"Businesses are built on relationships."  What are the implications of this idea for managing the external environment?

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thetall eNotes educator| Certified Educator

“Businesses are built on relationships.” This statement has several implications on managing of the external environment because for a business to achieve the set goals it needs to interact with elements in its environment. A business in its lifetime will interact with customers, competitors, suppliers, policy makers among other elements. These elements determine the ability of the business to continue its operations.

A business will need to manage and build its relationship with customers to ensure they continue to acquire products and services from the business in order to generate sales revenues and finally profits. It will also need to foster a working relationship with suppliers to ensure stocks arrive and are replenished on time and the quality standards as expected are maintained. The business will need to understand the competitors and their relationship because activities of the competitor are likely to impact on the business. Last but not the least, the business will need to foster relationships with policy makers and this can be exemplified by million dollar funded lobbies that exist in America with the purpose of protecting business interests.

pohnpei397 eNotes educator| Certified Educator

What this idea implies is that managers must actively involve themselves in the external environment.  They must be proactive and do things like networking with people who are important to their firm or who may become important to their firm.

When we say that businesses are built on relationships, we mean that it is necessary for people in one firm to have good relations with people in certain other firms.  This is particularly true for firms up and down your own supply chain.  Managers in a firm need to cultivate good relationships with those who supply their firm and with those to whom their firm sells.  By cultivating these relationships, they make it easier to do business with these other firms.

Because business is built on relationships, it is important for managers to actively network among people in the external environment.