The Study Of Microenvironments Business Essay

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Nokia Corporation is Multinational Corporation that produces communication and information technology product that is headquartered at Finland .Its major product is mobile phones and portable IT devices. Nokia has 97, 798 employees through 120 countries, it has throughout 150 countries and annual revenue of Euro 30 Billion. It is second largest mobile phone producer after Samsung Corporation. It holds a market share of 22.5% globally as reported on first quarter of year 2012. Nokia has been facing a decline in sales, thus it faced heavy competition from newcomers such Samsung, iphone and etc.

To ease the study of microenvironments, Scholar's have introduced the term 'PESTLE' which are associated with analysis of microenvironment. 'PESTLE' stands for: - Political, Economic, Sociological, Technological, Legislation, Environmental. The six key terms of 'PESTLE' are key factors which manipulate changes in environment.








Figure 1: Explains key factor of 'PESTLE'

Political factors means changes in governments decision influence and have a bigger impact on business. Political changes are also closely linked to legal changes. There have been always day-to-day changes in law. Certain government tends to have full control over their countries' economies performance like North Korea. Whereas certain government tends to lose free their countries economy whereby it is dominated by business person like China, Sri Lanka. There are also governments whom practice semi-controlled economy, whereby government tends to have equity on business and create a win-win situation for business person like being practiced in Malaysia. To better understand influence of political on business, took Nokia Corporation as an example. Recently Nokia has shifted its manufacturing facilities to India. It is important for Nokia to abide all rules and regulation that are set to be in India. Eg:- be aware of India's minimum wage system , health and safety regulation . It is import for Nokia to adapt to political situation of India, So that it can operate effectively and efficiently.

Economical factors have a great influence on business by mean of everything. Thus because economy performance plays lead role in determining how thus a business operates and performs in a bigger scale. An organization need to beware of global economic situation. If a country undergoes economic growth, it indicates that business has more opportunity to increase sales and gain more profit in return. Usually during peak period of economic growth, organization tends to increase business capacity and make more investment plans .Whereas during period of economic recession, organization will manage to maintain their business with minimal profit survival. During recession, organization jobless rate increase as an effort of business reducing their operating cost by reduces in manpower. For example , Nokia Corporation which operates globally must be aware in changes of exchange rates .Drastic changes in exchange rate have a negative impact on operating cost of business. Eg: - In 2008, Nokia Corporation faces financial problem due to changes in exchange rate of stock market.

Social factors has a high influence in the buying tastes of customer .These factor highly influenced on the customer's needs and the size of potential market .Organization operating under manufacturing line takes deep understanding of these social factor. Thus is because, social factors highly influenced the PLC cycle of product being produced .Social factors are factors such as demographic factors' like ,age distribution , martial status , career attitudes , education background , gender, and leisure interest . For example, Nokia Corporation launched its product and services by having better understanding over the culture of society. Current trends of society, is to have most latest and up-to-date smart phones which is considered as key fashion icon. In today's culture , consumer are after most innovative and best looking smart phones because society judge on how trendy they are based on mobile phones of choices .Therefore , Nokia corporation's R&D department tends to come up with more best looking and value added featured smart phones.

Technological factors also highly influenced the way business operates. Technology changes from time to time, in order to survive global competition. Technological advances create new products and new process. Advances in technology leads to innovation and quality improvement, also reduction in operating cost. Thus technological improvement benefits organization running their business. For example, smart phone in the market is continually growing and the level of competition become higher.Nokia Corporation ensures that their Smartphone's has the highest level of innovation with value added functionality .Nokia Corporation always thinking innovative new functionality to stay ahead of their competition rivals.

Legal factors and political factors are almost the same as both are interrelated each other .Legislative factors are law and order set by government and enforcement to hold control over operation of business within boundaries of country. It is vital for organization to abide all law and order set to be in order to operate their business without trouble. Example of law and order are , minimum wage policy < health and safety regulation , quality control and halal certification for consumable product within Islamic country. For example: - Nokia Corporation which operates manufacturing plants in various countries it is crucial that they abide law and regulation set to be in different countries. Example, employment laws, health and safety or even trade restrictions.

Environmental factors also play key roles in determining how business operates. Environmental factors include changes in the weather and climate change. Changes in temperature, will impact on many industries such as farming, tourism and insurance. Despite, current society portrays tremendous care towards protecting the environment. Therefore, organization must be in line with the environmental awareness factor. Therefore, organization tends to produce product and services which are environmentally friendly as it affecting the demand pattern and create business opportunity. For example :- Nokia Corporation are a member of mobile phone recycling organization, which reduces the impact of disposable mobile phones residues on environment. Therefore Nokia Corporation aware of the hazard of disposal of batteries in the phone .So, Nokia Corporation creates environmental friendly disposal plan as it is dangerous if not disposed appropriately.

As a conclusion, a better understanding of macro environment enables an organization to be much competitive and stay ahead of its rivals. By understanding macro environment, the risk the organization undertakes reduces and be added advantage of the organization.

Question 2

To establish a business, many there are many types of business ownership available to raise up capital for establish a business and managing it. Generally, in Malaysia there are two types of business ownership being famously practiced in today's business world. Those, business ownership are sole proprietorship and partnership .Both has its advantages and disadvantages in contrast one over the other.

Sole proprietorship is a business owned by single person known as Sole Trader whereas, partnership is a joint venture of one to twenty individual to form a business .To start up a business requires capital. Sole traders usually uses their own saving or apply for personal loan for capital needs, whereas capital in partnership raised through input of money in value of percentage according to partnership agreement .Usually partner whom bound the highest percentage of capital leads the business.

Profit and loss are common in business. In sole proprietorship business, sole trader receive the entire amount of profit and borne all the losses as a single individual. The risk taken by sole trader are much higher because they borne the entire risk as a single person. Whereas, profits are distributed interm of percentage and same goes to losses caused by the business. Partnership carries lower level of risk because losses are borne by many partner, therefore it does not burden the partner's as compared to sole trader whom faces tremendous burden.

Interm of business management, management of sole proprietorship business are full responsibility of the sole trader. Whereas, partnership tends to appoint an operating management team consist of many partners to monitor the movement and performance of the business.

Decision making is very crucial in every point of business operation. Commonly, sole traders have full freedom to make any decision of business without considering others. Whereas, it is difficult to make a decision in partnership business because decision made through series of meeting and discussion and must be support by majority of partner in order to be carried out. Therefore, it takes multiple meeting to be done and consume precious amount of time.

Commonly, sole traders have the flexibility of manipulating business according to his/her decision whereas, partnership does not . Both sole trader and partnership have advantages over each and other.

As a conclusion, I prefer sole proprietorship as a choice of business ownership. Thus because, it has many flexibility interm of decision making and management. Although partnership has its own value added feature.