Business Ecosystem and Environment Necessary for progress
BUSINESS ENVIRONMENT: DEFINITION, FEATURES, TYPES, AND FACTORS
A business environment can make or break your business. Building a reliable business environment matters if you are marketing products/services to clients. Businesses thrive on the basis of the environments they are built upon, and a business that remains relevant continues to operate actively and interact with the environment. The business environment can be described as a backdrop of conditions that makes it favorable for companies to thrive and succeed. If a business environment is bad or not implemented correctly, the organization is at high risk of failure.
What is a Business Environment?
A business environment is an ecosystem that consists of factors, people, and resources used to manage operations and problems and deliver solutions to clients. Activities related to supply chain management, logistics, HR recruitment, economic changes, market analysis, company ownership, etc., are included in this. Business environments may directly or indirectly affect how a company runs, thus impacting the corporate culture of the place. Many internal and external factors affect business environments, and good business environments help identify new revenue opportunities and improve overall business planning, performance, and profitability.
Types of Business Environment
The main types of business environments are as follows:
1. Micro Environment
A microenvironment can be described as a collection of elements that affect the functioning of the business. It's completely internal and does not include third parties and external vendors.
2. Macro Environment
When a business environment lies outside the market and microenvironments, it is called a macro business environment. Gross Domestic Product (GDP) Inflation, employment rates, expenditure, and monetary/fiscal policies are a part of macro environments.
3. Market Environment
A business's market environment combines internal and external factors that influence an organization’s marketing activities. It determines their business strategy and may involve launching specific campaigns for increased customer acquisition and sales.
4. Natural Environment
Natural environments refer to a collection of natural resources used by businesses to conduct operations. For example, if a business deals with manufacturing, its natural environment would work with elements such as:
· Where the organization procures raw materials/goods from?
· How to deal with natural disasters such as forest fires, tsunamis, and floods
· What products are made using natural materials?
· Steps the business takes to reduce carbon footprint and give back to the environment.
Features of Business Environment
The features of the business environment can be described as follows:
1. External and Internal Forces
A business environment is created as a result of internal and external forces working together in totality. External forces can be defined as the key stakeholders whom the organization comes into direct contact with. Stakeholders are committed to the organization’s growth and stay invested in the journey. The company's top management is collectively described as internal forces and members defining the corporate culture. Middle-level managers are responsible for making important decisions and establishing a level of trust among subordinates. Other specific forces that are closely tied to business environments are investors, competitors, suppliers, and customers. They also influence the company directly and play a role in running day-to-day operations.
2. Uncertainty
It is very difficult to predict what could happen in the future, especially when multiple changes are taking place. As in the case of technology trends, many customers choose to use smartphones instead of logging in from their laptops to view websites. An organization’s business environment or online business strategy can change due to this. Other examples of uncertainty are when products become obsolete, and customers move on. A classic example is women who prefer fusion wear in the fashion industry and those who opt out of buying traditional attires these days. You can apply this to different industries, business models, and types of business.
3. Complexity
Good business environments consist of numerous moving components and cannot be classified into one category. Many dynamic and interrelated forces work in tandem, and it can be difficult to understand how many variables make it up. A relative influence is given by each component on the entire enterprise, which means it's easier to understand when you look at every part individually. Every element of a business environment has its own features and characteristics. Removing a part could impact the organization or improve its functioning, depending on what its role is in the system.
4. Relativity
The business environment is subject to relativity and can differ from nation to nation. What's viewed as a unique business environment may seem like a failure in other countries. For example, there is high demand for traditional outfits in India, but this demand is dwindling in Japan. Another instance is the shift from soft drinks to fresh organic juice by beverage companies worldwide.
Business Environment Factors
Managing business environments requires continuous monitoring and consideration of operational planning, changes, and different variables. Several internal and external factors are involved and how influence company decisions.
Below is a list of the six key factors that affect business environments.
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1. Technological Factors
As a company develops its business model, it may experience a sharp decline in sales if it doesn't keep up with the latest technology trends.
For example, if businesses are shifting to eCommerce models and brands are stuck taking offline orders, they will lose revenue. Another instance is a company that manufactures GPS navigation for automobiles. The brand may suffer in sales if they stick to only catering to car companies and don't branch out to mobile devices and other sectors. Technology is not limited to sales and can influence communications, billing, inventory management, and business operations too. Companies that are leveraging automation to eliminate manual tasks will operate more efficiently than those working in traditional ways.
2. Political and Legal Factors
Political and legal factors influence how a business operates in that region and whether or not it can continue functioning. Companies have to follow modern legislation policies, and those that do not will have to modify their processes in order to stay compliant. Some policies that affect companies range from taxation, import restrictions, intellectual property laws, employment laws, and tariffs.
3. Demographics
Companies need to evaluate the demographics of their audience and ensure they are marketing the right products to them. If customers do not get benefits and pain points aren't addressed, they cannot make the most of offerings. Some demographics that impact business workflows are age, gender, location, nationality, marital status, income level, level of education, and race. An example of demographics in action is when a mobile company targets only a section of the population with a plan, such as those in the college level age with exclusive offers. Another example is when they target businesspeople and professionals with another offer. Nowadays, people of all ages use telecommunications devices, and the technology landscape has changed.
4. Competitive Factors
Businesses can study their competitors, learn about the latest market trends, and stay ahead of the competition. By remaining relevant in the industry and providing the best services to clients, they can continue growing and not worry about losing revenue. Information collected about the market/competition can deliver insights into their processes. It teaches how to improve products and processes and implement the right strategies for marketing goods.
5. Social Factors
Where customers live influences their decision to spend money on a company that sells specific goods/services. If a business wants to succeed with the crowd, it must understand where the people are coming from. Social factors include current events, societies, and local communities. Businesses consider social movements and factors to make products more appealing to customers. They have to cater to customers' specific preferences, values, and ideals to stay relevant. For example, a company that sells products for women must be able to connect with other women's emotional or financial values. It should focus on customer satisfaction and make lives easier for female buyers.
6. Global Factors
Global factors influence how a business deals with domestic and international issues. Social and cultural norms are tied to global factors, and business leaders need to develop the right training programs for employees. Business firms aim to develop a good array of products/services. Without being aware of global challenges, this is not possible. The more customer economic status and global issues are considered, the better the quality of products becomes. Additionally, it makes the business approachable to larger audiences and expands upon targeted demographics.
CONCLUSION:
Business environments bring many job opportunities to employees and help firms deal with a variety of challenges, pitfalls, and setbacks. They prepare them for the future, teach them how to properly utilize resources, and cope with difficulties. A business environment can affect the operations of a company, influence processes, and affect key decisions made by managers or stakeholders. It dictates how fast a company scales up and whether or not it is likely to succeed. Creating a strong business environment is important because it teaches companies how to analyze competitors and run their operations better. It gives structure and meaning to their workflows, providing actionable insights on how to improve their processes. The 5 common types of business environments are - the technology environment, economic environment, social environment, market environment, and natural environment.
BUSINESS ECOSYSTEM
A Business Ecosystem is a network of different entities that are dynamic and interact with each other to create and exchange sustainable value. Productivity, robustness, and the ability to develop niches and opportunities for new firms are key success factors for ecosystem models.
In the ecosystem model, different participants, like organizations, create value for each other compared to the traditional business model, with one participant delivering value for the customer. Furthermore, the survival and flourishing of the organization or other ecosystem participants are considered the biggest challenge.
Business Ecosystem Model Explained
A business ecosystem is an ecosystem where the main players facilitate an economic community by utilizing the resources in the habitat. The prime resources are raw materials and technology. The main players are producers, suppliers, consumers, competitors, and government agencies. These organisms in the ecosystem interact, producing goods and services. Similar to a biological ecosystem, the participants and the processes in this business environment continually evolve to increase and maintain efficiency. Therefore, the system is dynamic, constantly remaking since it reacts to forces like innovations, technological advancements, and competition.
UNDERSTAND BY AN EXAMPLE
Let us consider subscription streaming services like Netflix, Disney+, etc., for interpreting the business ecosystem example.
In the online economy, an ecosystem with participants that rely on each other to exist and prosper, along with their competitors and authorities who set the regulations for streaming services, has grown in size and importance. They are the potential source of significant revenues. Streaming service providers benefit economically from their interactions with other ecosystem participants. Consumers, investors, and competitors are examples of various actors in a streaming service ecosystem. The value proposition of the streaming service company is the entertainment content. They provide a huge content library, on-demand video streaming, and personalized recommendations, catering to customers from a plethora of taste communities. To be ahead of the competition, they have to understand the competitors like other streaming service providers, cinemas, and cable TV networks. Streaming services interact with many different entities like studios, content producers, cloud service providers for storing content, Internet Service Providers (ISPs) for streaming, and banks for payments. These different entities participate in the ecosystem to develop, provide, and collect value for one another, including the consumer since doing so helps them survive and thrive.
Types of Business Ecosystems
There are different types of business ecosystem models. The categorization can be based on the structure, purpose, success factors, value creation mechanisms, etc. Furthermore, the business environment might be local or operated in a small community, or global, focusing on the worldwide market. They are further divided into macro and micro business ecosystems. The former is credited to the ecosystem established by gathering entities with similar interests. On the other hand, the latter represents a company-wide picture of the entire system.
Let’s look into the brief description of categorization as a solution, transaction, and hybrid ecosystem model.
Digital Business Ecosystem
Another significant type is the digital business ecosystem. The digital environment enables the digital species such as APIs and cloud infrastructure to behave like species in the natural world where they interact and evolve. The digital environment consists of factors that are related to applied knowledge and have an impact on the business model of an organization. It includes internal parties to an organization like functions and external entities like suppliers, third-party providers, customers, developers, regulators, and competitors. Examples of network-manifesting customers are retailers making developers build apps and services that support business strategies and logistics companies making location and shipping applications available to others across the supply chain.
CONCLUSION
The business ecosystem definition describes it as a business arrangement formed by the interconnection of different entities. These entities cooperate or compete to deliver goods and services to a target market. The model company’s participants/organisms in the ecosystem, their relationships, and how they create value. Consider the example of a company producing consumer electronics. The actors in their ecosystem will comprise their suppliers, consumers, competitors, investors, etc. Therefore, the company’s survival in the ecosystem depends on several factors cooperation from suppliers and understanding the competitors. A business ecosystem strategy focuses on a larger horizon inclusive of suppliers, makers of related products, competitors, technology providers, and a host of other organizations. It provides satisfying social, economic, and technological value. Hence it is about focusing more on the entities outside the business, primarily customers, and satisfying the customers requires continuous innovation and marketTop of Form