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Business External and Micro Economic Environment

University: LSC London

  • Unit No: N/A
  • Level: High school
  • Pages: 14 / Words 3435
  • Paper Type: Essay
  • Course Code: N/A
  • Downloads: 935
Question :

Topic - business external and micro economic environment

Word Count: 3,000 words

Learning Outcomes

LO1. Discuss an understanding on the fundamental elements of the internal environment of organisations and the interaction with the external environment.

LO2.Examine how a market economy functions and the role of government within it.

LO3.Analyse the economic environment within which businesses operates in the United Kingdom.

LO4. Explain why countries benefits from trade with each other.

LO5.Analyse the growing impact of the European Union on British business.

 

Task

Provide an academic essay on Nokia and employ relevant Business environment and Micro Economic concepts and approaches. Explain how and why your selected Mobile Phone company requires to audit their External and Internal business environment and also how they can gain insights into their Micro Economic Environment.

This task cover LO1 and 3.

Answer :
Organization Selected : Nokia

INTRODUCTION

The business environment is a collection of citizens, institutions, and factors that may as well as may not be controlled by organisations. A few forces that are part of the business environment are market conditions, government, suppliers, media, conditions of economy, technologies and multiple companies (Ablaev, 2015). It presents opportunities and threats for all businesses. Organisational managers properly analyses and evaluates the external and internal environment so that they can frame relevant strategies or plans to react on the forces. The understand external and micro economic environment, Nokia is selected that is consumer electronics organisation established in 1865. it is one of the contributor within mobile telephone industry that has provided assistance in developing GSM, 3G as well as LTE Standards. The essay examines how and why Mobile Phone Company needs to audit their internal as well as external business environment. It further covers how they can gain insights for micro economic environment.

MAIN BODY

Internal Audit

Organisational Overview:

Nokia is one of the Finnish multinational telecommunication, consumer electronics as well as information technology company that was founded by Eduard Polón, fredrick Idestam along with Leo Mechelin in the year 1865. the headquarters of the entity are located at Espoo, Finland (Nokia, 2019). Nokia contributes greatly in mobile telephone industry and is considered as largest worldwide vendor of smartphones as well as mobile phones. It continues its operations as major patent licensor in context to various mobile phone vendors. The company accounts for exporting 21% of mobile handsets and devices to other countries.

Internal Environment

It is also known as micro environment that is composition of various elements that resides within boundaries of the entity which can affect as well as can be affected through activities, choices along win decisions of management. The elements within internal environment are work processes, management practices, corporate culture, stakeholders, internal resources, manpower and business policies. All these elements directly or indirectly impacts the working of company. At same time, organisational authorities have full control over all these factors. The institutions that do not consider elements of internal environment while structuring strategies or plans ends up with drastic circumstances. In context to Nokia, internal environment elements are employees, suppliers, media, distribution channels, customers and resources.

Needs to Audit Internal Business Environment

Auditing internal business environment is very important for all companies as it helps in monitoring as well as assuring that all the assets had been secured as well as safeguarded properly against threats (Boasson and Wettestad, 2016). In addition, auditing helps in verifying that all the processes reflects documented procedures with policies in prompt manner. In context to Nokia, internal auditing is needed to gain objective insights, identifying strengths along with opportunities so that they can overcome pertaining threats and weaknesses, evaluating risks,assessing controls and ensuring compliances with all the governed legislative regulations.

Tools for Auditing Internal Business Environment

To audit internal business environment, various tools are provided with different practitioners. The more analysis as well as measurement tools used in incorporating audits, the more is helps in learning to make all organisational activities more successfully. The internal environment of Nokia can be audited through SWOT Analysis.

SWOT Analysis

This type of analysis is strategic tool which evaluates the strengths, opportunities, threat and weaknesses for assessing business along with developing plans to move forward. This concept plays essential role in conducting effective auditing and developing awareness for factors that are residing internally. For Nokia SWOT Analysis is underneath:

Strength

Weaknesses

  • Nokia have strong brand name under which they provide high quality products and user friendly mobile accessories.
  • The company has excellent history behind as well as is one of largest smartphone addition to mobile phones within mobile telephone industry.
  • The organisation has diverse portfolio of mobile phones and high resale value in comparison to other mobile phone entities.
  • The company has formulated strong knowledge base in which they provides wide range of mobiles to market and takes customer feedback time to time.
  • Nokia reacts slow fro taking any initiatives in order to become more competitive as well as do not consider competition from small entities within such field.
  • The another weaknesses of Nokia is that it is has low sensitivity towards any changes in industry due to which they fails to respond for new dynamism to user expectations (Bowles and Whynes, 2015).
  • The company sells traditional designed smartphones because of which they are unable to attract new market segments.
  • Nokia usually manufactures as well as sells low performing mobiles due to which they lacks in offering quality sale services.
 

Opportunity

Threat

  • Nokia has diverse opportunities to attain growth and expansion. The smart phone industry is ever growing that provides big opportunities to the company so to have large and wide market to sell its products and services.
  • By adopting the Android operating system despite of Symbian provide Nokia the more success than competitors.
  • The company has suitable chances to enhance expansion of existing distribution channel at distinct industry across the globe (Harrison, 2017).
  • Demand of Nokia's smartphones are at edge. With this, company can develop it segment within underdeveloped countries too by providing them well designed as well as styled sets.
  • Nokia have strong existing and emerging competitors including Xiaomi, Oppo, Samsung, Apple and many more that results in declining sales of its mobile phones (Rugman and Eden, 2017).
  • In present era, Cheap and wide range models of mobile phones are in trend. To sustain in market, Nokia needs to modify its policies to manufacture mobile phones as per the going trend that will create hurdles in working effectively in existing market.
  • Nokia faces lawsuits threat in various market due to legislative changes regarding product standards.

 

 

External Audit

External Environment

It is also named as macro environment that is composition of numerous factors that resides outside organisational reach but have huge impacts on workings and operations of company. It composes all outside factors which directly impacts the company and its operations to great extent. By considering external environment, owners of company takes suitable adjustment decisions for their policies and plans so to make them adaptable with the influencing environment (Dopfer and Potts, 2015). In relevance to Nokia, elements within external environment are legislations, current economic situations, technological advancements, political systems, environmental frameworks and social demands.

Needs to Audit External Business Environment

Auditing external environment of business is needed for observing, studying as well as assessing factors of risks and controlling them at accurate duration. In relevance with Nokia, external environment auditing is needed for understanding dynamics within political systems, consumer perceptions, legislative governance, technological advancements, economic activities and environmental aspects. By auditing external environment, managers of business gains credibility, improves their internal systems as well as control various errors so to achieve goals successfully.

Tools for Auditing External Business Environment

For auditing external environment of company, professionals have devised certain frameworks or tools. Some of the strategic auditing tools are PESTLE analysis and Porters Five Force analyse that helps businessmen to properly analyse external factors and make decisions fro future in prompt manner. The managers of Nokia uses Porters five force and PESTLE analysis for auditing its external environment.

PESTLE Analysis

It is one of strategic tool that provides understanding about changes in market, direction of operations and scanning environment (Hillary, 2017). With this tool, marketers of Nokia analyses and monitor all the factors presenting externally which impacts the business at huge level. It includes six dimensions which provides detailed information about each factor. PESTLE Analysis of Nokia is as follows:

Political:

Factors concerned with the ways government intervenes in business are political factors. It includes tariffs, political stability, taxation policies and environmental legislations. The political environment of Finland is good and political systems takes less involvement in any international political disputes. The political system of such country makes effective relations with other nations and invite them to make investment in mobile industry that impacts positively of Nokia as the company can enjoy the growth in accordance with pertaining industry. At same time, political regulations associated with manufacturing, imports, exports as well as trade barriers are needed to be fulfilled fro setting industrialized plant through overseas entities that impacts negatively on Nokia's practices and strategies for business expansion in distinct nations. Various new political domains that resides in this contemporary world also impacts directly or indirectly on the company in distinct manner.

Economical:

The dimensions concerned with economy of a country are said to economic factors. It covers dimensions like economic growth, business cycle changes, interest rates addition to exchange rates (Huggins, 2018). All these factors affects the ways business operates within economy and makes decision. In context to Finland, it has highly industrialised as well as free market economy. While operating activities in different nations, Nokia analyses the economic factors such as taxes, interest rates, demand and buying power of population that targetted so that they can control production and improves its venture position that impact positively on its productivity as it manufacturers mobile phones after considering all the economic factors. The company has suffered downfall of product values with increased turmoil within entire Europe due to which it has to do great ramifications which impacted negatively on its operations.

Social:

It involves cultural aspects, population growth rate, safety emphasis, age distribution, health consciousness and career attitudes. The preferences of population of Finland changes with the trends. Nokia by putting their best efforts to operate activities with pertaining trends so to satisfy the emerging preferences about cellular products and devices that impacts positively on its sales volume and brand image in the market. In contrary, there are some companies that are providing new facilities such as software applications in their mobile phones that shifts the customers preferences to other cellular companies which impacts negatively on Nokia. To gain customer base, the company has to make various changes within its norms along with setting new benchmarks so that they can achieve recognition from the population.

Technological:

Factors part of technological aspects including technological incentives, technological changing rates and automation (Na, 2016). Finland has advanced technological environment in which new technologies are welcomed and more investment are made to develop the existing technologies within mobile industry. Nokia manufactures mobile phones that have highest innovation level and focuses more on adopting new state of art technologies for attract huge customers across world that impacts positively on its workings. At same time, to adapt latest technological advancement trends as well as bringing technological revolution needs more investment which results in decreasing profit reserves of the company.

Legal:

Dimensions of legal frameworks like employment law, discrimination act, electronic transaction act and intellectual property acts are legal factors (Tarp, 2017). The political authorities of Finland have governed various laws in mobile sector that are mandatory to be followed by all the companies so to accomplish operations successfully. Nokia while performing manufacturing, distribution and selling its products protect its rights by implementing laws related to trademark, patent and copyright so that its designs and innovations are not taken by competitors that impacts positively on the company. At same time, while setting manufacturing plants in distinct nations, Nokia abides all set regulations by different political systems.

Environmental:

Aspects of ecological addition to standards are part of environmental factors. Country like Finland basically believes on facilitating nature conservation and for this the political parties of such country have banned various commodities that are used while manufacturing mobile and smart phones. For instance, resources like brominated flame retardants, calcium as well as lead that releases toxins and pollute environment are banned in Finland. As Nokia manufactures mobile phones and other devices by restricting utilisation of the banned resources impacts in positive manner on its image. Through this, it provides ecological products that helps in gaining recognition from political authorities of distinct nations through it gains subsidies also to install manufacturing plants addition to promoting business internationally.

Porters Five Force Tool

The strategic tool is primarily used for identification addition to analyses of forces that plays key role in shaping all the companies and industry (Nowakowska-Grunt and Brzozowska, 2016). By using the tool, companies understand strength of existing positioning as well as strength of future strategy. It assist managers in looking towards strengths of five forces which affects competition. At Nokia, Porter's five force tool is used for auditing the industry structure so to determine corporate strategies. The Porter's five forces in context to Nokia is audited underneath:

New Entrant Threat:

Within mobile industry, threat of new entrant is quite high due to ample reasons. One of the reason is that technology required for producing latest mobile phone generation is very advance that creates hurdles for new entrants in order to differentiate them. The other reason is to enter in the mobile industry, a company has to spend money on research, development, marketing and technology for becoming an established player. As Nokia is among the established entity that has captured major market shares that makes difficulties for the new entrants in grabbing attention of existing customers. In present era, this threat is quite high for Nokia as market is developing and companies gains financial resources from various available sources that increases threat for the entity.

Bargaining Power of Suppliers:

The whole mobile industry relies on suppliers so to get raw materials in terms of hardware and software (Orford, 2017). Huge suppliers are present in such industry that willingly supplies the required parts and components to manufacture a smart phone. In context to Nokia, it makes relationships with multiple type of suppliers so to get products at low rates. In case, when one supplier enhances their pricing structure then the company shifts to other suppliers to get the desired resources. The company holds significant shares within mobile industry that makes it more attractive for suppliers. Due to this, no hardware suppliers bargain with Nokia as to maintain the relation with such purchaser. For software requirements, the company has made alliance with Microsoft that puts bargaining power at end. Hence, bargaining power of suppliers for Nokia is moderate and it helps in grabbing resources at low prices.

Bargaining Power of Buyer:

Growth and development in mobile industry is quite extensive that provides buyers with wide choices. Within such industry, there are wide choices available with buyers that provides them more powers. There are various entities that offers similar products as Nokia offers in the market that depicts that the bargaining power with buyers is high as customers seeks best valuables for the money they pay. The company do not provide its mobiles directly to the customers as it relies on intermediaries, carrier stores along with electronic shops that also offers wide options to customers as per their interest that makes difficulty for selected company to influence its sales (Rabellotti, 2016).

Threat of Substitute:

Smartphones and mobiles are everyday essentials in present era that customers find hard to replace with other substitute as they needs mobiles to constantly contact with their family and others while away from homes. The only substitute available in place of mobile phones of Nokia are home telephones which cannot be carried by consumers at all places. Hence, threat of substitution is very low for mobile phones of Nokia.

Competitive Rivalry:

The competition level is extremely high in mobile industry as huge players are present that have invested heavily to retain market shares. Nokia has kept slow move within smart phone market due to which it is expected that its shares will fall. Key players in this industry are Apple, HTC, Motorola and many more. Existence of all these players creates competition for Nokia. Although, no such differences are found in mobile phones and devices that are manufactured by all the companies, yet differences are made in context to applications addition to services offers (Rodríguez-Gutiérrez, Moreno and Tejada, 2015). Nokia competes with all the players and always work for innovations an uniqueness among the mobile phones.

How They Can Gain Insights Into Micro Economic Environment

Micro Economic environment includes factors like distribution chains, market size, demand, competitors and suppliers associated in specific industry. Nokia works in consumer electronic industry that is also known as mobile industry or telecommunication industry that generates turnover of 3.5 billion euros.

For gaining insights for micro economic industry, Administrative of Nokia can use various research methods, observational tools addition to survey techniques. In addition, they can also use statistics, journals together with magazines that include relevant information concerned with micro economic industry of pertaining sector (Storey 2016). Other than this, various private universities or institutions conducts primary research so to analyse information for business strategies, suppliers activities, demand-supply of mobile phones and market preferences can also help Nokia to gain insights for micro economic en

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