Evolution of Business Theories - Essay Example

Interaction of Business Environments The term business environment can be simply defined as a set of economical, social, political, legal, and institutional conditions which are unmanageable in nature, and influence the day to day performance of an organization. The framework of business environment has two major components including internal environment and external environment. According to Daft and Marcic (2010), internal environment comprises of man, material, money, machinery, and management and it is usually within the control of business; whereas, external environment represents factors which are beyond the control of the organization (pp.47-48). The external environment is again subcategorized into two, such as macro environment and micro environment.

Suppliers, customers, market intermediaries, competitors, and public constitute micro environment while macro environment includes economic, socio-cultural, technological, demographic, and international environments. Generally, external environments of organizations, particularly that of multinational corporations, relate to each other regardless of their industrial differences. According to Bird and Stevens, “increasingly, an identifiable and homogeneous group is emerging at least within the world business community” (cited in Samovar, Porter, and McDaniel, 2009, p.11). Researchers argue that cross cultural differences may or may not influence the interaction of business environments, because cultural elements largely deviate from region to region.

Nowadays, a high level interaction is observed among business environments. Industrialization and urbanization together with the emergence of information technology provide infinite opportunities for business houses; and therefore, modern firms tend to expand internationally. Consequently, a number of international business models developed including import/export businesses, franchisee models, joint ventures, foreign direct investments, and mergers and acquisitions. Each of these models necessitates interaction of business environments.

As Maznevski, Steger, and Amann (2007) comment, modern business management is a much complex task; and diversity, frequent market trend changes, and ambiguity are the major drivers of this complexity. This complexity in turn leads to uncertainty regarding future. Many management experts are of the view that global interdependence can have a great role in reducing modern business complexity. Hence, a number of organizations have recently adopted an interactive business style where its external environments communicate with each other.

This increased interaction of business environments assists organizations to effectively predict future trends and immediately respond to unforeseen contingencies. In addition, business environments’ interactions have greatly aided firms to avoid unhealthy market competition and thereby to trim down unnecessary operational expenses. Furthermore, this policy would help companies to easily reach global customers and increase the geographical coverage of the business. Thus evidently, interaction of all business environments has led to the evolution of a globalized business environment, which offers infinite opportunities for modern organizations.

Business Theories While analyzing the modern business era, the old paradigm of business practices seems unsuccessful because market and market trends have been notably changed over the past few decades. Nowadays