Overview
This lecture introduces the concept of the firm and its relationship with its environment, a key topic in business administration.
Introduction to the Firm
- A firm is an organization that produces goods or services for profit.
- Firms are essential actors in the economy, converting inputs into outputs.
- The main objectives of a firm usually include profit maximization, growth, and sustainability.
The Firm's Environment
- The environment of a firm includes all external and internal factors affecting its operations.
- External environment consists of factors outside the firm, such as economic, social, political, and technological influences.
- Internal environment refers to factors within the firm, like employees, management, and company culture.
Interaction with the Environment
- A firm must adapt to changes in its external environment to stay competitive.
- Strategic decision-making depends on understanding both internal strengths and external threats.
Key Terms & Definitions
- Firm — An organization producing goods or services for profit.
- External Environment — Factors outside the firm influencing its performance (e.g., economy, laws, technology).
- Internal Environment — Elements within the firm that affect operations (e.g., staff, structure).
Action Items / Next Steps
- Review the definitions and concepts of firm and its environments.
- Be prepared to discuss examples of how firms adapt to environmental changes.