This is the process of adding new,
unrelated products or services for present customers is what we call
horizontal Diversification. For example, when your kiosk neighbour
who sales white sugar adds a detergent paste in his shop. It is a new
product, but it is not related to what he is currently offering to you.
3. Conglomerate Diversification - It refers to adding new and unrelated
products or services. When you see that your kiosk neighbour goes
into the new market after introducing a detergent paste into his shop.
 Business Goals
•  Profit - Making profit is the primary goal of any business
enterprise, with the exceptions of NGOs.
• Growth - Business should grow in all directions over a
period of time.
• Power - Business houses have vast resources at its
command. These resources confer enormous economic
and political power.
• Employee satisfaction and development - Business is
people. Caring for employee satisfaction and providing for
their development has been one of the objectives of
enlightened business enterprises.
• Quality Products and Services - Persistent quality of
products earns brand loyalty, a vital ingredient of success.
 Business Goals
• Market Leadership - To earn a niche for oneself
in the market, innovation is the key factor.
• Challenging - Business offers vast scope and
poses formidable challenges.
• Job of creation - It is through business strategies
new ideas and innovations are given a shape and
are converted into useful products and services.
• Service to society - Business is a part of society
and has several obligations towards it.
 What is Business Environment

• By now you should be to explain what a

business is.
• By understanding what a business is, will
make it easy for you to understand what a
business environment is.
• A business firm is an open system.
• It gets products from the environment and
supplies its goods and services to the
environment.
 What is Business Environment
• Thinking of a farmer for example, he buys seeds from
agriculture shops, plants the seeds into the earth,
harvest the crops and sales them to the market. I hope
you have not missed out the point.
• This is to say that, he gets things from the environment
(The agriculture shops, and the earth) and sales the
crops to the environment (the market). The only issues
are the difference in the types of the environments.
• What can you say the term environment mean in this
case?
 What is Business Environment
• According to William G et al, “Environment contains the
external factors that create opportunities and threats to the
business. This includes socio-economic conditions,
technology and political conditions.” (William G, 1980)
• In simple terms, The word Environment refers to all external
forces, which have a bearing on the functioning of business.
• These Environmental factors “are largely if not totally,
external and beyond the control of individual industrial
enterprises and their managements. The business
environment poses threats to a firm or offers immense
opportunities for potential market exploitation.
 Environment……
• The environment does not only affect big
companies, Even a small businessman, your
kiosk neighbour, who plans to open a small
shop as a general merchant in your town
needs to study the environment before
deciding where he wants to open his shop, the
product she intend to sell and what brands he
wants to stock.
 Environment……
• The relation between a business and an
environment is not a one way affair. In as
much as the environment affects the business,
the business also equally influences the
external environment and can bring about
changes in it. Powerful business lobbies for
instance, actively work towards changing
government policies. You may have seen this
in the mining sector.
 Environment……
• The environment, in this sector has a two way
relationship. You see the government set policies,
(for example increase in royalty tax), and Mining
companies react by either change in the way of
doing business or lay off some few worker.
• This reaction causes the government either to
revert its actions, or to change policies to a win-
win situation.
• Therefore, the government affects the Mines and
the Mines affect the environment.
 Environment……
• So it is quite obvious that success in a business
depends upon better understanding of the
environment.
• A successful businessman does not look at the
environment on an ad hoc basis but develops a
system to study the environment on a continuous
basis to try and protect the organization from every
possible threat and to take the advantage of every
opportunity. Sometimes better and timely
understanding of the environment can even turn a
threat into an opportunity.
 Features of Business Environment

• Totality of external forces: Business environment is the sum

total of all things external to business firms and, as such, is
aggregative in nature.
• Specific and general forces: Business environment includes
both specific and general forces. Specific forces (such as
investors, customers, competitors and suppliers) affect
individual enterprises directly and immediately in their day-to-
day working. General forces (such as social, political, legal and
technological conditions) have impact on all business
enterprises and thus may affect an individual firm only indirectly.
• Multi faceted: The same environment trend can have different
effects on different industries. As the GATS is an opportunity for
some companies and threat for some companies.
 Features of Business Environment
• Environment has a far reaching impact: The environment has far reaching
impact on the organization. The growth and profitability of an organization
depends critically on the environment in which it exists. The impact of an
environmental trend often differs significantly for different firm within the same
industry: Any change in environment may have different impacts on different
firms operating in the same industry
• Inter-relatedness: Different elements or parts of business environment are
closely interrelated. For example, increased life expectancy of people and
increased awareness for health care have increased the demand for many health
products and services like diet Coke, fat-free cooking oil, and health resorts. New
health products and services have, in turn, changed people’s life styles.
• Dynamic nature: Business environment is dynamic in that it keeps on changing
whether in terms of technological improvement, shifts in consumer preferences
or entry of new competition in the market.
Features of Business Environment
• Uncertainty: Business environment is largely uncertain as it
is very difficult to predict future happenings, especially when
environment changes are taking place too frequently as in
the case of information technology or fashion industries.
• Complexity: Since business environment consists of
numerous interrelated and dynamic conditions or forces
which arise from different sources, it becomes difficult to
comprehend at once what exactly constitutes a given
environment. In other words, environment is a complex
phenomenon that is relatively easier to understand in parts
but difficult to grasp in its totality
 The Importance of Business Environment

• In a globalised economy, the business

environment plays an important role in almost
all business enterprises.
• The importance of business environment and
its understanding can be appreciated if you
consider the following facts:
Importance of Business Environment....
• It enables the firm to identify opportunities and getting the
first mover advantage: Opportunities refer to the positive
external trends or changes that will help a firm to improve its
Performance. Environment provides numerous opportunities
for business success. Early identification of opportunities helps
an enterprise to be the first to exploit them instead of losing
them to competitors.
• Helps to understand internal Environment: It is very much
important for business enterprise to understand its internal
environment, such as business policy, organization structure
etc. In such case an effective management information system
will help to predict the business environmental changes.
 Importance of Business Environment.....

• Help to Understand Market Conditions: It is necessary

for an enterprise to have the knowledge of market
structure and changes taking place in it. The knowledge
about increase and decrease in demand, supply,
monopolistic practices, government participation in
business etc., is necessary for an enterprise.
• Determining Threats: The interaction between the
business and its environment would identify threats to
the business. It helps the business enterprises for
meeting the challenges successfully
Importance of Business Environment....
• Giving direction for growth: The interaction with the
environment leads to opening up new frontiers of
growth for the business firms. It enables the business to
identify the areas for growth and expansion of their
activities.
• Continuous learning: Environmental analysis makes the
task of managers easier in dealing with business
challenges. The managers are motivated to continuously
update their knowledge, understanding and skills to
meet the predicted changes in realm of business.
Importance of Business Environment....

• Image building: Environmental understanding

helps the business organization in improving
their image by showing their sensitivity to the
environment with which they are working.
• Meeting competition: It helps the firms to
analyze the competitors’ strategies and
formulate their own strategies accordingly.
Importance of Business Environment....
• Identifying firm’s strength and weakness: Business
environment helps to identify the individual strengths and
weakness in view of technological and global developments.
• It helps in tapping useful resources: Environment is a source
of various resources for running a business. To engage in any
type of activity, a business enterprise assembles various
resources called inputs like finance, machines, raw materials,
power and water, labour, etc., from its environment
including financiers, government and suppliers. They decide
to provide these resources with their own expectations to
get something in return from the enterprise.
 Importance of Business Environmental Study

• The few benefits of environmental study that you need to

know are as follows;
1.  Development of broad strategies and long-term policies of
the firm.
2. Development of action plans to deal with technological
advancements.
3. To foresee the impact of socio-economic changes at the
national and international levels on the firm’s stability.
4. Analysis of competitor’s strategies and formulation of
effective countermeasures.
5. To keep oneself dynamic.
ENVIRONMENT - BUSINESS RELATIONS…..

• The term business typically refers to the development

and processing of economic values in society.
• Therefore, the business is the product of the
technological, political-legal, economic, social – cultural,
global and natural factors amidst which it functions.
• Environment is closely related with business. There is a
constant ‘give and take’ relationship between
environment and business. The business receives inputs,
information and technology from the environment and
gives it back in the form of outputs (goods and services).
 Business and environment interaction

• Business is affected by economic conditions of the

environment. During recessionary conditions, for example,
firms reduce the production or pile their inventories to sell
during normal or boom conditions.
• Business, on the other hand, can create artificial scarcity of
goods by piling inventories and force the economic
conditions to show signs of adversity while it is not actually
so. Both business and environment, thus, affect and are
affected by each other.
• When financial institutions increase the lending rates, firms
may resort to other sources of funds, like bank loans or
internal savings (reserves). This may force the financial
institutions to lower the interest rates. The financial
environment and the business system, thus, act and
interact with each other.
 Business and environment interaction
• The firm’s micro environment consisting of workers, suppliers,
shareholders and so on, affects the business activities and is,
affected by them.
• Workers demand high wages, suppliers demand high prices
and shareholders demand high dividends. Firms reconcile the
interests of diverse groups and satisfy their demands. If
management resolves these demands, it will be positively
affected by the environmental forces but if it fails to satisfy
these demands, it becomes a victim of the environment.
• Growing firms pay high wages and dividends to their workers
and shareholders to maintain harmonious industrial relations
and a positive business-environment interface.
• IF YOU PAY PEANUTS, YOU GET MONKEYS.
 Business and Environment interaction
• Business receives useful information from the environment regarding
consumers’ tastes and preferences, technological developments,
Government policies, competitors’ policies etc. and provides useful
information to the environment regarding its goals, policies and
financial returns.
• This information is transmitted to environment through annual
reports as a requirement of disclosure practices.
• The basic function of a business enterprise, input-output conversion,
is carried through active interaction with the environment. It receives
inputs from the environment, converts them into outputs through
productive facilities which are also received from the environment
and sends them back to the environment. A constant feedback is
received from the environment to improve its performance.
 Business and Environment interaction
• The environment offers threats and opportunities to
business systems which they overcome and exploit through
their strengths and weaknesses.
• SWOT analysis helps in integrating external environment
with the internal environment.
• The business and environment, thus, have much to give
and take from each other. The economy is structured by
effective interaction of the business and its environment.
The business-environment interaction is a continuous
process. It is like a biological organism that keeps
environment and management responsive to each other.