1.The external environment has a significant impact on all organisations. Discuss how small and medium sized businesses (SMEs) are affected by changes in the external environment and explain the impact of two (2) driving forces for change, faced by managers of SMEs.
A.1: There are many forces around every organization which helps in formulating the business strategies of that organization. These forces are either out of control of the firm or they under the control of the organization. These forces are classified majorly into 2 groups:
- Macro environmental forces: these are the forces which are not under the control of the organizations (Banham, 2010). Thus the companies formulate their strategies depending upon these external forces. Majorly these forces are:
- Micro environmental forces: these are the forces which are also external to the organization but they are under control of the companies thus they can change the behaviour of these forces for successful achievement of the organizational objectives. Some of these forces are (Altintas, Vrontis, Kaufmann and Alon, 2011):
- Intermediaries (Retail, wholesale, distributors)
All the organizations have to face these forces in many ways and even directly as well as indirectly. These forces are even experienced by small and medium sized business (SME). These SMEs formulates their strategy depending upon the external forces and to succeed in this tough competition they have to modify their strategies regularly for sustainability. These external forces tend t change the basic business operations as well as marketing and overall strategy of the SMEs. The small and medium sized businesses have not much bargaining power as compared to big organizations (Altintas, Vrontis, Kaufmann and Alon, 2011). Thus they tend to modify their business operational rules according to the terms and conditions of the suppliers as well as technologies. Even to acquire the major chunk of customers they need to have their strategies developed according to the external forces. SMEs should make their business plan very creatively because following the path of same sector big organization will not be effective because the external forces impact would be different for SME and other organizations.