Chapter 2: Business Environment, Stakeholders and Managerial Responsibility

1. Introduction

No organization operates in isolation. Every business depends on customers, employees, suppliers, investors, governments, communities, technologies and natural resources. These forces influence what an organization can do, the risks it faces and the opportunities it can pursue. Managers therefore need more than technical knowledge of production, finance or marketing. They must understand the environment in which the organization operates and accept responsibility for the effects of managerial decisions.

The business environment includes internal conditions within the organization and external forces outside it. Internal factors include organizational structure, resources, leadership, culture and employee capabilities. External factors include economic conditions, laws, social expectations, technological developments, competitors and environmental pressures. Some environmental forces can be controlled directly, while others can only be monitored and managed through adaptation.

This chapter examines environmental analysis, stakeholder interests, organizational culture, globalization, sustainability, corporate social responsibility, ethics and basic governance. These subjects are interconnected. For example, a company’s response to climate change involves external environmental analysis, stakeholder expectations, ethical judgment, corporate responsibility and governance systems.

2. Learning Objectives

After studying this chapter, students should be able to:

1. Explain the meaning and importance of the business environment.

2. Distinguish between internal and external environmental factors.

3. Identify and analyse organizational stakeholders.

4. Apply PESTLE and stakeholder analysis to managerial situations.

5. Explain organizational culture and its effect on performance.

6. Discuss globalization and its managerial implications.

7. Explain sustainability, corporate social responsibility and ethical management.

8. Describe basic corporate governance responsibilities.

9. Evaluate environmental and stakeholder issues in practical cases.

10. Recommend responsible and strategically appropriate managerial actions.

3. Meaning and Concept

The business environment is the total set of conditions, institutions, relationships and forces that influence an organization’s decisions, operations and performance. It is dynamic rather than static. Customer preferences change, technologies develop, regulations are amended and competitors introduce new products. Managers must therefore treat environmental analysis as a continuing process rather than a one-time exercise.

The environment has two broad dimensions. The internal environment consists of factors located within the organization or substantially influenced by it. Examples include financial resources, human skills, production systems, organizational culture, leadership style, policies and information systems. The external environment consists of forces outside the organization. The immediate external environment includes customers, competitors, suppliers, regulators and labour markets. The wider environment includes political, economic, social, technological, legal and ecological influences.

Stakeholders are individuals or groups that affect, or are affected by, an organization’s activities. Employees expect fair pay and safe working conditions. Customers expect value, quality and honest communication. Owners and investors expect returns and responsible risk management. Governments expect legal compliance and taxes. Communities may expect employment and protection from pollution. Stakeholder analysis helps managers recognize these interests and consider their relative importance in decision-making.

Managerial responsibility refers to the obligation of managers to achieve organizational objectives while using resources responsibly and considering the effects of decisions on stakeholders and society. It includes economic, legal, ethical and, in many cases, social and environmental responsibilities.

4. Fundamental Principles

4.1 Organizations are open systems

An organization receives inputs such as materials, labour, capital, information and energy from its environment. It transforms these inputs into goods or services and returns outputs to customers and society. Feedback from the environment helps managers correct weaknesses and improve performance. An organization that ignores environmental feedback may become inefficient or irrelevant.

4.2 Environmental forces are interdependent

External factors rarely operate separately. An increase in fuel prices may raise transport costs, increase consumer prices, influence inflation and change customer demand. A new data-protection law may require investment in technology, staff training and revised marketing practices. Managers should therefore examine relationships among forces rather than treating each factor as isolated.

4.3 Change creates both opportunities and threats

A technological development may reduce the cost of production but also make existing skills or products obsolete. Global trade can provide access to new markets while increasing competition. Effective managers do not merely react to threats; they seek opportunities to innovate and create value.

4.4 Stakeholder interests should be balanced

Stakeholders do not always want the same outcomes. Investors may favour cost reduction, while employees may seek higher wages. Customers may want low prices, while suppliers may seek higher prices. Responsible management requires transparent reasoning, fair treatment and attention to both short-term and long-term effects.

4.5 Responsible conduct supports long-term performance

Legal compliance is the minimum standard of conduct. Organizations that also promote honesty, safety, fairness and environmental responsibility are more likely to gain trust, retain employees and protect their reputation. Responsibility is therefore not only a moral issue; it is also relevant to organizational resilience and competitiveness.

4.6 Decisions should be evidence-based but ethically informed

Data, forecasts and financial analysis improve decision quality, but they do not determine what is right. A decision may be profitable yet unacceptable if it exploits workers, deceives customers or creates serious environmental harm. Managers must combine analysis with ethical judgment.

5. Major Components / Elements

5.1 Internal environment

The internal environment includes the organization’s mission, objectives, resources, structure, systems and culture. Financial strength affects investment capacity. Human resources influence innovation and service quality. Structure determines authority and coordination. Culture shapes how employees behave when policies do not provide a clear answer.

Leadership is another major internal factor. Participative leaders may encourage ideas and commitment, while highly centralized leadership may support quick decisions but limit employee involvement. Internal communication, performance measurement and reward systems also influence behaviour.

5.2 External micro-environment

The micro-environment consists of groups that interact directly with the organization. Customers determine demand and influence product design. Competitors affect prices, quality standards and innovation. Suppliers influence cost, reliability and quality. Distributors and business partners affect market access. Financial institutions influence access to capital. Labour markets affect recruitment and wage levels.

5.3 External macro-environment

The macro-environment includes broad forces that affect many organizations. PESTLE analysis examines political, economic, social, technological, legal and environmental factors. These forces are discussed in greater detail below.

5.4 Organizational culture

Organizational culture is the shared pattern of values, beliefs, assumptions and expected behaviours that guides members of an organization. Visible elements include language, ceremonies, office design and dress. Less visible elements include assumptions about authority, risk, customers and ethical conduct.

A strong culture can create unity and commitment, but strength alone does not guarantee effectiveness. A culture that rewards aggressive sales without regard to customer welfare may produce short-term results and long-term damage. Managers must ensure that cultural values support organizational objectives and responsible conduct.

5.5 Globalization

Globalization is the increasing integration of markets, production, technology, finance and communication across national boundaries. It enables organizations to source materials internationally, enter foreign markets and access global talent. It also exposes firms to currency risk, cultural differences, political uncertainty, international competition and complex supply chains.

Global managers need cultural intelligence. A communication style accepted in one country may be viewed as disrespectful in another. Managers must understand local laws, customs, negotiation practices and expectations concerning employment and consumer protection.

5.6 Sustainability

Sustainability means meeting present needs without undermining the ability of future generations to meet their needs. It involves economic viability, social well-being and environmental protection. Sustainable management may include reducing waste, using energy efficiently, designing durable products, treating workers fairly and considering the entire life cycle of a product.

5.7 Corporate social responsibility

Corporate social responsibility (CSR) refers to an organization’s responsibility for the social and environmental consequences of its activities, beyond minimum legal requirements. CSR may include community development, responsible sourcing, employee welfare, environmental programmes and transparent reporting. CSR should be connected to genuine practices rather than used merely as promotional language.

6. Process / Framework / Methodology

A systematic environmental and stakeholder analysis can follow these steps.

Step 1: Define the decision or issue

Managers should state clearly what is being analysed. For example, the issue may be whether to enter a foreign market, introduce electric vehicles or close an inefficient branch. A clear question prevents irrelevant information from overwhelming the analysis.

Step 2: Identify internal capabilities and weaknesses

Managers should assess resources, skills, technology, finance, culture, processes and leadership. Useful questions include: What does the organization do well? Where is it dependent on others? Which capabilities are difficult for competitors to copy?

Step 3: Scan the external environment using PESTLE

Political factors include government stability, public policy, taxation and trade restrictions. Economic factors include inflation, interest rates, unemployment, exchange rates and income levels. Social factors include demographics, education, lifestyles, values and consumer attitudes. Technological factors include automation, digital platforms, artificial intelligence and cybersecurity. Legal factors include employment law, competition law, consumer protection and data regulation. Environmental factors include climate change, resource scarcity, pollution controls and extreme weather.

The analysis should identify how each factor may create an opportunity or threat, its likely importance and the time period over which it may have an effect.

Step 4: Identify stakeholders

Managers should list internal and external stakeholders, determine their interests and assess their power, legitimacy and urgency. Employees may have high legitimacy and moderate power. A regulator may have high power and legitimacy. A small community group may have limited formal power but significant moral legitimacy and the ability to influence public opinion.

Step 5: Assess stakeholder impact and conflict

Managers should ask who gains, who bears costs and whether any group is being unfairly disadvantaged. Conflicts should be made explicit rather than hidden in financial assumptions.

Step 6: Develop strategic responses

Possible responses include adaptation, innovation, negotiation, risk reduction, partnership, compliance, investment or withdrawal. Managers should compare alternatives using financial, operational, legal, ethical and sustainability criteria.

Step 7: Implement and communicate

A decision requires responsibilities, resources, timelines and performance indicators. Communication should explain the reasons for the decision and how stakeholder concerns will be addressed.

Step 8: Monitor and review

Environmental conditions and stakeholder expectations change. Managers should monitor indicators, gather feedback and revise plans when assumptions become inaccurate.

7. Important Theories and Models

7.1 PESTLE analysis

PESTLE is a framework for examining the macro-environment. Its value lies in encouraging broad thinking. It does not predict the future automatically; it provides a structured basis for discussion and scenario planning.

7.2 Stakeholder theory

Stakeholder theory argues that organizations should create value for a broad range of stakeholders, not only shareholders. It challenges the narrow view that managerial success is measured exclusively by short-term profit. The theory does not mean that all interests can always be satisfied equally. It requires managers to recognize legitimate interests and justify trade-offs.

7.3 Stakeholder salience model

The stakeholder salience model assesses stakeholders according to power, legitimacy and urgency. Stakeholders possessing one attribute may be important; those possessing all three require particularly careful attention. The model helps managers prioritize engagement while avoiding the assumption that less powerful groups are irrelevant.

7.4 Carroll’s pyramid of CSR

Carroll’s pyramid presents four responsibilities: economic, legal, ethical and philanthropic. Economic responsibility involves being viable and producing value. Legal responsibility involves obeying laws. Ethical responsibility involves doing what is fair and right even when not legally required. Philanthropic responsibility involves voluntary contributions to communities. The categories overlap and should not be treated as completely separate.

7.5 Triple bottom line

The triple bottom line evaluates performance through three dimensions: people, planet and profit. It encourages managers to consider social and environmental outcomes alongside financial results. The model is useful, although measurement of social and environmental outcomes can be difficult.

7.6 Open-systems perspective

The open-systems perspective views organizations as dependent on exchanges with their environments. It emphasizes inputs, transformation, outputs and feedback. This model helps managers understand why organizational performance depends on both internal efficiency and external relationships.

7.7 Ethical decision-making model

A practical ethical model involves identifying the facts, affected stakeholders, possible alternatives, relevant duties and likely consequences. Managers should test decisions against fairness, rights, law, organizational values and professional standards. They should also ask whether they would be comfortable if the decision became public.

8. Practical Applications

A retail manager considering a new store location can use PESTLE to examine planning regulations, local income, population growth, online shopping trends, payment technology and environmental requirements. Stakeholder analysis can identify customers, employees, landlords, local authorities, residents and suppliers.

A manufacturing manager facing pressure to reduce costs may examine whether cheaper inputs create safety, quality or labour risks. Responsible action may involve supplier audits, longer-term contracts with reliable suppliers or redesigning the product to reduce material use.

A human resource manager can use cultural analysis when introducing flexible work. Employees may value autonomy, while managers may fear reduced control. Clear performance measures, communication and appropriate digital tools can align these interests.

9. Examples

A food company that discovers contamination in a product must protect consumers before considering sales revenue. It may recall the product, notify regulators, investigate the cause and communicate honestly. Although the recall creates immediate costs, concealment could cause greater harm, legal liability and loss of trust.

A clothing business sourcing from overseas must consider not only price but also wages, working hours, workplace safety, child labour risks and environmental practices. Supplier codes of conduct are useful, but independent verification and corrective action are more credible than statements alone.

A bank introducing artificial intelligence for loan decisions should assess accuracy, privacy, cybersecurity and possible discrimination. Managers must ensure human oversight and provide an explanation or appeal process for affected customers.

10. Technology and Digital Applications

Digital technology strengthens environmental and stakeholder analysis. Business intelligence platforms can combine sales, customer, supply-chain and market data to identify trends. Scenario tools can model the effects of inflation, exchange-rate changes or supply disruption.

Customer relationship management systems help organizations record complaints, preferences and service outcomes. Stakeholder engagement platforms can collect feedback from employees, customers and communities. Supply-chain technologies, including digital tracking and sensor systems, can improve visibility of product origins, delivery conditions and environmental performance.

Technology also creates responsibilities. Organizations must protect personal data, control access to systems and manage cybersecurity threats. Automated decisions may reproduce bias if training data are incomplete or discriminatory. Digital tools should support managerial judgment rather than remove accountability. A manager remains responsible for decisions made with the assistance of software or artificial intelligence.

11. Strategic / Managerial Importance

Environmental analysis improves strategic fit. An organization is more likely to succeed when its capabilities match external opportunities and when it prepares for threats. Stakeholder management improves access to resources, trust and cooperation. Employees are more committed when they believe that management is fair. Customers are more loyal when product claims are reliable. Governments and communities are more supportive when the organization behaves responsibly.

Responsible management also reduces risk. Ethical failures can result in fines, lawsuits, employee departures, customer boycotts and reputational damage. Sustainability initiatives may reduce energy costs, improve innovation and prepare the organization for future regulation. Culture is strategically important because it influences how plans are implemented in daily behaviour.

12. Detailed Case Study

Illustrative Case: GreenBite Foods and Sustainable Packaging

#### Background

GreenBite Foods is a fictional medium-sized company producing prepared meals for supermarkets. Its sales have grown rapidly, but most products are packaged in non-recyclable plastic. A major supermarket customer has announced that suppliers must reduce packaging waste within two years. Customers and community organizations are also criticizing the company’s environmental impact.

#### Problem

GreenBite must decide whether to replace its current packaging. Sustainable alternatives cost more, may affect product shelf life and require changes in machinery. The company must balance profitability, food safety, customer expectations, regulatory developments and environmental responsibility.

#### Analysis

A PESTLE analysis identifies possible environmental regulations on packaging, economic pressure from increased material costs, social demand for environmentally responsible products, technological developments in compostable materials and legal requirements concerning food safety and product labelling.

The principal stakeholders are owners, supermarket customers, final consumers, employees, packaging suppliers, regulators, waste-management organizations and local communities. The supermarket has substantial purchasing power. Consumers have market influence through buying decisions and public reviews. Regulators have legal authority, while communities possess legitimate concerns about waste.

Internally, GreenBite has strong product-development staff but limited experience with alternative materials. Its culture values cost control, although senior managers are increasingly concerned about reputation and long-term resilience.

#### Strategy / Solution

The company establishes a cross-functional team involving production, purchasing, marketing, finance, quality assurance and sustainability staff. It tests two recyclable materials and one compostable material. Rather than making unverified environmental claims, it obtains independent evidence and uses clear labels explaining disposal requirements.

GreenBite negotiates with suppliers for a phased price reduction and invests in machinery that can process the preferred material. It introduces a pilot product range, measures customer response and monitors food safety, waste reduction, cost and complaint levels. The board receives quarterly reports, and managers consult employees whose work processes will change.

#### Outcome

The pilot increases packaging cost by 6 percent but reduces non-recyclable waste by 70 percent for the selected products. The supermarket renews its contract, and customer satisfaction improves. After process improvements, the cost difference falls to 3 percent. The company decides to expand the programme gradually while continuing to assess material availability and disposal infrastructure.

#### Learning Points

The case demonstrates that environmental responsibility is connected with strategy, operations, stakeholder relationships and governance. It also shows why managers should use evidence, pilots and measurable targets rather than relying on unsupported claims. A responsible solution may involve short-term cost increases but create longer-term commercial and reputational benefits.

13. Advantages / Benefits

Effective environmental and stakeholder management can:

• improve strategic decision-making;
• identify opportunities before competitors;
• reduce legal, operational and reputational risk;
• strengthen customer and employee trust;
• improve innovation and organizational learning;
• support access to finance and business partnerships;
• improve resource efficiency;
• strengthen organizational legitimacy; and
• promote long-term resilience.

14. Limitations / Challenges

Environmental analysis cannot remove uncertainty. Information may be incomplete, outdated or biased. PESTLE categories may overlap, and managers may underestimate unexpected events. Stakeholder interests can conflict, making compromise difficult. Some social and environmental outcomes are difficult to measure in financial terms.

CSR programmes may become symbolic if they are not integrated into operations. Sustainability claims may create accusations of greenwashing when communication is stronger than actual performance. Global supply chains may be difficult to monitor beyond first-tier suppliers. Organizational culture can resist change, especially when new responsibilities threaten established incentives. Finally, managers may face pressure to prioritize short-term results over long-term responsibility.

15. Ethical and Governance Considerations

Ethical management requires honesty, fairness, respect for rights and avoidance of harm. Managers should not mislead customers, manipulate performance information or hide material risks. Conflicts of interest should be disclosed and managed. Employees should have safe working conditions, fair treatment and appropriate channels for raising concerns.

Corporate governance is the system by which an organization is directed, controlled and held accountable. Basic governance responsibilities include setting purpose and strategy, overseeing risk, ensuring reliable financial reporting, monitoring legal compliance, protecting organizational assets and evaluating senior management. Boards or governing bodies should exercise independent judgment and act in the organization’s legitimate interests.

Good governance requires clear authority, separation of duties and appropriate internal controls. For example, the person approving a payment should not be the only person recording and reconciling it. Whistleblowing systems should protect people who report misconduct in good faith. Governance should also address data protection, cybersecurity, environmental commitments and stakeholder impacts.

16. Current and Emerging Trends

Important trends include the expansion of remote and hybrid work, increased use of artificial intelligence, stricter data regulation, climate-related reporting and pressure for transparent supply chains. Consumers and investors increasingly examine how organizations treat workers and manage environmental risks.

The circular economy is gaining attention. It seeks to reduce waste by designing products for durability, repair, reuse, remanufacture and recycling. Organizations are also developing climate-resilience plans because extreme weather can disrupt facilities, transport and supply.

Social expectations concerning diversity, equity and inclusion are influencing recruitment, leadership and customer relationships. At the same time, misinformation and rapid online communication mean that reputational crises can spread quickly. Managers must therefore combine operational preparedness with transparent communication.

17. Best Practices

Effective organizations commonly:

1. review their environment regularly rather than only during crises;

2. distinguish facts from assumptions and identify uncertainty;

3. connect environmental analysis with strategic objectives;

4. map stakeholders and engage them proportionately;

5. use measurable social, environmental and financial indicators;

6. align rewards with ethical and sustainable behaviour;

7. verify claims through reliable evidence;

8. train employees in ethics, compliance and responsible decision-making;

9. maintain strong internal controls and reporting channels; and

10. review outcomes and correct unintended consequences.

Managers should document major assumptions, assign responsibility for action and ensure that stakeholder engagement is meaningful. Consultation should not be used merely to create the appearance of participation while decisions have already been made.

18. Future Scope

Future managers will need to operate in environments characterized by technological disruption, climate uncertainty, geopolitical tension and changing social expectations. Environmental analysis will increasingly use real-time data, predictive tools and scenario planning. However, technological capability will not replace the need for judgment, empathy and accountability.

Sustainability is likely to move from a specialist activity into mainstream strategy, finance, procurement and performance management. Organizations may be assessed more closely on their full value chains rather than on direct operations alone. Managers who can integrate commercial objectives with ethical and environmental responsibility will be better prepared to create durable value.

19. Chapter Summary

The business environment consists of internal and external forces affecting organizational decisions and performance. Organizations are open systems that depend on resources, relationships and feedback from their environments. PESTLE analysis provides a framework for examining political, economic, social, technological, legal and environmental forces. Stakeholder analysis identifies groups affected by organizational decisions and helps managers understand power, legitimacy, interests and conflict.

Organizational culture shapes behaviour and can either support or undermine strategy. Globalization creates opportunities for markets and resources but also introduces cultural, political and supply-chain risks. Sustainability and CSR require managers to consider social and environmental effects alongside financial performance. Ethical management involves fairness, honesty and respect for rights, while governance provides systems of direction, control and accountability. Responsible managers continuously scan the environment, engage stakeholders, evaluate trade-offs and monitor outcomes.

20. Key Terms

1. Business environment: The internal and external conditions influencing an organization.

2. Internal environment: Resources, systems, culture and capabilities within an organization.

3. External environment: Forces outside the organization that affect its activities.

4. Stakeholder: A person or group that affects or is affected by an organization.

5. PESTLE analysis: A framework analysing political, economic, social, technological, legal and environmental factors.

6. Organizational culture: Shared values, beliefs and behavioural expectations within an organization.

7. Globalization: Increasing integration of economies, markets, technology and societies across countries.

8. Sustainability: Meeting present needs without compromising future generations’ ability to meet theirs.

9. Corporate social responsibility: Responsibility for an organization’s social and environmental impacts.

10. Corporate governance: Systems through which an organization is directed, controlled and held accountable.

11. Stakeholder salience: The relative importance of a stakeholder based on power, legitimacy and urgency.

12. Triple bottom line: Evaluation of performance through people, planet and profit.

13. Ethics: Principles concerning right and wrong conduct.

14. Greenwashing: Making misleading or unsupported claims about environmental performance.

15. Open system: An organization that exchanges resources, information and outputs with its environment.

16. Legitimacy: The perceived rightfulness or acceptability of an organization or stakeholder claim.

17. Internal control: A procedure designed to protect assets, ensure reliable information and reduce risk.

18. Circular economy: An economic approach emphasizing reduction, reuse, repair, remanufacture and recycling.

21. Review Questions

Short Answer Questions

1. What is meant by the business environment?

2. Identify the six elements of PESTLE analysis.

3. Define a stakeholder and provide two examples.

4. What is organizational culture?

5. Distinguish between CSR and corporate governance.

Long Answer Questions

1. Explain how internal and external environments influence managerial decision-making.

2. Discuss the usefulness and limitations of PESTLE analysis.

3. Explain stakeholder theory and how managers can handle stakeholder conflicts.

4. Discuss the relationship between globalization, sustainability and corporate responsibility.

5. Describe the basic governance responsibilities of a board or governing body.

Analytical / Application Questions

1. A manufacturing company is considering relocating production to a country with lower labour costs. Using PESTLE and stakeholder analysis, identify the major issues management should examine.

2. A bank’s automated loan system rejects applications from one demographic group at a higher rate than others. What ethical, technological and governance actions should managers take?

3. A retailer wants to advertise its products as “100 percent green” without independent evidence. Evaluate the proposal and recommend a responsible course of action.

22. Multiple Choice Questions with Answers

Question 1

A manager uses PESTLE analysis primarily to examine which aspect of an organization?

A. The personal traits of individual employees

B. The broad external environment

C. The organization’s accounting entries only

D. The daily production schedule only

Correct Answer: B. The broad external environment

Question 2

Which stakeholder is most likely to have high legal power over a business?

A. A casual social-media follower

B. A competitor’s customer

C. A regulatory authority

D. A former employee with no current claim

Correct Answer: C. A regulatory authority

Question 3

A company changes its packaging after customers demand lower environmental impact. This best illustrates that managers should:

A. Ignore social expectations until laws change

B. Consider stakeholder interests in decisions

C. Focus only on short-term production costs

D. Transfer all responsibility to suppliers

Correct Answer: B. Consider stakeholder interests in decisions

Question 4

Which example is an internal environmental factor?

A. Inflation

B. Government taxation

C. Organizational culture

D. Competitor pricing

Correct Answer: C. Organizational culture

Question 5

Under the triple bottom line, organizational performance is assessed through:

A. Sales, advertising and distribution

B. People, planet and profit

C. Price, promotion and product

D. Planning, staffing and controlling

Correct Answer: B. People, planet and profit

Question 6

Which action most clearly demonstrates ethical responsibility beyond minimum legal compliance?

A. Hiding a product defect that is not yet illegal

B. Providing safe working conditions and honest product information

C. Paying taxes only when audited

D. Using misleading environmental claims

Correct Answer: B. Providing safe working conditions and honest product information

Question 7

What is a major risk of greenwashing?

A. It guarantees regulatory approval

B. It improves the accuracy of environmental reporting

C. It can mislead stakeholders and damage trust

D. It eliminates the need for sustainability investment

Correct Answer: C. It can mislead stakeholders and damage trust

Question 8

A board reviewing risk controls, financial reporting and senior management performance is performing a governance role involving:

A. Accountability and oversight

B. Product packaging design only

C. Informal socialization

D. Consumer purchasing

Correct Answer: A. Accountability and oversight

Question 9

Why should managers review environmental analysis regularly?

A. Because environmental forces and stakeholder expectations change

B. Because internal resources never matter

C. Because analysis removes all uncertainty

D. Because strategy should not be linked to evidence

Correct Answer: A. Because environmental forces and stakeholder expectations change

Question 10

A company entering a foreign market faces cultural differences, currency risk and new regulations. These issues demonstrate that globalization:

A. Eliminates competition

B. Creates opportunities but also increases complexity and risk

C. Makes local laws irrelevant

D. Guarantees higher profits

Correct Answer: B. Creates opportunities but also increases complexity and risk