The management procedure of any organization is a complex cyclical process that requires a clear understanding. It is important to know not only the stages of production, but also to understand what is the internal and external environment of the enterprise, as well as to determine their degree of influence on business entities.
The essence of the economic activity of the enterprise
Each organization carries out a complex process in which all the links and units of the subject of modern business are involved. The economic activity of the enterprise is the interaction between all components of production throughout the full cycle from the purchase of raw materials to the sale of goods to the consumer.
For successful business management, it is not enough to understand the mechanisms of interaction of the constituent elements, but it is also necessary to analyze the process both from the inside and the outside.
For the purpose of a detailed and correct analysis, the economic activity of the enterprise is divided into several aspects, from which the main indicators are distinguished, which are used to track the dynamics of activities in different reporting periods.
Synthetic analysis techniques are often used: all indicators are combined into a single mechanism, and the relationship between them is monitored, the degree of influence of each other and the level of interdependence of factors among themselves are determined (for example, how indirect costs depend on gross income and, conversely, in the reporting period or previous).
Undoubtedly, the type of activity of the organization plays an important role in the direct analysis procedure. For example, one cannot evaluate a hotel complex of a private type and a company producing cellophane packages with a state share in the capital.
Depending on the form of ownership, there are private and public enterprises. The latter species differ in that they have part of the state capital. The former include private and cooperative business entities.
In addition, the type of activity of the organization according to the degree of entrepreneurship can be both commercial and non-commercial. In this case, the name speaks for itself - the latter do not set their primary task of making a profit as a result of their main activities and function more quickly according to the trade union, religious and stock foundations.
Also in Russian legislation there is a ranking of organizations according to economic activities. This list is enclosed in the Unified Classifier and is represented by groups that include about a hundred items.
Enterprise Environment: Definition
The organization cannot function separately, according to the set plans and objectives, without intersecting with factors influencing its activity. The reasons can be varied: weather conditions, the action of competitors, the work of bookkeeping, certain actions of staff recruiting staff, etc.
All these events can be summarized under a separate concept - the environment of the enterprise. Without it, no business entity can do, and sometimes the environment can influence both positively and negatively, despite the abstractness of its definition as such.
Suppose a person was late for work for the reason that his car broke down - he was negatively affected by the external environment. But if he had arrived early for the reason that he had met an old friend and he gave him a lift, then there is a positive influence of the external environment.
The business entity is not an exception - its activities may be affected by the internal and external environment of the enterprise in a positive or negative aspect.
What is the environment of the enterprise
So, we decided that any changes in the functioning of a business entity depend on factors influencing the production process.
However, it is not entirely correct to separate the influencing indicators into the purely internal and external environment of the enterprise, since each of them can be divided into several subgroups. So, for example, any field of activity can be divided according to the degree of influence, factors of the distribution of forces and the area of influence.
The internal environment of the enterprise
Any components that take place within the enterprise and somehow affect the business process are elements of the internal environment of the business entity. This phenomenon is a completely controllable process and can be arbitrarily regulated by any managerial decisions, which together constitute a mechanism of interaction between technological and organizational engines.
The internal and external environments of the enterprise have a clear distinction between themselves in terms of their components, so the elements of the first are:
- labor resources (ordinary personnel);
- management capabilities (leadership);
- technological stocks (production equipment);
- advertising promotion of goods (marketing group);
- financial security;
- company culture;
- social image.
These indicators are not constant, therefore, some business entities may lack some of them. All of the above elements can be combined and highlight the factors of the internal environment of the enterprise:
- economy (includes marketing and financial elements);
- working capacity (cultural and image elements of the environment, staff structure);
- technological support (includes the entire production group).
The analysis procedure of all of the above forces allows the company to strengthen all its weaknesses and improve its strengths, which allows the business entity to gain greater stability in the foreign market.
The internal environment of the enterprise on the example
Let's take a practical look at how changes in the internal environment can affect the business as a whole.
Let’s say you have qualified personnel, but not enough to work quickly and efficiently. You, as a manager, organize advanced training courses aimed at the specifics of your enterprise.
As a result, the personnel after completing the courses receive answers to many of their questions and now it takes less time to perform direct duties, since the employee does not spend his working time turning to colleagues for help, and thereby distracting them from their work.
We examined the changes in the labor factor, let's try to change something in the technological support. For example, replace equipment with a newer one. Thus, we exclude or minimize production stagnation due to breakdown of a particular mechanism. This means that we no longer spend money on the repair of fixed assets, thereby affecting the economic factor, changing the indirect costs of capital investment.
Since we are talking about technological support, let's dwell on the production environment of the enterprise in more detail, as one of the main components of the internal.
Each manager needs to be most responsible for product planning, since this component is, although not constant, but one of the long-term.
The production environment of the enterprise includes the following components:
- any space on which the workflow is carried out: including the main structures, outbuildings with all the infrastructures included;
- software and hardware that is involved in the main process;
- other services and systems that are involved in the auxiliary production line.
Each sector of the sphere responsible for the production of products must be equipped in such a way that it can serve the company for many years.
The external environment of the enterprise
Any environment outside the scope of a business entity that in any way affects its activities, even if indirectly, is called the external environment of the enterprise. Moreover, it has macro and micro influences. The former relate to indirect driving forces, while the latter are based on activities directly related to the enterprise of other entities.
The main factors of the external environment of the enterprise:
- nature (weather conditions, the impact on production by changing them);
- demographic indicator (change in the average age of the population);
- economic component (any processes taking place in the country and affecting national and foreign exchange markets, the presence of competitors);
- institutional engine (any actions of government and fiscal authorities).
So, we can say that the external environment of the enterprise is not subject to managerial decisions in any way and can affect the business entity randomly, without a clear algorithm and directional vector.
External environment by example
Let us, for example, imagine how the external environment of an enterprise affects a business entity in a demographic aspect. Suppose there is a corporation that has been producing baby products for several decades, while in recent years the average birth rate has decreased by 20%.
Roughly speaking, entrepreneurs will have to adjust to demographics and slightly reduce volumes (unless, of course, for these very reporting years they managed to enter the foreign market).
Consider how the natural factor can affect the business entity. For example, a hurricane, a storm warning - and the supply of raw materials is disrupted due to adverse weather conditions.
The institutional indicator is manifested in practice under the guise of government decrees, changes in legislation and the taxation process. Jumps in exchange rates make up the economic factor, in which the competitive environment of the enterprise also plays an important role, with which, by the way, the manufacturer can fight in the slightest degree.
It is known that competition is a kind of rivalry process, which may be caused by the release of the same goods sold within the same geographical framework.
You can deal with the competitive environment by varying some indicators of your business. For example, pricing policy. The cost of goods is one of the indicators that directly affect the choice of the buyer. Therefore, the lower it is, the higher the demand.
However, do not forget about the quality of products. Often unscrupulous manufacturers sacrifice quality to lower the price threshold. You can reduce the cost of goods in other ways: for example, reduce the cost of supply or automate the production process, thereby reducing direct production costs.