A business firm is an open system. It gets resources from the environment and supplies its goods and services to the environment. There are different levels of environmental forces. Some are close and internal forces whereas others are external forces. External forces may be related to national level, regional level or international level. These environmental forces provide opportunities or threats to the business community. Every business organization tries to grasp the available opportunities and face the threats that emerge from the business environment. Business organizations cannot change the external environment but they just react. They change their internal business components (internal environment) to grasp the external opportunities and face the external environmental threats. It is, therefore, very important to analyze business environment to survive and to get success for a business in its industry. It is therefore, a vital role of managers to analyze business environment so that they could pursue effective business strategy. A business firm gets human resources, capital, technology, information, energy, and raw materials from society. It follows government rules and regulations, social norms and cultural values, regional treaty and global alignment, economic rules and tax policies of the government. Thus, a business organization is a dynamic entity because it operates in a dynamic business environment (ABU, 2016). This essay overviews the business environment relationship with critical emphasis on the factors influencing the Nigerian general business environment and organizational responses in analysis of business environment.
Business is the product of the technological, political-legal, economic, social – cultural, global and natural factors amidst which it function. Three features are common to this web of relationship between business and its environment. There is symbolic relationship between business and its environment and among the environmental factors. In other words, business is influenced by its environment and in turn, to certain degree, it will influence the external forces. Similarly, political-legal environment influences economic environment and vice versa. The same relationship between other environment factors too. These environmental forces are dynamic. They keep on changing as years roll by, so does business. The third feature is that a particular business firm, by itself, may not be in a position to change its environment. But along with other firms, business will be in a position to mold the environment in its favor (ABU, 2016; NOUN, nd).
The business environment is a set of forces and conditions outside the organization’s boundaries that have the potential to affect the way the organization operates. These forces and conditions change from time to time. The business environment presents opportunities which organizations can take advantage of and threats that the organization should avoid. For example changes in the environment such as the introduction of new technology or the opening of global markets, create opportunities for managers to obtain resources or enter new markets and thereby strengthen their organizations. In contrast, the rise of new competitors, a global economic recession, or an oil shortage poses threats that can devastate an organization if managers are unable to obtain resources or sell the organizations goods or services. The quality of managers understanding of organizational environmental forces and their ability to respond appropriately to those forces are critical factors affecting organizational performance (ibid).
At this point, it will be helpful for us to distinguish between the general environment, the task environment and the internal environment. The general environment consist of factors such as legal, economic, political, socio-cultural, technological and ethical which affect business organization operations which emanate from local, national and international sources (NOUN, nd) .The task environment which is an aspect of the external environment and is also referred to as immediate or operational environment is the set of forces and conditions that originate with supplies, distributors, customers, and competitors. These forces and conditions affect an organizations ability to obtain inputs and dispose of its output. The task environment contains the forces that have the most immediate and direct effect because they pressure and influence managers on a daily basis. When managers turn on the radio or Television, arrive at the offices in the morning, open their mail, or look at their computer screens, they are likely to learn about problem facing them because of changing conditions in their organization’s task environment (ibid). An organizations internal environment consist of conditions and forces within the organization which consist of the owners, board of directors, employees, the organization cultures, the physical work environment and the various departments that make up the organizational structure (ibid).
The Nigerian context can reasonably be described as an unfolding one, as the policies underpinning many key sectors are still maturing and evolving. It has also been labeled in different forums with regards to matters of; policy inconsistency, lack of transparency and accountability in relation to execution of specific political, social, financial and economic fundamentals. In these circumstances, organizations usually bear the unenviable burden of making strategic business decisions on the basis of faulty assumptions which could impact negatively in the foreseeable future. In light of the peculiarities associated with the Nigerian business terrain; it is needful to expound specific issues that organizations should prioritize in terms of the consequences it portends (Osibanjo, et al, 2014).
Political will of a subsisting government to partly do or refrain from doing anything which from all reasonable estimation will result to the greatest benefit to the greatest number of persons. The question then is how to effectively measure or ascertain the level of political disposition attributable to a particular government or it agencies. A practical way to achieve this is by assessing the degree of commitment applied to a given cause of action. Once this attribute (commitment) begins to wane and eventually culminates in a distraction from identified goals, it may be practical in such circumstances, to conclude that political will is lacking within the system (that is, even if it existed in the first instance). In specific terms, positive political disposition will suggest on the part of the prevailing government; ensuring compliance with the rule of law, preserving due processes, implementing international standards and best practices. An inclination towards such indices serves as the basis to forge an enabling environment for human participants within any given context. The absence of which is a dis-incentive to willing multinationals to establish businesses and when they actually do, it provides viable impediment to expansion possibilities in the future. In 2012, Richard Branson, the chairman of the Virgin Group shared his frustrations on doing business in Nigeria as result of the poor political disposition. He stated the corruption inherent in the Nigerian government, the poor political disposition and bureaucratic structure of agencies (ibid).
Nigeria is usually considered as a country with manifold potentials and unrealized expectations. Actually, it is the failure to resolve certain fundamentals that has prevented human resource and expertise from making enduring contributions that would positively impact on the socio-economic fabric of the nation. In essence, once these underlying issues are appropriately managed, it should result in a transfer of the required confidence-levels to a variety of organizations to deposit the requisite skills-set and expertise in Nigeria over a sustained period. Thus, the more corporations regard Nigeria as a place they can truly call a “home”, the higher the chances of Nigeria achieving enduring economic prosperity (ibid).
The nature of the legal and regulatory environment of a country represents one of the basic parameters to assess the posture of the government on central issues that affect the wellbeing of the citizenry. In specific terms, it alludes to the fact as to whether or not there is a viable platform for local and foreign businesses to build and grow their diverse commercial interests. The attainment of an effective legal and regulatory framework is very important for Nigeria because it will enable the benchmarking of its processes, labour and human resource management practices inclusive, against what is obtainable in other mature climes. This approach will also result in the adapting of existing models to suit prevailing local circumstances in Nigeria towards achieving practical goals of; enhancing local skill levels, developing mature labour laws and regulations, effective dispute resolution mechanisms and sustenance of functional regulatory agencies on matters of education, training, corporate social responsibility and local content. Nigeria’s legal environment is still relatively weak as there is no correlation between the number of available legal officers and regulatory agencies and the rate of compliance and enforcement. Also, the level of funding that is dedicated to these aspects of governance (legal and regulatory) is partly responsible for the declining performance of the relevant agencies in this respect. It is noteworthy, that the high incidence of agency duplication as opposed to the empowerment of functional agencies has blurred the essence of regulation. As a consequence of Nigeria’s inconsistent legal and regulatory environment, corporations may have to contend with many uncertainties which may result in unintended consequences (ibid).
In Nigeria, it is not unusual for foreign businesses to assign expatriates to fill positions within their organizations in spite of available local options. The weak regulatory regime permits the uncontrolled influx of foreigners into Nigeria with limited consideration as to the impact on the local employment conditions, bearing in mind the prevailing high rate of unemployment. Also, as a result of the pressure to attract new businesses and encourage economic growth, there is an apparent urge to ease the requirements on expatriate quotas. Hence, the need to maintain an effective balance as regards the training and placement of local manpower is progressively eroded. As the emphasis on the enhancement of local skills degenerates (Jimmoh, 2011)
Infrastructural components and socio-economic indicators of a country are directly linked. In effect, as the level of infrastructure advances and becomes more accessible to the citizens of that country, it will progressively lead improved quality of life. Thus, infrastructure should be perceived as an integrated system of processes and structures, rather than, as fragmented assets. As a result of the apparent infrastructural deficit in Nigeria, particularly in terms of (electricity, roads, water, public education and affordable housing) many organizations are left with little option but to limit their investments on certain aspects of their operations. In such a complex operating environment as Nigeria, some measure of trade-offs will have to be applied in order to sustain any business on a profitable basis. Essentially, the longer it takes for these germane issues to be effectively addressed; it becomes more convenient for organisations to make strategic business decisions that will not unduly expose them to the associated risks of doing business in Nigeria. It is thus not unusual for such organizations to scale down operations in Nigeria in preference for more favorable neighboring countries, downsize or even completely divest from Nigeria in extreme situations (Adeyemi, 2000).
Many years ago, it would have been out of place to suspect that Nigeria will experience a series of horrendous acts of terrorism perpetrated on a grand scale and with blatant impunity. Today, terrorist acts have become a reality of the everyday existence of an average Nigerian. Although there are other groups existing in Nigeria such as the Movement for the Emancipation of the Niger Delta (MEND) and the Movement for the Actualization of the Sovereign State of Biafra (MASSOB) who are famous for kidnapping for ransom, oil theft and pipe-line vandalization (Adeyemi, 2000); the notoriety of the Boko Haram sect is undeniable. This is apparent in the increasing trend of their criminal activities ranging from the bomb blasts, destruction of lives, properties (Jimmoh, 2011) and very recently kidnaps and blackmail. The impacts of the activities of Boko Haram insurgents on the Nigerian business environment are indelible and multi-faceted. Alao et al, in 2012 state that the insurgence has slowed down national economic growth as it is not practicable for investors to invest in a troubled business environment. Eme and Ibietan in 2013 posit that terrorism is a „bad signal to investors?, as it is progressively changing the economic structure of Nigeria. Whilst local business are shutting down and relocating to other parts of the country perceived to be less troubled,
Many techniques are available to organizations for the analysis of the business environment. Some of the techniques include scenario development, forecasting, benchmarking, trend exploration, and expert opinion, cross impact matrices, SWOT or TOWS. More precisely, tools to militate against external influences are environmental scanning, PESTEL Analysis; STEEPLE Analysis (NOUN, nd).
Environmental scanning is a process that systematically surveys and interprets relevant data to identify external opportunities and threats. An organization gathers information about the external world, its competitors and itself (ibid).
PESTEL Analysis is a technique for identifying and listing the political, economic, social, technological, environmental and legal factors in the general environment that are most relevant to an organization (ibid).
STEEPLE Analysis is a technique for identifying and listing the social, technological, economic, environmental, political, legal and ethical factors in the general environment that are most relevant to an organization’s activities (ibid).
However, despite the usefulness of environmental analysis as a useful tool of decision making in an organization, there are some limitations in its application. To start with, analysis of business environment is not an exact science and would not limit uncertainty in an organization. In fact there could be unanticipated events which are unconventional patterns and hence might distort the information system (ABU, 2016).