qxd 18/4/06 08:46 Page 1 fifth edition The Business Environment Ian Worthington and Chris Britton The Business Environment A vibrant and contemporary introduction to the business environment, Worthington and Britton comprehensively examine how external influences affect the decisions and operations of today’s organisations. What roles do culture, diversity and ethics play in the dynamic world of business today? How do unpredictable political and economic conditions affect an organisation? What are the impacts of globalisation, social and technological change on fifth edition business decisions? Using well-known examples and case studies from the public and private sectors, this fifth edition of The Business Environment addresses these key questions and many more. The Business Environment Encouraging students to consider the challenges and opportunities that managers face in the Ian Worthington and Chris Britton business environment, it provides a strong basis from which to build an overall understanding of the context of business. Key Features Learn about the latest issues in business: technology and e-business, corporate responsibility, and socio- cultural influences Apply theory to practice through diverse cases and examples, such as Amazon, Toyota and the mobile fifth phone market edition Study online! Test your knowledge through self-assessment questions, and find useful weblinks at www.
and Britton Worthington Ian Worthington is a Reader and Chris Britton a Principal Lecturer in the Department of Strategy and Management at Leicester Business School, De Montfort University. ISBN 0-273-70424-9 Additional student support at www.uk/worthington 9 780273 704249 www.com Additional student support at An imprint of www.uk/worthington BUEN_A01.QXD 4/4/06 2:58 pm Page i The Business Environment Visit the The Business Environment, fifth edition, Companion Website at www.uk/worthington to find valuable student learning material including: Self-test questions for every chapter Links to articles and resources on the Internet Searchable online glossary BUEN_A01.QXD 24/4/06 1:46 pm Page ii We work with leading authors to develop the strongest educational materials in business, bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including Financial Times Prentice Hall, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing please visit us on the World Wide Web at: www.QXD 4/4/06 2:58 pm Page iii fifth edition The Business Environment Ian Worthington and Chris Britton Leicester Business School, De Monfort University, Leicester BUEN_A01.QXD 4/4/06 2:58 pm Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE United Kingdom and Associated Companies around the world Visit us on the World Wide Web at: www.uk First published in Great Britain in 1994 Second edition 1997 Third edition 2000 Fourth edition 2003 Fifth edition 2006 © Ian Worthington and Chris Britton 1994, 1997, 2000, 2003, 2006 The right of Ian Worthington and Chris Britton to be identified as authors of this work has been asserted by them in accordance with the Copyright, Designs, and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without either the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1P 0LP. ISBN-13: 978-0-273-70424-9 ISBN-10: 0-273-70424-9 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Library of Congress Cataloguing-in-Publication Data A catalogue record for this book is available from the Library of Congress.5/13 pt Stone Serif by 30.
Printed and bound by Mateu Cromo Artes Graficas, Spain. The publisher’s policy is to use paper manufactured from sustainable forests.QXD 4/4/06 2:58 pm Page v For Lindsey, Tom and Georgina and for Rachael, Philip, Nick and Megan, with our love BUEN_A01.QXD 4/4/06 2:58 pm Page vi BUEN_A01.QXD 4/4/06 2:58 pm Page vii Brief contents Full contents ix Contributors xviii Preface to the first edition xix Preface to the second edition xx Preface to the third edition xxi Preface to the fourth edition xxi Preface to the fifth edition xxii Guided tour xxiv Part One INTRODUCTION 1 1 Business organisations: the external environment 3 2 Business organisations: the internal environment 18 Part Two CONTEXTS 39 3 The political environment 41 4 The macroeconomic environment 80 5 The demographic, social and cultural context of business 120 6 The resource context 145 7 The legal environment 171 Part Three FIRMS 197 8 Legal structures 199 9 Size structure of firms 231 10 Industrial structure 262 11 Government and business 289 Part Four MARKETS 313 12 The market system 315 13 Market structure 341 14 International markets and globalisation 367 15 Governments and markets 402 Part Five ISSUES 429 16 The technological environment: e-business 431 17 Corporate responsibility and the environment 447 18 Monitoring change 471 Glossary 496 Index 513 BUEN_A01.QXD 4/4/06 2:58 pm Page viii BUEN_A01.QXD 4/4/06 2:58 pm Page ix Contents Contributors xviii Preface to the first edition xix Preface to the second edition xx Preface to the third edition xxi Preface to the fourth edition xxi Preface to the fifth edition xxii Guided tour xxiv Part One INTRODUCTION 1 Business organisations: the external environment 3 Ian Worthington Learning outcomes and key terms 3 Introduction 4 The business organisation and its environment 4 The general or contextual environment 7 Mini case: A healthy business? 7 The immediate or operational environment 9 Analysing the business environment 10 Mini case: Levi Strauss: jean therapy? 10 Central themes 13 Synopsis 14 Summary of key points 14 Case study: A shock to the system 15 Review and discussion questions 16 Assignments 16 Further reading 17 2 Business organisations: the internal environment 18 Ian Worthington and Zena Cumberpatch Learning outcomes and key terms 18 Introduction 19 Approaches to organisation and management 19 Organisation structures 23 Mini case: Change at Deutsche Bank? 23 Mini case: Royal Dutch Shell 28 BUEN_A01.QXD 4/4/06 2:58 pm Page x x Contents The virtual organisation 29 Structural change 30 Aspects of functional management 30 Synopsis 35 Summary of key points 35 Case study: Structuring global companies 36 Review and discussion questions 37 Assignments 38 Notes and references 38 Further reading 38 Part Two CONTEXTS 3 The political environment 41 Ian Worthington Learning outcomes and key terms 41 Introduction 42 Political systems 44 Government in democratic states 46 Mini case: Action on the environment 50 The three branches or functions of government 52 Mini case: Supranational lobbying 54 Checks and balances in democracies 57 A model of the policy process 58 Synopsis 60 Summary of key points 60 Appendix 3.1: A democratic political system in action: UK national government 60 Appendix 3.2: Subnational government: UK local authorities 68 Appendix 3.3: Supranational government: the European Union 71 Case study: Left out in the cold 77 Review and discussion questions 78 Assignments 78 Notes and references 79 Further reading 79 4 The macroeconomic environment 80 Ian Worthington Learning outcomes and key terms 80 Introduction 81 Economic systems 82 Eastern Europe: economies in transition 86 Politico-economic synthesis 88 The macroeconomy 90 BUEN_A01.QXD 4/4/06 2:58 pm Page xi Contents xi Mini case: Global economic crisis 96 Government and the macroeconomy: objectives 97 Mini case: Indicators of success 103 Government and the macroeconomy: policies 104 The role of financial institutions 109 International economic institutions and organisations 111 Synopsis 114 Summary of key points 115 Case study: Toyota UK 116 Review and discussion questions 118 Assignments 118 Notes and references 118 Further reading 119 5 The demographic, social and cultural context of business 120 Ian Worthington Learning outcomes and key terms 120 Introduction 121 The demographic environment of business 121 The social context 126 Mini case: Fit for purpose? 131 The cultural environment 133 Mini case: National cultures 134 Application: market segmentation 136 Synopsis 138 Summary of key points 138 Case study: The effects of an ageing population 138 Review and discussion questions 143 Assignments 144 Notes and references 144 Further reading 144 6 The resource context 145 Chris Britton Learning outcomes and key terms 145 Introduction 146 People 146 Mini case: The minimum wage 151 Technology 156 Mini case: Call centres 158 Natural resources 164 Synopsis 167 Summary of key points 167 Case study: Resource prices 168 Review and discussion questions 169 Assignments 169 BUEN_A01.QXD 4/4/06 2:58 pm Page xii xii Contents Notes and references 170 Further reading 170 7 The legal environment 171 Diane Belfitt and Martin Taylor Learning outcomes and key terms 171 Introduction 172 Classification of law 172 Mini case: Banking on advice 173 Sources of law 174 The legal system: the courts 176 Mini case: Jean-Marc Bosman – a case of foul play? 178 Business organisations and the law 179 Contract law: the essentials 180 Agency 183 Law and the consumer 184 Codes of practice 190 Synopsis 190 Summary of key points 191 Case study: The sale of goods and the Internet 191 Review and discussion questions 194 Assignments 194 Notes and references 195 Further reading 195 Part Three FIRMS 8 Legal structures 199 Ian Worthington Learning outcomes and key terms 199 Introduction 200 Private sector organisations in the UK 200 Mini case: Daimler-Benz under pressure 206 Public sector business organisations in the UK 209 Business organisations in mainland Europe 212 The public sector in mainland Europe 216 Legal structure: some implications 217 Mini case: Big Mac gets bigger 222 Franchising, licensing and joint ventures 222 Synopsis 225 Summary of key points 225 Case study: The entrepreneurial spirit 226 Review and discussion questions 229 BUEN_A01.QXD 4/4/06 2:58 pm Page xiii Contents xiii Assignments 229 Notes and references 229 Further reading 230 9 Size structure of firms 231 Chris Britton Learning outcomes and key terms 231 Introduction 232 The size structure of UK industry 232 Organisational growth 234 Mini case: Mergers in commercial radio 235 Methods of growth 236 Finance for growth 239 Small firms 245 Mini case: The small-firm sector 251 Multinationals 254 Synopsis 255 Summary of key points 255 Case study: Executive search 256 Review and discussion questions 260 Assignments 260 Notes and references 260 Further reading 260 10 Industrial structure 262 Chris Britton Learning outcomes and key terms 262 Introduction 263 The structure of industry 263 Mini case: The life cycle model 274 Deindustrialisation 278 Mini case: Productivity 279 Synopsis 282 Summary of key points 283 Case study: Spending on leisure services 283 Review and discussion questions 286 Assignments 287 Notes and references 287 Further reading 287 Appendix 10.1: The Standard Industrial Classification (SIC), 2003 288 11 Government and business 289 Ian Worthington Learning outcomes and key terms 289 Introduction 290 Government and business: an overview 290 BUEN_A01.QXD 4/4/06 2:58 pm Page xiv xiv Contents Regional policy 291 Regional aid within the European Union 294 Mini case: Attracting foreign inward investment 296 UK urban policy 297 Selected urban policy instruments 299 More recent developments in urban policy 301 Local government and business in the UK 302 Business as an influence on government 303 Mini case: Oiling the wheels? 303 Synopsis 309 Summary of key points 310 Case study: Government and business – friend or foe? 310 Review and discussion questions 311 Assignments 312 Notes and references 312 Further reading 312 Part Four MARKETS 12 The market system 315 Chris Britton Learning outcomes and key terms 315 Introduction 316 The market mechanism 316 Demand 316 Supply 319 Price determination 322 Mini case: Branston Pickle 324 Price controls 326 Mini case: Pollution 328 Elasticity of demand 329 Elasticity of supply 333 The importance of the market to business 334 Synopsis 335 Summary of key points 335 Case study: The Common Agricultural Policy of the European Union 335 Review and discussion questions 338 Assignments 338 Notes and references 339 Further reading 339 13 Market structure 341 Chris Britton Learning outcomes and key terms 341 BUEN_A01.