Name: Abdulkadir Rahma Arah

ID NUMBER: 20222409

DEPARTMENT: BUSINESS ADMINISTRATION

COURSE CODE: MBA 814

QUESTION: Vividly discuss the impact of environment on organizational performance

ANSWER

Business environment and organizational performance are related closely. Organizational

performance mostly depends on how the business environment reacts, No business can exist in a
vacuum. The rapidly changing business environment might shorten the life of a given strategy. The
external changes might influence the activities and quality of decisions of both the firm and its
competitors.

In summary, business environment is regarded to be a complex and important consequent, it

has been addressed in a number of ways by numerous scholars such as Oyebanji (1994), Lawal(1993)
and Aldrich (1979). Environment in management does not mean the surrounding but it covers the
factors of forces that affect business effectiveness in the process of producing an intending result.

TYPES OF BUSINESS ENVIRONMENT

There are two types of environment namely, External environment and internal environment (Lawal,
1993).

Internal Business Environment

These are situational factors that occur within the organization. These factors are largely the result of
decisions of the management process, most times under management control. It is described as the
resources, behavior, strengths, weaknesses, synergy and distinctive completeness within or internal to
the organization.

The way the organization uses this resources results in synergy or dynergy inside the organization,
which over time causes the development of strengths or weaknesses.

Organizational capability in the design and implementation of corporate policy and strategy rests on the
organization’s capacity and ability to use its distinctive competencies to excel in a particular field.

There are five significant factors in the organization that management must take into account:

(i) Objectives (ii) Structure (iii) Tasks (iv) Technology (v) People

(i) Objectives
The formulation of objectives by management through the planning process is a powerful mechanism of
coordination. It informs members of the organization of their responsibilities. The objectives could be in
terms of increase in profit, productivity, cost-effectiveness, market shares, quality service, and new
product development, management training and selection, Social responsibility Eruemegbe(2015)

(ii) Structure
Formal organizations are made up of various levels of management and functional divisions
such as marketing, personnel, finance, and production. The structure of an organization is
the logical linkage between certain management levels and functional areas designed in
such a way that objectives can be achieved effectively. Eruemegbe(2015)
(iii) Tasks
Assigned job that must be accomplished in a specific manner and within a specific time
frame. The formation of tasks is an offshoot of the division of labor. Based on management's
structure decision, each position is assigned a set of activities designed to contribute to the
achievement of the organization's goals. Eruemegbe(2015)
(iv) Technology
This is a management process that converts raw materials (people, information, or physical
materials) into desirable goods and services. It also comprises machines, equipment, and
knowledge supplies involved in the transformation process. Eruemegbe(2015)
(v) People
When we talk of organization, management, subordinates, and workers, we're just referring
to groupings of individuals. When a factory closes, it is not the decision of the management,
but of single person. When a company's product is of poor quality, it is the result of
incompetent employees. Management achieves its goals through people; so, individuals are
crucial, and these differences must be learned. According to research, the likelihood of any
two people acting in exactly the same way in all scenarios is 0%. Eruemegbe(2015)

External Business Environment

I. Micro/direct/task Environment
These are factors that have a direct impact on and are influenced by the organization's
operations and performance. Customers, competitors, labor unions, and government regulatory
bodies are examples of these.
a. Customers: Individuals and organizations in the environment who purchase goods or services
from the organization are critical to the organization's success.
The only legitimate company goal is to acquire consumers.
b. Competitors: Organizations in the same industry or type of business that offer similar goods
or services to the same clients. Unique competitive challenges, entry difficulty, and other critical
issues must be handled here.
c. Suppliers: Individuals and organizations that offer the raw materials used by the organization
to manufacture its output (materials, equipment, energy, capital, and labor).
d. Government Regulatory Agencies: Several government agencies control business activities
through politics and legislation that have a significant impact on company. These laws and
policies have an impact on businesses, either positively or negatively.
II. Macro/indirect/general Environment
Another constituent of business environment in the macro environment which includes all those
economic and non-economic factors which exerts its influence on the business activity in
general. Considering the business point of view, the role of macro environment may be both
positive or negative.Sethy(2015)

(a) Economic aspect

Griffin (1997) emphasized the general soundness of the economic system in which many
companies function in his article.
Inflation, interest rates, and unemployment are major economic factors that affect many firms.
To recoup such funds, corporations boost the price of their goods, causing customer demand to
plummet because they are unwilling to pay more for a product.
When there is a high percentage of unemployment, the company becomes more selective in the
recruitment of workers, which may result in low production, causing the company to lose its
consumer demand.
(b) Technology aspect
It refers to the process of transforming raw materials into completed goods and services
through the use of new machinery. The technology used within an organization is derived from
the wider surroundings. It comprises new processes, technologies, and materials as well as
improvements to current ones.
This could imply a massive repository of organized information about how to execute things
mechanically rather than manually. The impact of technology on work practices, production
design, as well as machine and better services.
The following are some of the societal benefits:
i. Increased societal availability of commodities and services.
ii. Price reduction, despite the fact that it fosters large-scale production and raises society's
standard of living.
iv. Production efficiency is maintained
iv. It improves production system design, planning, scheduling, and control.
v. Organizational system mechanization and automation are made possible. Mechanization is
defined as the substitution of machinery for labor. Capital-intensive equipment, whereas
automation is the automatic production of a product or its pieces from one process to another.

(c) Ethnic/social aspect

This comprises the consumers, moral values, rules, and demographics of the society in which the
firm operates. The process of ethical behavior is significant because it determines the products,
services, and degree of conduct that society is likely to receive. It enables for a friendly
interaction between management, employees, and customers.
According to Oyebanji (1994), behavior is intertwined with persons and it is difficult to discern
individuals and their behavior, that individuals' attitudes differ in work habits, risk taking,
introducing or accepting difficulties, assessing the level of authority, and material again. Ethnic
ancestry manifests itself in specific behavioral tendencies observed in company operations.
(d) Political significance
Political considerations are observed to be government regulations on business. The link
between business and government is critical for three reasons.
First, the legal system specified in part what an organization should and should not do.
Second, there are pro- and anti-business sentiments that the government uses to influence
commercial operations in organizations.
Third, political stability has an impact on planning; for example, no organization wants to open a
branch in a country where trade relations are not well defined and stable.
According to Oyebanji (1994), a stable political environment promotes growth and development
while also encouraging both foreign and domestic investment. In terms of the legal
environment, it encourages business organizations to stay up to date on any business
legislation. To be legally compliant, large corporations must build legal departments, while small
businesses must engage legal professionals. The current political regime in Nigeria does not
attract both foreign and domestic investors.
(e) Government /National Aspect
The government establishes rules on industries, which have a significant effect and impact on
business. For example, the FEPA, NAFDAC, and NDLEA are regulatory bodies established by the
government to restrict the public from engaging in certain commercial practices.

In summary
The business environment includes historical aspects, psychological variables, government
attitudes toward foreign goods, international factors, and marketing tactics that influence an
individual's business organization. The relationship between business and its environment is
mutual, in the sense that the environment puts pressure on business while business impacts
various aspects of its surroundings.
Business is likewise dependent on its surroundings for the supply of all of its inputs as well as
the absorption of its output.
The environment's effect boils towards two fundamental elements to which the organization
must respond: information collecting and limited material and financial resources. These forces
produce uncertainty, such as a lack of information to forecast external changes and the
availability of resources.
There are two types of environmental forces that have an impact on business
performance. These two types of environmental forces are internal environmental forces and
external environmental forces. Internal environmental forces or influences are those that have
an impact on the enterprise as a separate entity. They include the enterprise's function
structure and relationships. The external environment refers to the influences that affect a
business unit as well as other firms functioning in the same environment. They are external to
the organization and cannot be properly managed by managers. They are important to the
organization's success.
Nigerian businesses have a number of constraints, which contribute to inefficiency and
failures on occasion. Many of these issues are particular to small businesses, while others are
universal to all businesses of any size. Internal problems that affect small businesses and other
businesses in general include, among other things, the wrong choice of business, a lack of
export, a lack of business connections, management incompetence, a lack of adequate
attention, a marketing problem that is unethical, a location problem, a lack of production
improvement techniques, and so on.

REFERENCES
Aldrich, H. (1979). Fundamental as Moderate of Job Satisfaction, New
York; Random House Incorporation
Eruemegbe, G. O. (2015). IMPACT OF BUSINESS ENVIRONMENT ON ORGANIZATION
PERFORMANCE IN NIGERIAA STUDY OF UNION BANK OF NIGERIA. European Scientific Journal,
ESJ, 11(10). Retrieved from https://eujournal.org/index.php/esj/article/view/6553
Griffin (1997). “Business Today”. Management Journal: Random House Incorporation.
Lawal, A.A. (2000). “Management in Focus”, Lagos: Malthouse Press (2nd
Edition) Revised
Oyebanji, J. (1994). Nigerian Business Environment and Organization
Effectiveness; Abiola Bookshop Limited.
Top 2 Types of Business Environment. (2015, July 8). Your Article Library.
https://www.yourarticlelibrary.com/business-environment/top-2-types-of-business-
environment/62814