Small Business Environment: Managing External Relations Chapter 3 © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor

Small Business Environment:

Managing External Relations

Chapter 3

© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

Learning Objectives

LO1 Describe the elements that make up the small business environment.

LO2 Demonstrate your ability to scan the small business environment.

LO3 Apply the techniques of building legitimacy for your organization.

LO4 Navigate the techniques of social networking.


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Learning Objectives (cont.)

LO5 Explain the basic skills for handling a crisis.LO6 Recognize how small businesses can achieve

sustainability.LO7 Identify the major steps in making ethical

decisions in small business.


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The Environment of Small Business

Environment The sum total of

forces outside of the entrepreneur and the firm.

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The Environment of Small Business

Organizational identity composed of the name, description, and

distinctive elements of a firm, such as trademarks, uniforms, logos, characters and stories

part of the BRIE model


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The Environment of the Small Business

Bootstrapping Using low-cost or free techniques to minimize

your cost of doing business


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Organization’s Environment

Figure 3.1


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The Elements of the Small Business Environment

Internal environment The people and groups within the boundary of a

firm, including the owners, managers, employees, and board members of the firm


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The Elements of the Small BusinessEnvironment

Organizational culture A set of shared beliefs, basic assumptions, or

common, accepted ways of dealing with problems and challenges within a company that demonstrate how things get done.


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External environment The forces, institutions and people (i.e., the rest

of the world) outside the boundary of the firm.


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The Components of the Small Business Environment

Task environment A part of the external environment made up of

those components that the firm deals with directly such as customers, suppliers, consultants, media, interest groups, and the like.


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General environment A part of the external environment made up of

sectors of major forces that shape the people and institutions of the task and internal environments, such as the economic sector or the demographic sector


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Environmental Scanning for Small Business

Look for trends in the trade press of your industry

Ask your customers and suppliers what they see on the horizon

Keep notes on how work has changedSubscribe to blogs outside your area of

business


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Five Skills for Managing Relationswith the Environment

External relations The general description for the processes and

skills used in the management of a firm’s interactions with people, organizations and institutions outside of its boundary.


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Building legitimacy

Developing a social network

Handling a crisis

Achieving sustainability

Making ethical decisions


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Social capital characteristics of a business, like trust,

consistency, and networks, that represent potential social obligations which are an asset of the firm or entrepreneur


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Building Legitimacy

Legitimacy the belief that a firm is worthy of consideration

or doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors

Based on people, product, or organization


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People-Based Legitimacy Indicators

Table 3.1


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Product-Based Legitimacy Indicators

Table 3.2


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ISO (International Standards Organization) refers to certification for having met a standard

of quality that is consistently evaluated around the world


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http://www.iso.org/iso/home.html


Baldrige Award given by the U.S. government to businesses and

nonprofit organizations that have been judged outstanding in seven measures of quality leadership; strategic planning; customer and market focus; measurement, analysis, and knowledge management; human resource focus; process management; and results


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http://www.nist.gov/baldrige/

Organization-Based Legitimacy Indicators

Table 3.3


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Developing a Social Network

Social network the entrepreneur’s set of relationships and

contacts with individuals and institutions way to work trust, reciprocity, and long-term

relationships into your day-to-day business operations.


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Sources for Network Connections

Figure 3.2


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Types of Help Sought


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Figure 3.3

Asking for help

Request from people you trust Ask for specific behavior Do not be defensive Do not overreact or underreact Summarize what was said to ensure

understanding Explain what you are going to do about feedback Thank the person for the input Follow through


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Mutuality The action of each

person helping another.

Networking Interacting with

others in order to build relationships useful to a business.

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Networking Skills

Know who you areKnow whom you want and whyBuddy upBone up on the small talkDo not forget why you’re hereMake the connectionFollow up


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Online Social Networking Sites

Table 3.4


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Make it easy for people to contact youTake the initiative to ask others on the

network to link with youFind and link up with network mavensKeep at it—successful online networking

requires consistent involvement


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Handling a Crisis

1. Admit you’re in trouble – quickly2. Get to the scene as soon as possible3. Communicate facts you know4. Have one person serve as the firm’s

spokesperson5. Separate crisis management from the everyday

management of the firm6. Deal with the crisis quickly


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Achieving Sustainability

Sustainable entrepreneurship identifies or creates and then exploits

opportunities to make a profit in a manner that minimizes the depletion of natural resources, maximizes the use of recycled material, improves the environment, or any combination of these outcomes

Green entrepreneurship


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Making Ethical Decisions

Ethics a system of values that people consider in

determining whether actions are right or wrongEthical Dilemma

a situation that occurs when a person’s values are in conflict, making it unclear whether a decision is the right thing to do


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Ethical decision-Making Model for Small Business

Figure 3.4


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Caveat emptor A Latin expression which means “let the buyer

beware” which has been made into a philosophy sometimes used by businesses to put the burden for consumer protection onto the customer


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Golden Rule suggests you treat others in the manner you wish

to be treatedUtilitarianism

supports seeking the greatest good for the greatest number of people


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Universalism there is a code of right and wrong that everyone

can see and follow.Billboard principle

asks whether someone would be comfortable having his decision and name advertised on a billboard for the public to see.


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Business Costs of Ethical Failure

Figure 3.5


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Small Business Environment: Managing External Relations Chapter 3 © 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor