The previous chapters dwell around the microfoundations of management (chapter one), plus strategy formulation and the challenges contemporary management (chapter two). Key-constructs (fear and thought) are taken as an instinctive-driven and rational-driven configuration of human behavior. In this chapter, one starts to immerse into the realm of business context in our modern world. One starts to focus on business environments (BE) and address seminal concepts, such as “environment;” “ecosystem;” or “market” (and underlying ideas, as marketspace, marketplace or e-market). Here, a BE is assumed to fit, at the begging of the 21st century, a dynamic paradigm, and so the chapter discusses the types of business environment´s changes and their inner changing events. Moreover, is presented the strategic paths (to respond to BE´s change), and the tenets of organizational success. With regard to the latter, the analyzability function is introduced as a determinant of success.
TopIntroduction To Business Environments (Be): Key-Conceptualizations
Before narrowing down to the specifics of a business environment (BE) is, it is here covered first some related ideas, which their meaning seemingly a matter of common-sense, yet give origin to some misperceptions which we wish to avoid as they touch the domain of strategic management (SM). Thus, we do start by defining them and discussion their boundaries.
Hereupon, the first idea connected to the BE here introduced is the notion of market. The term is frequently used and interchangeable applied with other close ones, as marketplace, marketspace.
Moreover it is frequent the blending of these concepts above with other related ones, as business ecosystems, sector, industries, or even with organizational ecology, often with a senseless meaning.
Especially for someone with no background on business studies (or perhaps to a most unwary reader about such terminology) this section is especially relevant. However it is also works as a recapitulating exercise for others, since these foundational terms (and ideas) here expressed, are often used by media on news about the state-of-the-art of businesses and the economy, sometimes with blurred connotation. So, let us raise this simple open-end question:
Question 1: What is a market?
One shall acknowledge at first that this is concept perceived differently across scientific areas within the realm of Social Sciences. A multiplicity of definitions co-exist and could be seen then as an obstacle hindering its comprehension. However, here we will explore the richness of conceptual diversity by bringing two (2) major perspectives. Naturally the Marketing perspective and the Industrial Economics perspective.
Starting by the latter, for scholars on industrial economics a market entails a set of companies producing an identical product or service or a bundle of interrelated products and/or services (Varum et al., 2018). Here the market structure and relations of power among agents is dictated by the rule of elasticity of the demanded quantity versus its price, which has dominated the vision of market competition. This corresponds to the dominant paradigm of Structuralism. In this perspective the variable concentration (of the market), is a seminal component for comprehend the structure, plus the degree of competition and efficiency therein.
Frequently, due to the ease of access to data per industry, a firm is classified into a market being associated to a specific code that classifies its economic activity by the sector it competes on. Just as a matter of curiosity, firms can hold more than a code as their activities may span across various businesses, or better said, companies might hold businesses in several industries at the same time, something that in corporate-level strategies is dominated as a diversification strategy. Here, two (2) major international classification measures co-exist. The European one, termed with a francophone expression, as the Nomenclature Statistique des Activités Économiques (NACE), referring to the Statistical Classification of Economic Activities. Also the classification offered by the Organisation for Economic Cooperation and Development (OECD), denominated as the International Standard Industrial Classification (ISIC). At national-level, several countries developed also their own metric systems, such as, the Nomenclature d' Activités Française (NAF), or the Classificação de Actividades Económicas (CAE) in Portugal, both with a similar structure as the General Industrial Classification of Economic Activities within the European Communities, i.e. the 2nd revision of NACE (or NACE rev. 2). Nevertheless, the current versions of NACE and ISIC are the most commonly adopted instruments worldwide in scholarly practice and international reporting.