Environmental factors affecting success of a new business

Gurmeet Singh
Contact No. 9896711366
Abstract

In this paper, we characterize the factors and their impact on adoption. in addition, and equally
importantly, we describe our experience and lessons learnt in construction of a cloud computing
platform, cloud computing is a new general purpose internet-based technology through which
information is stored in servers and provided as a service and on-demand to clients. In this we
describe the reasons of that why people switch from traditional IT to the cloud and also discuss
the characteristics and types of cloud computing. This paper describes cloud computing, a
computing platform for the next generation of the Internet. The paper defines clouds, explains
the business benefits of cloud computing, and outlines cloud architecture and its major
components. In particular, we argue that with continued research advances in trusted computing
and computation-supporting encryption, life in the cloud can be advantageous from a business
intelligence standpoint over the isolated alternative that is more common today.
Keywords: - Business Environment, Entrepreneur, External Environment, Internal Environment.
INTRODUCTION
As stated earlier, the success of every business depends on adapting itself to the environment
with in which it functions. For example, when there is a change in the government polices, the
business has to make the necessary changes to adapt it to the new policies. Similarly, a change in
the technology may render the existing products obsolete, as we have seen that the introduction
of computer has replaced the typewriters; the colour television has made the black and white
television out of fashion. Again a change in the fashion or customers taste may shift the demand
in the market for a particular product, e.g., the demand for jeans reduced the sale of other
traditional wear. All these aspects are external factors that are beyond the control of the business.
So the business units must have to adapt themselves to these changes in order to survive and
succeed in business.
IMPORTANCE OF BUSINESS ENVIRONMENT
There is a close and continuous interaction between the business and its environment. This
interaction helps in strengthening the business firm and using its resources more effectively. As
stated above, the business environment is multifaceted, complex, and dynamic in nature and has

a far-reaching impact on the survival and growth of the business. To be more specific, proper
understanding of the social, political, legal and economic environment helps the business in the
following ways:
o 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.
o Determining Opportunities and Threats: The interaction between the business and its
environment would identify opportunities for and threats to the business. It helps the
business enterprises for meeting the challenges successfully.
o 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.
o Meeting Competition: It helps the firms to analyze the competitors strategies and
formulate their own strategies accordingly.
o Image Building: Environmental understanding helps the business organizations in
improving their image by showing their sensitivity to the environment within which they
are working. For example, in view of the shortage of power, many companies have set up
Captive Power Plants (CPP) in their factories to meet their own requirement of power.
o Identifying Firms Strength and Weakness: Business environment helps to identify the
individual strengths and weaknesses in view of the technological and global
developments.

THE

ENTREPRENEURIAL

DECISION

AS

AN

INVESTMENT

DECISION
A few works belonging to the financial area conceptualize the entrepreneurial decision as a
particular case of real business investment. Investment is usually a macro concept, studied at
integrated level: in elementary macroeconomic models, the private investment flow plays a
Daniela Grieco, The entrepreneurial decision: theories, determinants and constraints crucial role
in connecting real markets and monetary markets. Aggregate investment depends on individual
firms choice: since in orthodox neoclassical theories macroeconomics and microeconomics are
not distinctly different disciplines, analyzing macroeconomic investment is analytically identical

to analyzing microeconomic investment, because both theories describe profit maximizing

behavior of firms balancing their marginal costs and benefits. The entrepreneurial decision as a
self employment decision Literature in labour economics has devoted a lot of effort in
investigating the entrepreneurial decision that has been conceptualized as self-employment.
Since Osborne (1976), these works have depicted the entrepreneurship decision as involving the
choice between two income streams: a rational individual can decide to accept a wage position
earning a certain amount of money per year, or go into business with the anticipation of receiving
a share of profits.
ENVIRONMENT FACTOR AFFECTING
EXTERNAL ENVIRONMENTS:
External environments are all the events outside a company that have the potential to influence
or affect it. For example, Canada exported more than $10 billion worth of lumber to the United
States in 2000. In mid-2002, after many years of threatening to place tariffs on Canadian exports,
the United States imposed a 27 percent tariff on softwood lumber. This significantly affected
producers in British Columbia, Quebec, Ontario, and Alberta, with exports from Quebec and
Ontario falling by more than half. Canadian trade officials and industry groups appealed to the
World Trade Organization (WTO) and under the North American Free Trade Agreement
(NAFTA). In August 2005 Canada won a major NAFTA judgment, but the U.S. government
ignored the ruling and appealed an unfavorable WTO ruling.2 In the meantime, the effect on
some companies and communities has been devastating.
External Environment and its Factors (PESTLE Analysis Model)
The external environment of a business consists of a set of conditions and influences outside the
business but which shape the life and continued existence of the business. These conditions and
influences are outside the firm as a business unit, but which effect changes in the organization
and the business entity cannot control but only adjusts to them.
P Political Factors;
E Economic Factors;
S Social Factors;

T Technological Factors;
L Legal Factors; and
E Ecological Factors.
Political Factors: These entail the extent and process of government direct or indirect
intervention and influence on businesses in an economy. Specifically, political factors
include such areas as tax policy, labour law, environmental law, trade restrictions, tariffs,
incentives, other encouragements and political stability. Political factors may also include
goods and services which the government wants to provide or be provided (merit goods)
and those that the government does not want to be provided (demerit goods or merit bad).
Furthermore, governments have great influence on the health, education, and
infrastructure of a nation.
Economic Factors: These 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.
Social Factors: These are the cultural aspects and include health consciousness,
population growth rate, age distribution, career attitudes and emphasis on safety nets.
Trends in social factors affect the demand for a company's products and how that
company operates. For example, an aging population may imply a smaller and lesswilling workforce (thus increasing the cost of labour); government enhanced social
insurance scheme may increase the demand for insurance services in a country.
Furthermore, companies may change various management strategies to adapt to these
social trends (such as recruiting older workers).
Technological Factors: This component of external environment includes technological
aspects such as Research and Development (R&D) activity, automation, technology
incentives and the rate of technological change. They can determine barriers to entry,
minimum efficient production level and influence outsourcing decisions. Technological
shifts can affect costs, quality, and stimulate further invention, innovation and
competition.

 Legal Factors: Included in this component are discrimination law, consumer law,
antitrust law, employment law, and health and safety law. These factors can affect how a
company operates, its costs, and the demand for its products.
Ecological Factors: These include environmental aspects such as weather, climate, and
climate change, which may affect industries like tourism, farming, and insurance.
Growing awareness of the potential impacts of climate change is affecting how
companies operate and the products they offer, both creating new markets and
diminishing or destroying existing ones.

Internal Environments
External environments are external trends and events that have the potential to affect companies.
The internal environment consists of the trends and events within an organization that affect the
management, employees, and organizational culture. For example, consider the internal
environment at SAS, the leading provider of statistical software. Unlike most software
companies that expect employees to work 12- to 14-hour days, SAS offices close at 6 P.M. every
evening. Employees also receive unlimited sick days each year. And to encourage employees to
spend time with their families, theres an on-site daycare facility, the company cafeteria has
plenty of highchairs and baby seats, and the company even has a seven-hour workday. Plus,
every Wednesday, the company passes out M&M chocolate candies, plain and peanut, to all
employeesa total of more than 200 tones of M&Ms per year. SAS senior vice president Jim
Davis says, We are firm believers that happy employees equal happy customers.Internal
environments are important because they affect what people think, feel, and do at work. Given
SASs internal environment, it shouldnt surprise you to know that almost no one quits.
Internal Environment and its Factors (SWOT Analysis Model)
Strengths: characteristics of the business, or project team that give it an advantage over
others
Weaknesses (or Limitations): are characteristics that place the team at a disadvantage
relative to others
Opportunities: external chances to improve performance (e.g. make greater profits) in
the environment

 Threats: external elements in the environment that could cause trouble for the business
or project

Example of McDonalds Swot Analysis

SUCCESS AND CHANGE

Lets take a closer look at the creation and maintenance of organizational cultures, successful
organizational cultures, and changing organizational cultures. Creation and Maintenance of
Organizational Cultures Organizational culture often referred to as corporate culture, can be
strong and enduring. Shared values, beliefs, attitudes, and assumptions drive organizational
culture. Organizations also have subcultures, or cultures within cultures. For example, different
divisions within an organization that are located in different parts of the country or the world will
often share some similar elements of culture, but there may also be things that make them a little
different. Within the same company, managers in Toronto and Hawaii may have different beliefs
about how managers should dress or communicate with each other. Visible elements of corporate
culture are called visible artifacts. The way people dress, company rituals and ceremonies, and
corporate offices are all visible artifacts. IBM was once referred to as the men in the blue suits
because most of their employees dressed in dark blue suits and employees dress reflected the
uniformity and strength of IBMs organizational culture. In addition to dress, language and forms
of communication can indicate the level of formality expected within a workplace.

CHANGING ENVIRONMENTS
Lets

examine

the

three

basic

characteristics

of

changing

external

environments:

environmentalchange, environmental complexity and munificence, and uncertainty.

Environmental Change

Environmental change is the rate at which a companys general and specific environments
change. In stable environments, the rate of environmental change is slow. In dynamic
environments, the rate of environmental change is fast. While it would seem that companies
would either be in stable external environments or dynamic external environments, recent
research suggests that companies often experience both stable and dynamic external
environments.
Economy
The current state of a countrys economy affects most organizations operating in it. A growing
economy means that, in general, more people are working and therefore have relatively more
money to spend. More products are being bought and sold than in a static or shrinking economy.
While a growing economy doesnt mean that sales of an individual firm are necessarily growing,
it does provide an environment favorable to business growth.
Technological Component
Technology is the knowledge, tools, and techniques used to transform inputs (raw materials,
information, etc.) into outputs (products and services). For example, the knowledge of authors,
editors, and artists (technology) and the use of equipment such as computers and printing presses
(also technology) transformed paper, ink, and glue (raw material inputs) into this book (the
finished product). Changes in technology can help companies provide better products or produce
their products more efficiently. For example, advances in surgical techniques and imaging
equipment have made open-heart surgery much faster and safer in recent years.
Socio-cultural Component
The socio-cultural component of the general environment refers to the demographic
characteristics and general behavior, attitudes, and beliefs of people in a particular society. Sociocultural changes and trends influence organizations in two important ways. First, changing
demographic characteristics, such as the number of people with particular skills, or the growth or
decline in particular population segments (single or married; old or young; men or women; or
visible minorities, Aboriginals, or the disabled, etc.) affect how companies run their businesses.

Political/Legal Component
The political/legal component of the general environment includes the legislation, regulation,
and court decisions that govern and regulate business behavior. Throughout the last decade, new
legislation and regulations have placed additional responsibilities on companies. Unfortunately,
many managers are unaware of these new responsibilities. For example, the Canadian Human
Rights Act prohibits discrimination against those who are infected with HIV/AIDS.
Discrimination against anyone with HIV/AIDS could result in the company having to pay
damages and back pay.
SPECIFIC ENVIRONMENT
In contrast to general environments that indirectly influence organizations, changes in an
organizations specific environment directly affect the way a company conducts its business. If
customers decide to use another product, or a competitor cuts prices 10 percent, or a supplier
cant deliver raw materials, or federal regulators specify that industry pollutants must be reduced,
or environmental groups accuse your company of selling unsafe products, the impact on your
business is immediate.
CUSTOMER COMPONENT
Customers purchase products and services. Companies cannot exist without customer support.
Therefore, monitoring customers changing wants and needs is critical to business success. There
are two basic strategies for monitoring customers: reactive and proactive. Reactive customer
monitoring is identifying and addressing customer trends and problems after they occur. One
reactive strategy is to identify customer concerns by listening closely to customer complaints.
COMPETITOR COMPONENT
Competitors are companies in the same industry that sell similar products or services to
customers. GM, Ford, and DaimlerChrysler all compete for automobile customers. CBC, CTV,
and Global compete for TV viewers attention. And Tim Hortons, Subway, and McDonalds
compete for fast-food customers dollars. Often, the difference between business success and
failure comes down to whether your company is doing a better job of satisfying customer wants
and needs than your competitors.

SUPPLIER COMPONENT
Suppliers are companies that provide material, human, financial, and informational resources to
other companies. Stelco, Canadas largest steel producer buys iron ore from suppliers to make
steel products. WhenIBM sells a mainframe computer; it also provides support staff, engineers,
and other technical consultants to the company that bought the computer.
INDUSTRY REGULATION COMPONENT
In contrast to the political/legal component of the general environment that affects all businesses,
the industry regulation component consists of regulations and rules that govern the business
practices and procedures of specific industries, businesses, and professions. Regulatory agencies
and government departments affect businesses by creating and enforcing rules and regulations to
protect consumers, workers, or society as a whole.
MAKING SENSE OF CHANGING ENVIRONMENTS
Environmental scanning is searching the environment for important events or issues that might
affect an organization. Managers scan the environment to stay up to date on important factors in
their industry. Managers also scan their environments to reduce uncertainty. For example, with
one out of every four new car buyers purchasing highly profitable sports utility vehicles (SUVs),
auto executives havent paid much attention to environmental groups complaints about SUVs
extremely poor gas mileage.
Conclusion

The results from a survey conducted to identify success factors of Indonesian SMEs have been
presented in this paper. Reliability and validity analyses have proved that the research instrument
was a fairly reliable and valid measure. However, items to measure social network should be
improved to increase the reliability. The analyses revealed that education and source of capital
were related significantly to business success. However, these two seemed to need moderating
variables since more operational explanations were needed to link these two with business
success.
The decision of becoming entrepreneur can be understood in all its components only if the
perspective of analysis accounts for the alternative ways of conceiving it that the economic
thought offers. The paper emphasizes the need of relating each characterization of the
entrepreneurial decision within the circumstance where it takes place, and purposes a
classification of this choices determinants based on the distinctions between internal and
contextual factors. Sustaining technologies improve the performance of established products
along the dimensions of performance that mainstream customers in major markets have

historically valued. However, disruptive technologies introduce a different product package that
has attributes different from what mainstream customers value.
Information processing and information technology are critical to many companies whether they
are world class or SME. To be successful with respect to IT implementation, each organization
must understand the nature of strategic change it must make, which can be provided by success
and failure factors model. Companies do not resist to implement IS projects but they fear to fail
implementation of is project. In the literature nearly eighty percent of information systems
projects end up with failure. However if companies use the model that is recommended in the
paper, probability of failure decreases sharply.

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