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 The Business Environment

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 The Business Environment:
A Global Perspective
Ninth edition

Ed Thompson, Ian Worthington and Chris Britton

De Montfort University, Leicester

Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong
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First published in Great Britain in 1994 (print)

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© Ian Worthington and Chris Britton 1994, 1997, 2000, 2003 (print)
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British Library Cataloguing-in-Publication Data

A catalogue record for the print edition is available from the British Library

Library of Congress Cataloging-in-Publication Data

Names: Worthington, Ian, 1946- author. | Britton, Chris, author. |
Thompson, Edward, 1986- author.
Title: The business environment : a global perspective / Ian Worthington,
Chris Britton and Ed Thompson, De Montfort University, Leicester.
Description: Ninth Edition. | Hoboken, NJ : Pearson, [2023] | Revised
edition of The business environment, 2018. | Summary: “The business
environment is our environment, it is the world we live in and all
aspects of the business environment should be viewed in terms of people.
Business ethics is about fairness in how a business operates; a business
environmental policy is about how we pollute or preserve our own world;
employment and unemployment are about people’s ability to house and feed
themselves. This is a book about all of us and how we interface with the
world and each other, because businesses are just organisations of
people and material things”-- Provided by publisher.
Identifiers: LCCN 2022058060 (print) | LCCN 2022058061 (ebook) | ISBN
9781292417844 (paperback) | ISBN 9781292417868 (ebook) | ISBN
9781292417851 (epub)
Subjects: LCSH: Industrial management--Great Britain. | Great
Britain--Commerce. | European Union countries--Commerce. | Industrial
policy--Great Britain. | Industrial policy--European Union countries. |
International economic relations. | Business.
Classification: LCC HD70.G7 W64 2023 (print) | LCC HD70.G7 (ebook) | DDC
658--dc23/eng/20221201
LC record available at https://lccn.loc.gov/2022058060
LC ebook record available at https://lccn.loc.gov/2022058061

10 9 8 7 6 5 4 3 2 1
23 22 21 20 19

Cover design: Kelly Miller

Cover image: bfk92/iStock/Getty Images Plus/Getty Images

Print edition typeset in 9.5/13pt Stone Serif ITCPro by Straive

Printed by Ashford Colour Press Ltd., Gosport

NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

F01_The_Business_Environment-A_Global_Perspective_9e.indd 4 11/02/2023 09:16

 For Lindsey, Tom and Georgina, for Rachael, Philip,
Nick and Megan, and for Ramanjeet, Darshan, Sandra
and David – with our love

F01_The_Business_Environment-A_Global_Perspective_9e.indd 5 11/02/2023 09:16

F01_The_Business_Environment-A_Global_Perspective_9e.indd 6 11/02/2023 09:16
 Brief contents

Contributors xix
Preface to the Ninth Edition xx
Publisher’s Acknowledgements xxii
Guided tour xxiv

Part One INTRODUCTION 1

1 Business organisations: the external environment 3
2 Business organisations: the internal environment 17
3 The global context of business 39
4 De-globalising factors: sovereignty, conflicts and political priorities 55

Part Two CONTEXTS 69

5 The political environment (P) 71
6 The macroeconomic environment (E) 103
7 The demographic, social and cultural context of business (S) 141
8 The resource context: people, technology and natural
resources (T) 163
9 The legal environment (L) 189
10 The ethical and ecological environment (E) 215

Part Three FIRMS 233

11 Legal structures 235
12 Size structure of firms 261
13 Industrial structure 285
14 Government and business 307

Part Four MARKETS 325

15 The market system 327
16 Market structure 351
17 International markets and trade 373
18 Pandemics and Covid-19 399
19 Governments and markets 419

Part Five CONCLUSION 441

20 Strategy and the changing environment 443

Glossary 469
Index 489

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F01_The_Business_Environment-A_Global_Perspective_9e.indd 8 11/02/2023 09:16
 Contents

Contributors xix
Preface to the Ninth Edition xx
Publisher’s Acknowledgements xxii
Guided tour xxiv

Part One INTRODUCTION

1 Business organisations: the external environment 3

Learning outcomes and key terms 3
Introduction 4
The business organisation and its environment 4
The general or contextual environment 7
Mini case: The impact of regional economic conditions 8
The immediate or operational environment 9
Analysing the business environment 10
Mini case: Fresh but not so easy 10
Central themes 12
Synopsis 14
Summary of key points 14
Case study: Facing the unexpected 14
Review and discussion questions 15
Assignments 16
Further reading 16

2 Business organisations: the internal environment 17

Learning outcomes and key terms 17
Introduction 18
The concept of the organisation: an initial comment 18
Understanding the nature of organisations: theories of
organisation and management 19
Other theoretical approaches 23
Organisational structures 23
Mini case: ‘Into the Dragon’s Den’ 24
Mini case: Mergers and competition 27
The virtual organisation 29
Structural change 30
Aspects of functional management 30
Synopsis 35
Summary of key points 35

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 x Contents

Case study: Reshuffle at Microsoft 36

Case study: Thomas Cook expansion 37
Review and discussion questions 37
Assignments 38
Further reading 38

3 The global context of business 39

Learning outcomes and key terms 39
Introduction 40
Globalisation versus internationalisation 40
The role of multinational enterprises 43
Mini case: Transfer pricing 44
Globalisation and business 46
Mini case: Currency crisis in emerging markets 47
Globalisation and the small and medium-sized firm 48
Synopsis 49
Summary of key points 49
Case study: Global financial markets – too big to fail 50
Case study: FDI flows 51
Review and discussion questions 52
Assignments 53
Further reading 53

4 De-globalising factors: sovereignty, conflicts and

political priorities 55
Learning outcomes and key terms 55
Introduction 56
What is globalisation? 57
Bretton Woods System (or the ‘New World Order’) 58
The 1970s to the present 59
Isolationism 59
International conflicts 62
Sanctions 63
Case study: Local solutions to global problems 65
Environmentalism 65
Summary of key points 66
Case study: Weetabix – local solutions to global problems 67
Assignments 68
Further reading 68

Part Two CONTEXTS

5 The political environment (P) 71

Learning outcomes and key terms 71
Introduction 72
Political systems 74

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 Contents xi

Government in democratic states 76

Mini case: Brought to book 79
The three branches or functions of government 82
Mini case: The power of the purse 83
Checks and balances in democracies 87
A model of the policy process 87
Synopsis 89
Summary of key points 89
Appendix 5.1: A democratic political system in action: UK national
government 90
The executive branch of government 92
The judicial branch of government 97
Appendix 5.2: Subnational government: UK local authorities 97
Appendix 5.3: Other levels of government 99
Case study: The business of lobbying 100
Case study: Political campaign funding 101
Review and discussion questions 102
Assignments 102
Further reading 102

6 The macroeconomic environment (E) 103

Learning outcomes and key terms 103
Introduction 104
Economic systems 105
Economies in transition 109
Politico-economic synthesis 110
The macroeconomy 111
Government and the macroeconomy: objectives 117
Mini case: Digging in for the long term 123
Government and the macroeconomy: policies 123
The role of financial institutions 128
Mini case: A new kid on the block: the rise of the credit rating
agency 130
International economic institutions and organisations 131
Synopsis 134
Summary of key points 135
Case study: Austerity 136
Case study: Quantitative easing (QE) 136
Review and discussion questions 138
Assignments 138
Further reading 139

7 The demographic, social and cultural context

of business (S) 141

Learning outcomes and key terms 141

Introduction 142

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 xii Contents

The demographic environment of business 142

The social context 147
Mini case: A new class structure? 148
Lifestyles 151
The cultural environment 153
Mini case: National cultures 155
Application: market segmentation 156
Synopsis 158
Summary of key points 158
Case study: An invitation to ‘tweet’ 159
Case study: Supply and demands – a changing workforce 160
Review and discussion questions 160
Assignments 161
Further reading 161

8 The resource context: people, technology and

natural resources (T) 163
Learning outcomes and key terms 163
Introduction 164
People 164
Mini case: Zero-hours contracts 166
Technology 173
Technological change 173
Mini case: The robots are coming 175
Natural resources 180
Synopsis 183
Summary of key points 183
Case study: Agricultural work and Brexit 184
Case study: Fracking 184
Review and discussion questions 186
Assignments 186
Further reading 187

9 The legal environment (L) 189

Martin Morgan-Taylor
Learning outcomes and key terms 189
Introduction 190
Classification of law 190
Public and private law 190
Mini case: Verity and Spindler v Lloyds Bank (1995) 191
The legal system: the courts 194
Mini case: Jean-Marc Bosman – a case of foul play? 196
Business organisations and the law 197
Contract law: the essentials 197
Agency 201
Law and the consumer 202

F01_The_Business_Environment-A_Global_Perspective_9e.indd 12 11/02/2023 09:16

 Contents xiii

Codes of practice 209

Synopsis 210
Summary of key points 210
Case study: The sale of goods on the Internet 211
Review and discussion questions 213
Assignments 213
Further reading 214

10 The ethical and ecological environment (E) 215

Learning outcomes and key terms 215
Introduction 216
Ethics and business 217
Mini case: Illegal or unethical? 218
Corporate social responsibility 219
The ‘environment’ as a business issue: the emergence of
corporate environmentalism 220
Drivers of ‘green’ business 221
Why and how firms become more environmentally responsible 225
Mini case: Going round in circles: Desso Carpets 226
Another perspective: the ‘outside-in’ view 227
Summary of key points 228
Case study: Doing well by doing good 228
Review and discussion questions 229
Assignments 230
Further reading 230

Part Three FIRMS

11 Legal structures 235

Learning outcomes and key terms 235
Introduction 236
Private sector organisations in the UK 236
Mini case: Companies under pressure 242
Social enterprises 245
Public sector business organisations in the UK 246
Legal structure: some implications 249
Franchising, licensing and joint ventures 254
Mini case: Cross-national joint ventures 256
Synopsis 257
Summary of key points 258
Case study: Uber 258
Review and discussion questions 259
Assignments 259
Further reading 260

F01_The_Business_Environment-A_Global_Perspective_9e.indd 13 11/02/2023 09:16

 xiv Contents

12 Size structure of firms 261

Learning outcomes and key terms 261
Introduction 262
The size structure of UK industry 262
Organisational growth 263
Methods of growth 264
Mini case: The story of a failed merger 267
Finance for growth 268
Small firms 273
Mini case: ‘Olderpreneurs’ and small firms 274
Multinationals 281
Synopsis 282
Summary of key points 282
Case study: The Scottish National Investment Bank 283
Review and discussion questions 283
Assignments 284
Further reading 284

13 Industrial structure 285

Learning outcomes and key terms 285
Introduction 286
The structure of industry 286
Mini case: The end of manufacturing? 290
Mini case: The life cycle model 295
Deindustrialisation 297
Synopsis 300
Summary of key points 301
Appendix 13.1: The Standard Industrial Classification (SIC), 2007 301
Case study: The rise of the public service companies 302
Review and discussion questions 304
Assignments 305
Further reading 305

14 Government and business 307

Learning outcomes and key terms 307
Introduction 308
Government and business: an overview 308
Selected urban policy instruments 309
Developments in urban policy: 1997–2010 312
Urban and industrial policy developments in the UK since 2010 313
Local government and business in the UK 315
Business as an influence on government 320
Mini case: A taxing issue 321
Synopsis 322
Summary of key points 322

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 Contents xv

Case study: Public sector procurement – the Royal Navy 323

Review and discussion questions 324
Assignments 324
Further reading 324

Part Four MARKETS

15 The market system 327

Learning outcomes and key terms 327
Introduction 328
The market mechanism 328
Demand 328
Supply 331
Shifts in demand and supply 335
Mini case: The effect of a factory fire on the market for microchips 336
Price controls 337
Mini case: The price of toilet rolls in Venezuela 339
Elasticity of demand 340
Cross-price elasticity of demand 343
Elasticity of supply 343
The importance of the market to business 344
Synopsis 345
Summary of key points 345
Case study: The housing market in the UK 346
Review and discussion questions 348
Assignments 348
Further reading 349

16 Market structure 351

Learning outcomes and key terms 351
Introduction 352
Market structures – in theory and practice 353
Porter’s five-forces model 360
Mini case: Open Skies and contestability 363
Mini case: Blizzard, Activision and Microsoft 365
Measuring the degree of actual competition in the market 366
Synopsis 368
Summary of key points 368
Case study: A Porter’s five-forces analysis of the cigarette industry
in the UK 369
Review and discussion questions 371
Assignments 372
Further reading 372

F01_The_Business_Environment-A_Global_Perspective_9e.indd 15 11/02/2023 09:16

 xvi Contents

17 International markets and trade 373

Learning outcomes and key terms 373
Introduction 374
International trade – why it takes place 374
Restrictions to international trade 375
Mini case: The cotton dispute 376
The establishment and growth of the European Union 377
‘Brexit’ and Euroscepticism 379
The balance of payments 380
The history of the balance of payments in the UK 383
Mini case: The current account of the balance of payments 385
Exchange rates 388
Exchange rates and business 394
Synopsis 394
Summary of key points 394
Case study: Post-Brexit trade 395
Review and discussion questions 396
Assignments 397
Further reading 397

18 Pandemics and Covid-19 399

Learning outcomes and key terms 399
Introduction 400
Pandemics 400
Pandemics in history 403
Global spread 406
Prevention 407
Case study: Covid-19 408
Mini case: FFP2/N95 respirators and surgical masks 408
Mini case: Peloton bikes 409
UK government support measures 411
The future 416
Returning to normal 417
Synopsis 417
Assignments 418
Further reading 418

19 Governments and markets 419

Learning outcomes and key terms 419
Introduction 420
Privatisation policy in the UK 420
Mini case: Government to the rescue 426
Competition policy 429
Mini case: Accusations of price fixing 431
Government and the labour market 432
Synopsis 436
Summary of key points 436

F01_The_Business_Environment-A_Global_Perspective_9e.indd 16 11/02/2023 09:16

 Contents xvii

Case study: Who leads who? 437

Case study: ‘What a fine mess you’ve got me into’ 438
Review and discussion questions 439
Assignments 439
Further reading 439

Part Five CONCLUSION

20 Strategy and the changing environment 443

David Orton
Learning outcomes and key terms 443
Introduction 444
The need to monitor environmental change 445
Analysing the business environment: broad approaches 446
Mini case: Multinational inward investment: a PESTLE analysis 447
Techniques 450
Limitations to environmental analysis 455
Sources of information 455
Synopsis 463
Summary of key points 463
Case study: Scenario planning at Shell 464
Review and discussion questions 466
Assignments 466
Further reading 467

Glossary 469
Index 489

F01_The_Business_Environment-A_Global_Perspective_9e.indd 17 11/02/2023 09:16

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 Contributors

Authors
Ed Thompson, BA (Hons), MSc, PhD, PGCertHE, CMBE, CMgr, FHEA, FRSA, MCMI is
Associate Professor and Director of Apprenticeships in Leicester Castle Business School
at De Montfort University. His research is focused on organisational behaviour and
crisis management, and is a member of the editorial board of the SGEN Research Review
in the Philippines.

Ian Worthington, BA (Hons), PhD (Lancaster), is Emeritus Professor of Corporate Sus-

tainability at De Montfort University, Leicester, UK. He has published in, and reviewed
for, a variety of academic journals in both the UK and United States and is also author
of a book entitled Greening Business: Research, Theory and Practice.

Chris Britton, BA (Hons), MSc, was formerly a Principal Lecturer at De Montfort

University where her teaching and research interests included industrial economics,
labour markets and executive recruitment. With Ian Worthington and Andy Rees, she
is also co-author of a book on business economics.

Contributors
Martin Morgan-Taylor, LLB, LLM, FHEA, FRAS I, LTM, is an Associate Professor in the
School of Law at De Montfort University, Leicester, where he teaches business and com-
mercial law on a range of undergraduate and postgraduate courses. His research inter-
ests include online trading, consumer protection, and light pollution and nuisance. He
is a legal adviser on the latter to the Campaign for Dark Skies and the British
Astronomical Association.

David Orton, BA (Hons), MSc, is a Senior Lecturer at the University of Derby where he
is programme leader of the MBA Global and MBA Global Finance programmes. His
teaching and research interests lie in the fields of strategic management and crisis and
business continuity management.

F01_The_Business_Environment-A_Global_Perspective_9e.indd 19 11/02/2023 09:16

 Preface to the Ninth Edition

Why study the business environment?

The business environment is our environment, it is the world we live in and all aspects
of the business environment should be viewed in terms of people. Business ethics is
about fairness in how a business operates; a business environmental policy is about
how we pollute or preserve our own world; employment and unemployment are about
people’s ability to house and feed themselves. This is a book about all of us and how we
interface with the world and each other, because businesses are just organisations of
people and material things.
In reading about the business environment you are reading about your world. You
are reading about why the prices of the things you buy might go up or down, or why
at any given time it might be harder or easier for you to get a job. By understanding
the things in this book that make up your world you will better understand how the
world works, what changes mean and the implications they might have on your
organisations (whether they are organisations that we work for, or the organisations
that we have at home). In my own life, understanding the business environment has
helped me make decisions about when and where and how to buy a home, and what
and what not to invest in. Understanding the world allows us to make informed
decisions.
Despite the global pandemic, Brexit, the Russian invasion of Ukraine and increased
international trade tensions, the world keeps on turning. People continue to learn at
home and at universities – and people continue to graduate and find jobs. It will be
sensible for somebody going for an interview to carry out some research on the poten-
tial employer and understand how they might be affected by their business
environment.
The first aim of this book is to set out the way things are in the world today. It will
do this by breaking down everything outside of a business (and cover a little bit inside
as well) into chapters organised in a logical way. In effect, what we mean by external
and internal environments in a global context in which business operates today. The
second part will cover aspects of the business environment as you might find them in
a PESTLE analysis (Political, Economic, Social, Technological, Legal, Ethical/Ecological).
The third part will cover firms and industries, as well as how government regulates
business. The fourth part will consider the importance of markets as a concept, nation-
ally and internationally. Finally, we will consider how the business environment feeds
into strategy making for organisations.
The second aim of the book is to offer you examples and opportunities to apply what
you have learned. The biggest change in this edition of the book has been the inclusion
of specific chapters on the biggest contemporary events – namely the global Covid-19
pandemic and the retreat of some aspects of globalisation, including Brexit. These new
chapters apply some of the content which are introduced elsewhere to give an all-round
perspective on how factors influence one another, and convey the complexity of the
business environment.

F01_The_Business_Environment-A_Global_Perspective_9e.indd 20 11/02/2023 09:16

 Preface to the Ninth Edition xxi

The context
With this edition, like the last, I feel I have to introduce some caveats at this point. A 600-
page textbook takes a while to update. As I write this (in early 2022) the terms of Brexit
arrangements are finalised, but the implications are still being worked out – particularly
at the Irish/Northern Irish boarder. The tide appears to be turning with respect to Covid-
19, with several viable vaccines, countries making progress with their distribution, and
plans for how the developing world will be supported to ensure global protection. How-
ever, things change quickly. While I will address Brexit and Covid-19, the concepts set
out here can be applied to many different contexts; the specific situations will change
over the next two to five years but the concepts will persist. Further afield, when I started
the last edition Russia was considered a friendly nation to Europe; when I started this
edition things were a bit more icy between the two nations. Now things are very different
and Ukraine has been invaded – with things in Ukraine looking increasingly like a proxy
war. . . at any rate, the most significant conflict in Europe for 20 or more years.
The second caveat is with respect to data. I have updated data wherever possible – but
in some circumstances there are simply no more updates. Sometimes data are reported
in a different way, so continuity could not be maintained if the datasets were any more
up to date, and in a few cases data had been collected by agencies which have changed
or been disbanded. As a result, some of the datasets are not as up to date as I would have
preferred, but they are sufficient to illustrate the points made in the book.

My authorship
This book is now in its ninth edition. Ian Worthington approached me to author this
title in a more stable world (2015), a time when pandemic flu was hypothetical and
before Brexit; a time when writing a book on the business environment seemed like a
less troublesome undertaking!
I have quite a broad background in terms of my experience with the business envi-
ronment, having worked for large and small private and public sector organisations.
My first degree in business studies equipped me with most of my foundational business
environment knowledge. Subsequently, I gained a master’s degree in project manage-
ment, and a doctorate in organisational behaviour. In most of my organisational work
I have applied an actor–network theory perspective to how the world works. Actor–
network theory considers all things related, nothing existing in isolation. This has
proven a logical approach writing this book too; the environment is a world of many
connections, some obvious and others less so. I hope through reading this book that
you will come to understand the world in a similar way.
Thanks on behalf of Ian, Chris and myself to a dedicated team from Pearson for their
work on this edition, particularly Archana Makhija, Supervising Producer for UK and
Canada, for her support and encouragement through the development of this edition.
And on behalf of myself, a big thanks to Ian and Chris, who handed over the updating
of the title in the 8th edition. This remains their creation, but as the person responsible
for updates I must insist that errors are my own.
Finally, take it from someone with a British PhD in Organisational Behavior: organi-
sation is spelled with a Z in English English (it’s in the OED). However, to appease my
publishers, it will appear as organisation hereafter.

Ed Thompson

F01_The_Business_Environment-A_Global_Perspective_9e.indd 21 11/02/2023 09:16

 Publisher’s Acknowledgements

Text Credits
43 United Nations: Adapted from Annex Table 28, World Investment Report,
UNCTAD, 2013; 43 United Nations: Adapted from Annex Table 19, World Investment
Report UNCTAD, 2021; 51 United Nations: World Investment Report 2021:
Investing in sustainable recovery, UNCTAD, FDI/MNE database; 52 United Nations:
Adapted from unctadstat.unctad.org; 60 Donald Trump: Campaign Slogan by
Donald Trump; 94 The Cabinet Office: The Cabinet Office, https://www.gov.uk/
government/organisations; 95 The Cabinet Office: Government departments, April
2022, The Cabinet Office; 137 Bank of England: Bank of England, www.bankofeng-
land.co.uk/monetary-policy/quantitative-easing; 143 United Nations: United
Nations, Department of Economic and Social Affairs; 144 Office for National Sta-
tistics: Adapted from Social Trends. Available via www.ons.gov.uk; 144 United
Nations: Adapted from UN Department of Economic and Social Affairs -Annual
Demographic Indicators 2020; 150 Office for National Statistics: Office for
National Statistics; 150 Office for National Statistics: Adapted from ONS, Family
Spending, 2011; 152 Office for National Statistics: Adapted from ONS; 165 Office
for National Statistics: Adapted from Table A03 Statistical bulletin: UK labour mar-
ket, January 2018 www.ons.gov.uk; 165 House of Commons: Adapted from House
of Commons Library: Women and the UK economy, March 2022 www.researchbreif-
ings.files.parliment.uk; 165 European Union: Adapted from Table 2.2, http://epp.
eurostat.ec.europa.eu/cache/ITY_OFFPUB/1 (no longer active), © European Union,
1995–2014; 166 Organisation for Economic Co-operation and Development:
Table 2.8, OECD, Average Usual Weekly Hours Worked OECDlibrary.org; 171 The
Qualifications and Curriculum Authority: Qualifications and Credit
Framework, qca.org.uk, 2005; 172 Office for National Statistics: Office for National
Statistics - EMP04 - Employment by Occupation www.ONS.gov.uk; 173 Penguin
Random House: Penguin Dictionary of Economics; 177 Office for National Sta-
tistics: Adapted from www.ons.gov.uk Capital stocks and fixed capital consumption;
178 Office for National Statistics: Research and development in UK Businesses,
2020, (released 2021), www.ons.gov.uk; 180 The Department for Environment,
Food and Rural Affairs: Department for Environment Food & Rural Affairs - Farming
Statistics at 1 June 2019; 181 Department for Business, Energy & Industrial
Strategy: UK Energy in Brief 2021; 182 BP p.l.c.: Adapted from BP Statistical Review
of World Energy; 192 Incorporated Council of Law Reporting: Verity and
Spindler v Lloyds Bank (1995); 205 Parliament of the United Kingdom: Consumer
Rights Act 2015, Section 15; 208 Parliament of the United Kingdom: Consumer
Rights Act 2015, Section 62(4); 208 House of Lords: Director General of Fair Trading
v First National Bank [2001] UKHL 52 House of Lords; 217 Oxford University Press:
Crane, A. and Matten, D., Business Ethics: A European Perspective : Managing Corpo-
rate Citizenship and Sustainability in the Age of Globalization, Oxford University Press,
2004; 237 Parliament of the United Kingdom: The Partnership Act 1890; 262
Office for National Statistics: ‘top 10’ companies in the world in 2022, Fortune;

F01_The_Business_Environment-A_Global_Perspective_9e.indd 22 11/02/2023 09:16

 Publisher’s Acknowledgements xxiii

263 Office for National Statistics: UKBAD01 - Enterprise/local units by employ-

ment size band 2021 data (ONS); 269 European Union: Evaluation of the user guide
to the SME Definition, 2014, http://ec.europa.eu/docsroom/documents/5766/
attachments/1/translations/en/renditions/pdf; 272 Institute for Mergers, Acqui-
sitions and Alliances: Institute for Mergers Acquisitions and Alliances (2022); 274
Department for Business, Energy & Industrial Strategy: Business Population
Estimates, 2021’, Department for Business, innovation and Skills; 289 Office for
National Statistics: Based on Office for National Statistics (2022); 291 Office for
National Statistics: Adapted from EMP13: Employment by industry, Office for
National Statistics, 16 August 2022. Retrieved from https://www.ons.gov.uk/
employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/
employmentbyindustryemp13; 292 House of Commons: Industries in the UK,
House of Commons Library, 21 June, 2022; 292 European Union: Adapted from
Eurostat, 2008, 2013 © European Union, 1995–2014; 293 Office for National
Statistics: ONS, Consumer Trends Data, 2022, Office for National Statistics, 30 June
2022. Retrieved from https://www.ons.gov.uk/economy/nationalaccounts/satelliteac-
counts/datasets/consumertrends; 294 Office for National Statistics: ONS, Con-
sumer Trends Data, 2022, Office for National Statistics, 30 June 2022. Retrieved from
https://www.ons.gov.uk/economy/nationalaccounts/satelliteaccounts/datasets/con-
sumertrends; 298 Office for National Statistics: ONS - International comparisons
of productivity - final estimates 2020, Office for National Statistics, 20 January 2022;
358 Mintel Group Ltd: Adapted from Mintel Report, 2016; 366 The Department
for Business, Energy and Industrial Strategy: Adapted from ‘Sectoral Indicators
of Concentration and Churn 2006–2018’ from the Department for Business, Energy
and Industrial Strategy (BEIS), 2018; 369 The Office for National Statistics:
Adapted from Office for National Statistics, Opinions and Lifestyle Surveys; 369 The
Office for National Statistics: Adapted from Office for National Statistics, Adult
Smoking Habits in the UK 2019; 370 The Office for National Statistics: Adapted
from ONS Consumer Price Inflation Time Series Data (MM23); 375 Organisation for
Economic Co-operation and Development: Adapted from Financial Indicators
– Stocks: Private Sector Debt, http://stats.oecd.org/index.aspx?queryid=34814. OECD.
StatExtracts http://stats.oecd.org/; 381 Office for National Statistics: Adapted
from ONS Balance of Payments, 2021 Q4 Data www.ONS.gov.uk; 383 Office for
National Statistics: Adapted from Balance of payments, various years, www.ons.gov.
uk; 385 Office for National Statistics: Adapted from Office for National Statistics;
386 The Centre d’Études Prospectives et d’Informations Internationales:
Adapted from CEPII - BECI data, 2020; 387 Office for National Statistics: Adapted
from UK Trade ONS.gov.uk; 395 Agriculture and Horticulture Development
Board: Agriculture and Horticulture Development Board - www.AHDB.org.uk; 402
Cabinet Office: Adapted from Samuel Hilton and Caroline Baylon, Risk management
in the UK: What can we learn from COVID-19 and are we prepared for the next disas-
ter?, November 2020, National Risk Register, Cabinet Office, Crown copyright 2017;
406 World Bank: World Bank, Yearbook of Tourism Statistics, International Tourism,
Number of Arrivals (2022); 412 HM Revenue and Customs: HMRC (2022) Error and
Fraud in the COVID-19 schemes; 413 HM Revenue and Customs: ONS (2022), UK
Government Debt and Deficit (March 2022); 415 Office for National Statistics :
Office for National Statistics (2022) Inflation and price indices; 450 Harvard Business
Publishing: Adapted from Branden burger, A. and Nalebuff, B. (1995) ‘The right
game: use game theory to shape strategy’, Harvard Business Review, July–August,
pp. 57–71; 465 Jeroen van der Veer: Quoted by Jeroen van der Veer.

F01_The_Business_Environment-A_Global_Perspective_9e.indd 23 11/02/2023 09:16

 Guided tour
1
Business organisations:
the external environment

Business organisations differ in many ways, but they also have a common
Learning outcomesfeature:
highlight core coverage
the transformation in terms
of inputs of expected
into outputs; learning
it is through outcomes
this process that

2
after completing eachthe
chapter, to helpThis
value is created. students focusprocess
transformation their learning
takes placeand evaluate
against a their
progress.
Business organisations:
background of external influences which affect the firm and its activities. This

the internal environment

external environment is complex, volatile and interactive, but it cannot be
ignored in any meaningful analysis of business activity.

Learning
Having
The readapproach
systems this chapter you
to the should
study be able to:
of business organisations stresses the
outcomes
interaction
● indicate between a firm’s
the basic internal
features and external
of business environments. Key aspects of
activity
the internal context of business include the organisation’s structure and
● portray the business organisation as a system interacting with its environment
functions and the way they are configured in pursuit of specified organisational
● demonstrate the range and complexity of the external influences on business
objectives. If the enterprise is to remain successful, constant attention needs to
activity
be paid to balancing the different influences on the organisation and to the
● identify the
requirement central
to adapt to themes inherent
new external in the study This
circumstances. of the business environment
responsibility lies
essentially with the organisation’s management, which has the task of blending
people, technologies, structures and environments.
Key terms Environmental change Immediate (or operational) Outputs
External environment environment PESTLE analysis
General (or contextual) Inputs Transformation system
Learning Having read this chapter you should be able to:
outcomes environment Open system
Key terms are drawn out at
● outline the the
broadstart of every
approaches chapter
to organisation andand are emboldened
management, paying the first
time they appear in theparticular
text attention
to enable to thestudents
systems approach
to locate information quickly. A full
identify alternative organisational structures used by business organisations
Glossary appears at the end of the book.
●

● discuss major aspects of the functional management of firms

● illustrate the interaction between a firm’s internal and external environments

Key terms Bureaucracy Human relations approach Project team

Classical theories of Human resource Public sector
organisation management Re-engineering
Contingency approach Management Scientific management
Divisional structure Marketing Sub-systems
Downsizing Marketing concept Systems approach
Formal structures Marketing mix Theory X and Theory Y
Functional organisation Matrix structure Theory Z
Functional specialisation Organisation chart Virtual organisation
Hierarchy of needs Private sector Voluntary (or third) sector
Holding company Profit centre

M01_The_Business_Environment-A_Global_Perspective_9e.indd 3 10/02/2023 08:04

Lecturer resources tailored to support the use of this textbook in teaching is available
at go.pearson.com/uk/he/resources.
M02_The_Business_Environment-A_Global_Perspective_9e.indd 17 10/02/2023 08:05

F01_The_Business_Environment-A_Global_Perspective_9e.indd 24 11/02/2023 09:16

 Guided tour xxv
210 Chapter 9 · The legal environment (L)

Case studies of varying complexity

service customers relate
should expect the
to receive theory
and by represented
encouraging acceptable businessin the chapter to
prac-
tices. In addition, such codes of conduct invariably identify how customer complaints
real-life situations in should
a range of diverse organisations.
be handled and many offer low-cost or no-cost arbitration schemes to help settle
disputes outside the more formal legal process. Case study: The sale of goods on the Internet 211
Whilst codes of practice do not in themselves have the force of law, they are normally
seen as a useful mechanism for regulating the relationship between business organisa-
case
tions and their customers and accordingly they have the support of the OFT, which often
study
The sale of goods on the Internet
advises trade associations on their content. Businesses, too, usually find them useful,
particularly if through the establishment of a system of self- regulation they are able to
The saleavoid the introduction
of consumer of restrictions imposed
goods on the Internet byavailable
cancellation the law. under Article 9, where the buyer
(particularly those between European member states) has a right to cancel the contract for 14 days starting
raises a number of legal issues. And these issues are on the day the consumer receives the goods or
now complicated by the fact that the UK has left services (this was seven days under the Distance

Synopsis Europe, but not stopped trading with EU member

states. First, there is the issue of trust, without which
Selling Directive). This ‘cooling-off’ period is intended
to place the consumer in the position as if they had
the consumer will not buy; they will need assurance seen the goods in store. Failure to inform the
that the seller is genuine,activities,
All business and that they fromwill get
thethe consumerof
establishment of the
this right automatically
organisation extends the
through to the sale of
goods that they have ordered. Second, there is the period to a year and 14 days. Whilst the seller can
the product to the customer, are influenced by the law. This legal environment within
issue of consumer rights with respect to the goods in place the cost of returning goods on the buyer, the
question:which businesses
what rights exist and exist
do theyandvaryoperate
across evolves overrefund
seller must time the and is a key
standard rateinfluence
outgoing on firms of
Europe?all sizes
Last, and ofinenforcement:
the issue all sectors, as illustrated
what by anThe
postage. examination of some
seller is not entitled of the
to deduct any main
costs laws
happensgoverning
should anything thegorelationship
wrong? between a business
as a restockingandfee.its All
customers.
of this places The majority of con-
a considerable
sumer laws are of relatively recent origin obligation
and on the seller;
derive from however, such data should
the attempts by successive
Information and trust stop many misunderstandings and so boost cross-
governments to provide individuals with a measure of protection against a minority of
border trade by boosting consumer faith and
Europe recognises the problems of doing business
firms that behave in ways deemed to beconfidence unacceptable.in non-face-to-face sales.
across the Internet or telephone and it has attempted
Concomitantly, they also provide reputable
to address the main stumbling blocks via directives
Another organisations with a isframework
concern for the consumer fraud. The within
which are which to carry
incorporated out their
into member business
states’ own laws.and, as such, acthas
consumer who aspaid by credit cardto
an incentive willentrepreneurial
be
Summary of key points provides the student with a useful revision aid.
And these activity
European indirectives
market-based date to aeconomies.
time when
protected by section 83 of the Consumer Credit Act
1974, under which a consumer/purchaser is not liable
the UK was a member of the EU, and so they are
for the debt incurred if it has been run up by a third
incorporated into domestic law. The original Distance
party not acting as the agent of the buyer. The
Selling Directive, implemented as the Consumer
Distance Selling Regulations extended this to debit
Protection (Distance Selling) Regulations 2000, has
cards, and removed the ability of the card issuer to
Summary of key points
been replaced by the Consumer Rights Directive
(2011-83/EU). (Note that this is different from the
charge the consumer for the first £50 of loss.
Moreover, section 75 of the Consumer Credit Act
Consumer Rights Act 2015.) The replacement
1974 also gives the consumer/buyer a like claim
Directive is a ‘maximum harmonisation’ measure,
● The legal rules within which businesses exist
against the and
creditoperate are an
card company forimportant
any part of the
meaning that the provisions are binding on, and
misrepresentation or breach of contract by the seller.
external
cannot be modified by,environment
member states.of business organisations.
Both
This is extremely important in a distance-selling
Directives attempt to address the issues of trust in
Laws affecting businesses derive transaction, where the seller may disappear.
distance●sale. In short, the consumer who does not from a variety of sources, including custom, the deci-
buy face to sions
face may oflack
theimportant
courts and legislation.
information,
What quality and what rights?
which they may otherwise have easy access to if they Assignments 259
● Laws
were buying face toareface.sometimes made at international The nextand issuesupranational levelthat
relates to the quality (including
may be Europe).
Article 6 of the Consumer Rights Directive requires expected from goods bought over the Internet.
● Contract,
to abide by regulation (and bear the agency and consumer protection
cost that security? What are three key areas governing
are the advantages and disadvan- the day-to-
inter alia for the seller to identify themselves and an Clearly, if goods have been bought from abroad, the
regulation brings) and dayfind it hard to ofrestructure if tages of this position?
address must be work provided ifbusinesses.
the goods are to be paid levels of quality required in other jurisdictions may
demand changes. Critics argue that this system is 2 What advantages arethis
there to regulated services
for in advance. Moreover, a full description of the vary. It is for reason that Europe has and
attempted to
goods and the final price (inclusive of any taxes) must intention
● Offer, acceptance, consideration, to the
create
issue legal relations and capacity are
unfair on drivers, who earn money for Uber while formal organisations?
standardise of quality and consumer
having none of the protection of employees. Finally,
central
also be provided. Theelements
new directive of bans
contract 3law.
pre-tickedUber has recently with
remedies, launched Uber Connect
the Consumer – a same
Guarantees Directive
where Uber services are less regulated than taxi firms,
boxes (e.g. for insurance), and limits card transaction day parcel pick up andThe
(1999-44/EC). delivery service
Consumer provided
Rights by has
Act 2015
there have been cases where drivers
● Agency have been are a common feature of business practice.
relationships
charges to those of the cost actually incurred by the cyclists on the same non-contractual basis
replaced The Sale and Supply of Goods to Consumeras its
accused of crimes against passengers – and Uber
trader. These provisions will help to cut hidden costs. drivers.Regulations
What other types
2002 in ofimplementing
service and companies
this Directive,
accused of not taking● Thetheserelationship
crimes seriously. between businesses think and of?their customers is governed by a variety of

▼
The seller must also inform the buyer of the right ofcan youwhich not only lays down minimum quality standards
laws, many of which derive from statute.
Questions and assignments
Case study questions
● In addition to the provide engaging
protection provided activities
to consumers by the law,for
manystudents
organisations and lecturers
1 Given the choice, would you rather
operate underwork for a com-
agreed codes of conduct.
in and out of the classroom
pany with employment rights situation.
and responsibilities, orFurther questions on the website help to evaluate
work as a self-employed contractor with limited
their progress. M09_The_Business_Environment-A_Global_Perspective_9e.indd 211 10/02/2023 08:26

M09_The_Business_Environment-A_Global_Perspective_9e.indd 210 10/02/2023 08:26

Review and discussion questions

1 Numerically, the sole proprietorship is the most popular form of business organisation
throughout Europe. How would you account for this?

2 To what extent is corporate status an asset to a business organisation? Does it have

any disadvantages?

3 Examine the implications of privatising a public sector business organisation.

4 Discuss how the legal status of a business affects its objectives, its methods of finance
and its stakeholders.

5 How would you explain the rise in the popularity of franchising in recent years?

Assignments
1 You have recently been made redundant and decide to set up your own small
business, possibly with a friend. Assuming that you have £25,000 to invest in
your new venture, draft a business plan which is to be presented to your bank
manager in the hope of gaining financial support. Your plan should include a
clear rationale for the legal form you wish your business to take, your chosen
product(s) or service(s), evidence of market research, an indication of anticipated
competition and supporting financial information.
2 You work in a local authority business advice centre. One of your clients wishes
to start a business in some aspect of catering. Advise your client on the
advantages and disadvantages of the various legal forms the proposed
enterprise could take.

M11_The_Business_Environment-A_Global_Perspective_9e.indd 259 10/02/2023 08:29

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F01_The_Business_Environment-A_Global_Perspective_9e.indd 26 11/02/2023 09:16
 Part One

INTRODUCTION
1 Business organisations: the external environment
2 Business organisations: the internal environment
3 The global context of business
4 De-globalising factors: sovereignty, conflicts and
political priorities

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M01_The_Business_Environment-A_Global_Perspective_9e.indd 2 10/02/2023 08:04
 1 Business organisations:
the external environment

Business organisations differ in many ways, but they also have a common
feature: the transformation of inputs into outputs; it is through this process that
the value is created. This transformation process takes place against a
background of external influences which affect the firm and its activities. This
external environment is complex, volatile and interactive, but it cannot be
ignored in any meaningful analysis of business activity.

Learning Having read this chapter you should be able to:

outcomes ● indicate the basic features of business activity
● portray the business organisation as a system interacting with its environment
● demonstrate the range and complexity of the external influences on business
activity
● identify the central themes inherent in the study of the business environment

Key terms Environmental change Immediate (or operational) Outputs

External environment environment PESTLE analysis
General (or contextual) Inputs Transformation system
environment Open system

M01_The_Business_Environment-A_Global_Perspective_9e.indd 3 10/02/2023 08:04

 4 Chapter 1 · Business organisations: the external environment

Introduction
Business activity is a fundamental and universal feature of human existence and yet the
concept of ‘business’ is difficult to define with any degree of precision. Dictionary definitions
tend to describe it as being concerned with buying and selling, or with trade and commerce,
or the concern of profit-making organisations, and clearly all of these would come within the
accepted view of business. Such a restricted view, however, would exclude large parts of the
work of government and its agencies and the activities of non-profit-making organisations – a
perspective it would be hard to sustain in a climate in which business methods, skills, attitudes
and objectives have been vigorously adopted by these organisations. It is this broader view
of business and its activities that is adopted below and that forms the focus of an investiga-
tion into the business environment.

The business organisation and its environment

A model of business activity
Most business activity takes place within an organisational context and even a cursory
investigation of the business world reveals the wide variety of organisations involved,
ranging from the small local supplier of a single good or service to the multi-billion-dollar
international or multinational corporation producing and trading on a global scale.
Given this rich organisational diversity, most observers of the business scene tend to
differentiate between organisations in terms of their size, type of product and/or market,
methods of finance, scale of operations, legal status, and so on. Nissan, for example,
would be characterised as a major multinational car producer and distributor trading on
world markets, while a local builder is likely to be seen as a small business operating at a
local level with a limited market and relatively restricted turnover.

web Further information on Nissan is available at www.nissan-global.com

link
➚ The Nissan UK website address is www.nissan.co.uk

While such distinctions are both legitimate and informative, they can conceal the fact
that all business organisations are ultimately involved in the same basic activity, namely
the transformation of inputs (resources) into outputs (goods or services). This process is
illustrated in Figure 1.1.
In essence, all organisations acquire resources – including labour, premises, technology,
finance, materials – and transform these resources into the goods or services required by
their customers. While the type, amount and combination of resources will vary according
to the needs of each organisation and may also vary over time, the simple process described
above is common to all types of business organisation and provides a useful starting point
for investigating business activity and the environment in which it takes place.
A more detailed analysis of business resources and those internal aspects of organisa-
tions which help to transform inputs into output can be found in Chapters 2 and 8. The
need, here, is simply to appreciate the idea of the firm as a transformation system and
to recognise that in producing and selling output, most organisations hope to earn

M01_The_Business_Environment-A_Global_Perspective_9e.indd 4 10/02/2023 08:04

 The business organisation and its environment 5

Figure 1.1 The business organisation as a transformation system

Inputs Outputs
Land, premises
Materials Goods
Labour BUSINESS Services
Consumption
Technology ORGANISATIONS Ideas
Finance Information, etc.
Managerial skills, etc.

sufficient revenue to allow them to maintain and replenish their resources, thus permit-
ting them to produce further output which in turn produces further inputs. In short,
inputs help to create output and output creates inputs. Moreover, the output of one
organisation may represent an input for another, as in the case of the firm producing
machinery, basic materials, information or ideas. This interrelationship between busi-
ness organisations is just one example of the complex and integrated nature of business
activity and it helps to highlight the fact that the fortunes of any single business organisa-
tion are invariably linked with those of another or others – a point clearly illustrated in
many of the examples cited in the text.

The firm in its environment

The simple model of business activity described above is based on the systems approach
to management (see Chapter 2). One of the benefits of this approach is that it stresses
that organisations are entities made up of interrelated parts which are intertwined with
the outside world – the external environment in systems language. This environment
comprises a wide range of influences – economic, demographic, social, political, legal,
technological, etc. – which affects business activity in a variety of ways and which can
impinge not only on the transformation process itself, but also on the process of resource
acquisition and on the creation and consumption of output. This idea of the firm in its
environment is illustrated in Figure 1.2.

Figure 1.2 The firm in its environment

Environmental influences
Political, social, legal,
cultural, technological, etc.

BUSINESS
Inputs Outputs Consumption
ORGANISATIONS

M01_The_Business_Environment-A_Global_Perspective_9e.indd 5 10/02/2023 08:04

 6 Chapter 1 · Business organisations: the external environment

Figure 1.3 Two levels of environment

‘General’ or ‘contextual’ ‘Immediate’ or ‘operational’

environment environment
Economic Suppliers
Political Competitors
Legal Labour market
Social, etc. Financial institutions, etc.

BUSINESS
ORGANISATIONS

In examining the business environment, a useful distinction can be made between

those external factors that tend to have a more immediate effect on the day-to-day opera-
tions of a firm and those that tend to have a more general influence. Figure 1.3 makes
this distinction.
The immediate (or operational) environment for most firms includes suppliers, com-
petitors, labour markets, financial institutions and customers, and may also include trade
associations, trade unions and possibly a parent company. In contrast, the general (or
contextual) environment comprises those macroenvironmental factors such as eco-
nomic, political, socio-cultural, technological, legal and ethical influences on business
which affect a wide variety of businesses and which can emanate not only from local and
national sources, but also from international and supranational developments. Macro-
environmental factors might be thought of as factors so large that the business cannot
change them.
This type of analysis can also be extended to the different functional areas of an organi-
sation’s activities, such as marketing or personnel or production or finance, as illustrated
in Figure 1.4. Such an analysis can be seen to be useful in at least two ways. First, it empha-
sises the influence of external factors on specific activities within the firm and in doing
so underlines the importance of the interface between the internal and external

Figure 1.4 Environmental influences on a firm’s marketing system

Environmental influences
General
Immediate

Marketing Marketing Marketing

Market(s)
intermediaries system intermediaries

M01_The_Business_Environment-A_Global_Perspective_9e.indd 6 10/02/2023 08:04

 The general or contextual environment 7

environments. Second, by drawing attention to this interface, it highlights the fact that,
while business organisations are often able to exercise some degree of control over their
internal activities and processes, it is often very difficult, if not impossible, to control the
external environment in which they operate.

The general or contextual environment

While the external factors referred to above form the subject matter of the rest of the
book, it is useful at this point to gain an overview of the business environment by high-
lighting some of the key environmental influences on business activity. In keeping with
the distinction made between general and more immediate influences, these are dis-
cussed separately below. In this section we examine what are frequently referred to as the
‘PESTLE’ factors (i.e. Political, Economic, Socio cultural, Technological, Legal and Ethical
influences). A PESTLE analysis (or PEST analysis) can be used to analyse a firm’s current
and future environment as part of the strategic management process (see Chapter 19).
PESTLE examines factors external to the firm; these might represent opportunities or
threats and later can be used in a SWOT analysis (whereas strengths and weaknesses are
internal factors).

The political environment

A number of aspects of the political environment clearly impinge on business activity.
These range from general questions concerning the nature of the political system and its
institutions and processes (Chapter 5) to the more specific questions relating to govern-
ment involvement in the working of the economy (Chapter 6) and its attempts to influ-
ence market structure and behaviour (Chapters 12, 16, 18).
Government activities, both directly and indirectly, influence business activity, and
government can be seen as the biggest business enterprise at national or local level
(Chapter 14). Given the trend towards the globalisation of markets (Chapters 4 and 17)
and the existence of international trading organisations and blocs, international politico-
economic influences on business activity represent one key feature of the business envi-
ronment (Chapters 5, 8 and 17). Another is the influence of public, as well as political,
opinion in areas such as environmental policy and corporate responsibility
(Chapter 10).

The economic environment

The distinction made between the political and economic environment – and, for that
matter, the legal environment – is somewhat arbitrary. Government, as indicated above,
plays a major role in the economy at both national and local level (Chapters 6 and 14)
and its activities help to influence both the demand and supply side (e.g. see Chapter 15).
Nevertheless there are a number of other economic aspects related to business activity
which are worthy of consideration. These include various structural aspects of both firms
and markets (Chapters 11, 12, 13 and 16) and a comparison of economic theory and
practice (e.g. Chapters 15, 16 and 17).

M01_The_Business_Environment-A_Global_Perspective_9e.indd 7 10/02/2023 08:04

 8 Chapter 1 · Business organisations: the external environment

mini case The impact of regional economic conditions

For a company that trades in different markets needed for building more factories and
across the world, macroeconomic conditions (see infrastructure. To support its own steel industry
Chapter 6) in a particular part of its overall market China has been selling steel at less than the cost
can play a key role in determining its corporate European steelmakers can produce it. This is an
sales and profitability. French carmaker PSA example of the slowdown in European and
Peugeot Citroën, for instance, experienced a American economies causing Chinese businesses
significant decline in sales in 2012 as demand fell to act more aggressively, which has eventually led
in Southern Europe on the back of the recession in to the collapse of large parts of the British steel
the eurozone. In response to the problem, the industry such as the (Indian-owned) Tata steel
company announced significant job cuts aimed at works at Port Talbot near Cardiff in 2016.
reducing costs and looked to the French Since market conditions can vary substantially
government for a series of multi-billion-euro loans in different locations, some businesses can
to keep it afloat until trading conditions improved. experience significant variations in performance in
As the global economy slowed, steel industries different parts of their operations. US car giant
have been heavily affected. After a period of rapid Ford, for example, announced significant losses in
expansion (driven mostly by the growth of Chinese Europe in 2012 alongside ‘spectacular’ results in
infrastructure and social development), China’s its North American division. Like Chrysler and
economy has now started to slow as demand from other competitors including GM, Ford was able to
more developed countries who consume Chinese- offset its European losses with stronger sales in
made products has fallen. This has led to a the United States. It also posted pre-tax profits in
dramatic drop in the price of steel as it is no longer its South American and Asian markets.

Further information on the organisations mentioned in this mini case is available at

web
link www.psa-peugeot-citroen.com; www.tatasteel.com; www.ford.com;
➚ www.chrysler.com; www.gm.com

The social, cultural and demographic environment

Both demand and supply are influenced by social, cultural and demographic factors.
Cultural factors, for example, may affect the type of products being produced or sold, the
markets they are sold in, the price at which they are sold and a range of other variables.
People are a key organisational resource and a fundamental part of the market for goods
and services. Accordingly, socio-cultural influences and developments have an impor-
tant effect on business operations, as do demographic changes (Chapters 7 and 8).

The technological environment

Technology is both an input and an output of business organisations as well as being an
environmental influence on them. Investment in technology and innovation is fre-
quently seen as a key to the success of an enterprise and has been used to explain differ-
ences in the relative competitiveness of different countries (Chapter 8). It has also been
responsible for significant developments in the internal organisation of businesses in the
markets for economic resources.

M01_The_Business_Environment-A_Global_Perspective_9e.indd 8 10/02/2023 08:04

 The immediate or operational environment 9

The legal environment

Businesses operate within a framework of law, which has a significant impact on various
aspects of their existence. Laws usually govern, among other things, the status of the
organisation (Chapter 11), its relationship with its customers and suppliers and certain
internal procedures and activities (Chapter 9). They may also influence market structures
and behaviour (e.g. Chapters 16 and 19). Since laws emanate from government (includ-
ing supranational governments) and from the judgments of the courts, some under-
standing of the relevant institutions and processes is desirable (e.g. Chapters 5 and 9).

The ethical and ecological environment

Ethical considerations have become an increasingly important influence on business
behaviour, particularly among the larger, more high-profile companies. One area where
this has been manifest is in the demand for firms to act in a more socially responsible way
and to consider the impact they might have on people, their communities and the natu-
ral environment (Chapter 10).

The immediate or operational environment

Resources and resource markets
An organisation’s need for resources makes it dependent to a large degree on the suppliers
of those resources, some of which operate in markets that are structured to a considerable
extent (e.g. Chapter 8). Some aspects of the operation of resource markets or indeed the
activities of an individual supplier can have a fundamental impact on an organisation’s
success and on the way in which it structures its internal procedures and processes. By
the same token, the success of suppliers is often intimately connected with the decisions
and/or fortunes of their customers. While some organisations may seek to gain an advan-
tage in price, quality or delivery by purchasing resources from overseas, such a decision
can engender a degree of uncertainty, particularly where exchange rates are free rather
than fixed (Chapter 17). Equally, organisations may face uncertainty and change in the
domestic markets for resources as a result of factors as varied as technological change,
government intervention or public opinion (e.g. conservation issues).

Customers
Customers are vital to all organisations and the ability both to identify and to meet con-
sumer needs is seen as one of the keys to organisational survival and prosperity – a point
not overlooked by politicians, who are increasingly using business techniques to attract
the support of the electorate. This idea of consumer sovereignty – where resources are
allocated to produce output to satisfy customer demands – is a central tenet of the market
economy (Chapter 6) and is part of a capitalist ideology whose influence has become
all-pervasive in recent years, the idea being that companies competing is the most effi-
cient way to organise society. Understanding the many factors affecting both individual

M01_The_Business_Environment-A_Global_Perspective_9e.indd 9 10/02/2023 08:04

 10 Chapter 1 · Business organisations: the external environment

and market demand, and the ways in which firms organise themselves to satisfy that
demand, is a vital component of a business environment that is increasingly market led.

Competitors
Competition – both direct and indirect – is an important part of the context in which
many firms operate and is a factor equally applicable to the input as well as the output
side of business. The effects of competition, whether from domestic organisations or
from overseas firms (see Chapter 17, for example), are significant at the macro as well as
the micro level and its influence can be seen in the changing structures of many advanced
industrial economies (Chapter 13). How firms respond to these competitive challenges
(e.g. Chapter 12) and the attitudes of governments to anti-competitive practices (Chap-
ter 19) is a legitimate area of concern for students of business.

Analysing the business environment

In a subject as all-encompassing as the business environment it is possible to identify
numerous approaches to the organisation of the material. One obvious solution would
be to examine the various factors mentioned above, devoting separate chapters to each
of the environmental influences and discussing their impact on business organisations.
While this solution has much to recommend it – not least of which is its simplicity – the
approach adopted below is based on the grouping of environmental influences into three
main areas, in the belief that this helps to focus attention on key aspects of the business
world, notably contexts, firms and their markets.

mini case Fresh but not so easy

A recurring theme in this and previous editions of providing a low-risk method of entry into a large
the book is the need for businesses to monitor and lucrative market, with the focus on providing
and, where necessary, respond to changes in the fresh produce at low prices in competition with
business environment. Equally important is the existing retailers such as Trader Joe’s and Walmart.
requirement for a firm to understand the needs of As a preliminary step, the company sent some of
the customers in the markets in which it currently its senior executives to the United States to live
operates or in which it wishes to expand its with American families for several months in order
operations as a means of growing the organisation. to understand their shopping habits and product
Even some of the world’s largest and most preferences. It also ran a high-profile promotional
sophisticated companies can sometimes get this campaign to support its plans to open up 1,000
wrong. stores in California and neighbouring states before
Take the very well documented case of Tesco launching the brand on the east coast.
PLC’s foray into the US grocery retailing market Tesco’s hope that it would be able to break even
with the launch of its Fresh & Easy stores in 2007– in two years quickly evaporated and the company
8. Initially established in a number of states on the was forced to pump hundreds of millions of
US west coast, the experiment was aimed at pounds into the venture to keep it afloat. Apart

M01_The_Business_Environment-A_Global_Perspective_9e.indd 10 10/02/2023 08:04

 Mini case: Fresh but not so easy 11

from the rather unfortunate coincidence of the high-quality produce. Some consumers also
launch of its brand with the sub-prime crisis and apparently complained that the name Fresh & Easy
subsequent recession in the United States, retail reminded them of a deodorant or a sanitary
analysts have pointed to some fundamental errors product.
in understanding the preferences of US By the time of its withdrawal from the US
consumers. Mistakes are said to have included an market in September 2013, Tesco had reputedly
unclear image; cold and antiseptic stores; the lost more than £1.8 billion. On the positive side,
introduction of self-pay checkouts; using cling film Tesco has made ventures into other markets. Trent
on fresh products; an over-emphasis on ready Hypermarket, owned jointly by Tesco and Tata was
meals; an unwillingness to embrace the ‘coupon formed in 2015 and after a mixed time during the
culture’ that is an important part of the US pandemic was making around £4 million a month
shopping experience; and problems in ensuring in profit by the second quarter of 2022.

web Tesco’s website address is: www.tesco.com

➚ link

Following a basic introduction to the idea of the ‘business environment’, in Part Two
consideration is given to the political, economic, social, cultural, demographic, legal,
ethical and ecological contexts within which businesses function. In addition to examin-
ing the influence of political and economic systems, institutions and processes on the
conduct of business, this section focuses on the macroeconomic environment and on
those broad social influences that affect both consumers and organisations alike. The
legal system and the influence of law in a number of critical areas of business activity are
also a primary concern and one which has links with Part Three.
In Part Three, attention is focused on three central structural aspects: legal structure,
size structure and industrial structure. The chapter on legal structure examines the impact
of different legal definitions on a firm’s operations and considers possible variations in
organisational goals based on legal and other influences. The focus then shifts to how
differences in size can affect the organisation (e.g. access to capital, economies of scale)
and to an examination of how changes in scale and/or direction can occur, including the
role of government in assisting small business development and growth. One of the con-
sequences of changes in the component elements of the economy is the effect on the
overall structure of industry and commerce – a subject which helps to highlight the impact
of international competition on the economic structure of many advanced industrial
economies. Since government is a key actor in the economy, the section concludes with
an analysis of government involvement in business and in particular its influence on the
supply as well as the demand side of the economy at both national and local levels.
In Part Four, the aim is to compare theory with practice by examining issues such as
pricing, market structure and foreign trade. The analysis of price theory illustrates the
degree to which the theoretical models of economists shed light on the operation of
business in the ‘real’ world. Similarly, by analysing basic models of market structure, it is
possible to gain an understanding of the effects of competition on a firm’s behaviour and
to appreciate the significance of both price and non-price decisions in the operation of
markets.

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 12 Chapter 1 · Business organisations: the external environment

The analysis continues with an examination of external markets and the role of gov-
ernment in influencing both the structure and the operation of the marketplace. The
chapter on international markets looks at the theoretical basis of trade and the develop-
ment of overseas markets in practice, particularly in the context of recent institutional,
economic and financial developments (e.g. the Single Market, globalisation, the euro).
The section concludes with an investigation of the rationale for government interven-
tion in markets and a review of government action in three areas, namely privatisation
and deregulation, competition policy and the operation of the labour market.
To emphasise the international dimension of the study of the business environment,
each chapter of the book concludes with a relevant national and international cases
which draw together some of the key themes discussed in the previous chapters. By exam-
ining specific issues and/or organisations, the aim is to highlight linkages between the
material discussed in the text and to provide an appreciation of some of the ways in
which business activity reaches well beyond national boundaries.
The concluding chapter in the book stresses the continuing need for organisations to
monitor change in the business environment and examines a number of frameworks
through which such an analysis can take place. In seeking to make sense of their environ-
ment, businesses need access to a wide range of information, much of which is available
from published material, including government sources. Some of the major types of
information available to students of business and to business organisations – including
statistical and other forms of information – are considered in the final part of this
chapter.

Central themes
A number of themes run through the text and it is useful to draw attention to these at
this point.

Interaction with the environment

Viewed as an open system, the business organisation is in constant interaction with its
environment. Changes in the environment can cause changes in inputs, in the transfor-
mation process and in outputs, and these in turn may engender further changes in the
organisation’s environment. The internal and external environments should be seen as
interrelated and interdependent, not as separate entities.

Interaction between environmental variables

In addition to the interaction between the internal and external environments, the vari-
ous external influences affecting business organisations are frequently interrelated.
Changes in interest rates, for example, may affect consumer confidence and this can have
an important bearing on business activity. Subsequent attempts by government to influ-
ence the level of demand could exacerbate the situation and this may lead to changes in
general economic conditions, causing further problems for firms. The combined effect
of these factors could be to create a turbulent environment which could result in

M01_The_Business_Environment-A_Global_Perspective_9e.indd 12 10/02/2023 08:04

 Central themes 13

uncertainty in the minds of managers. Failure to respond to the challenges (or opportuni-
ties) presented by such changes could signal the demise of the organisation or at best a
significant decline in its potential performance.

The complexity of the environment

The environmental factors identified above are only some of the potential variables faced
by all organisations. These external influences are almost infinite in number and variety
and no study could hope to consider them all. For students of business and for managers
alike, the requirement is to recognise the complexity of the external environment and
to pay greater attention to those influences which appear to be the most pertinent and
pressing for the organisation in question, rather than to attempt to consider all possible
contingencies.

Environmental volatility and change

The organisation’s external environment is further complicated by the tendency towards
environmental change. This volatility may be particularly prevalent in some areas (e.g.
technology) or in some markets or in some types of industry or organisation. As indicated
above, a highly volatile environment causes uncertainty for the organisation (or for its
sub-units) and this makes decision-making more difficult.

Environmental uniqueness
Implicit in the remarks above is the notion that each organisation has to some degree a
unique environment in which it operates and which will affect it in a unique way. Thus,
while it is possible to make generalisations about the impact of the external environment
on the firm, it is necessary to recognise the existence of this uniqueness and where appro-
priate to take into account exceptions to the general rule.

Different spatial levels of analysis

External influences operate at different spatial levels – local, regional, national, suprana-
tional, international/global – exemplified by the concept of LoNGPEST/LoNGPESTLE
(see Chapter 19). There are few businesses, if any, today that could justifiably claim to be
unaffected by influences outside their immediate market(s).

Two-way flow of influence

As a final point, it is important to recognise that the flow of influence between the organi-
sation and its environment operates in both directions. The external environment influ-
ences firms, but by the same token firms can influence their environment, and this is an
acceptable feature of business in a democratic society which is operating through a mar-
ket-based economic system. This idea of democracy and its relationship with the market
economy is considered in Chapters 5 and 6.

M01_The_Business_Environment-A_Global_Perspective_9e.indd 13 10/02/2023 08:04

 14 Chapter 1 · Business organisations: the external environment

Synopsis
In the process of transforming inputs into output, business organisations operate in a
multifaceted environment which affects and is affected by their activities. This environ-
ment tends to be complex and volatile and comprises influences which are of both a
general and an immediate kind and which operate at different spatial levels.
Understanding this environment and its effects on business operations is vital to the
study and practice of business.

Summary of key points

● Business activity is essentially concerned with transforming inputs into outputs for
consumption purposes.
● All businesses operate within an external environment that shapes their operations and
decisions.
● This environment comprises influences that are both operational and general.
● The operational environment of business is concerned with such factors as customers,
suppliers, creditors and competitors.
● The general environment focuses on what are known as the PESTLE factors.
● In analysing a firm’s external environment attention needs to be paid to the interaction
between the different environmental variables, environmental complexity, volatility and
change, and to the spatial influences.
● While all firms are affected by the environment in which they exist and operate, at times
they help to shape that environment by their activities and behaviour.

case
study
Facing the unexpected

In previous editions of the book we have stressed The same is true when natural disasters occur, as
how the business environment can sometimes the following examples illustrate.
change dramatically and unexpectedly for the worse,
2010 – the eruption of an Icelandic volcano sent a
using the September 11, 2001 attack on the World
cloud of volcanic ash over large parts of Europe,
Trade Center in the United States as an example of
resulting in the grounding of aircraft and weeks of
what is known as an exogenous shock to the
disruption of air travel. Airlines in particular were
economic system.
badly affected and faced additional costs because
Mercifully, events of this kind tend to be relatively
of stranded passengers and cancelled flights.
rare, but when they occur they present a considerable
Beneficiaries included hoteliers who had to
challenge to the businesses and industries affected.

M01_The_Business_Environment-A_Global_Perspective_9e.indd 14 10/02/2023 08:04

 Review and discussion questions 15

accommodate people unable to travel and had an impact on tourism across Europe, with
alternative transport businesses (e.g. ferry hotel occupancy in London down as a result.
operators). In 2017 the Manchester Arena was bombed during
2013 – sudden and devastating storms in the a concert which had local and national effects on
Burgundy and Bordeaux regions of France how show security was managed.
destroyed swathes of the French wine industry, In 2020–21 Covid-19 radically changed business
resulting in a loss of jobs and income in the across a wide range of sectors.
affected local communities, with a knock-on
impact on local businesses. In China, a heatwave While there is little a business can do to protect
across the central and eastern parts of the country itself totally against events of this kind, many larger
badly affected the farming industry and tempted firms, especially multinationals, tend to put in place
the government to spend millions on artificial steps contingency plans to manage unexpected crises,
to trigger rain. In some areas power failures whether they are caused by human or natural
occurred as the demand for electricity soared as events. A business continuity plan (BCP) can help
individuals and organisations turned on the air- an organisation to respond quickly and effectively to
conditioning. Much warmer conditions were also a negative situation and hopefully to survive the
experienced in parts of Northern Europe, including experience and learn from it. Smaller firms on the
the UK, resulting in increased sales of certain items whole tend to lack the financial and human
(e.g. barbecues, sunscreen) and tempting many resources needed to adopt such resilience
people to holiday at home. Other adverse natural measures and some may not survive an adverse
events in 2013–14 included a super typhoon in the change in the external environment. For other
Philippines, extensive fires in parts of Australia, a organisations such a change may bring with it
major drought in California and severe storms and business opportunities, an unexpected though
flooding in southern England, all of which had possibly welcome gain from an event that has a
major effects on businesses and communities in negative impact on other firms.
the affected areas.
2015–16 – in 2015 terrorists armed with assault Case study questions
rifles and hand grenades attacked a beach resort in
1 Can you think of any other examples of major unan-
Tunisia. The British Foreign Office issued travel
ticipated events in your own country (or areas of your
advice to avoid all but essential travel to the
own country) that have had a serious adverse effect
country, as did many other governments. The
on its firms and/or industries?
result was a 37 per cent fall in foreign spending in
Tunisia, whose economy is 8 per cent dependent 2 Can you think of any businesses that may have ben-
on tourism. In 2016 attacks on Brussels and Paris efited commercially from this event or these events?

Review and discussion questions

1 In what senses could a college or university be described as a business organisation?
How would you characterise its ‘inputs’ and ‘outputs’?

2 Taking examples from a range of quality newspapers, illustrate ways in which business
organisations are affected by their external environment.

3 Give examples of the ways in which business organisations can affect the external
environment in which they operate.

M01_The_Business_Environment-A_Global_Perspective_9e.indd 15 10/02/2023 08:04

 16 Chapter 1 · Business organisations: the external environment

Assignments
1 Assume you are a trainee in a firm of management consultants. As part of your
induction process you have been asked to collect a file of information on an
organisation of your choice. This file should contain information not only on the
structure of the organisation and its products but also on the key external
influences that have affected its operations in recent years.
2 For a firm or industry of your choice, undertake a PESTLE analysis indicating the
likely major environmental influences to be faced by the firm/industry in the next
five to ten years.

Further reading
Daniels, J. D., Radebough, L. H. and Sullivan, D. P., International Business: Environments and
Operations, 14th edition, Prentice Hall, 2012.
Fernando, A. C., Business Environment, Dorling Kindersley/Pearson Education India, 2011.
Hamilton, L. and Webster, P., The International Business Environment, 3rd edition, Oxford University
Press, 2015.
Steiner, G. A. and Steiner, J. F., Business, Government and Society: A Managerial Perspective, 13th
edition, McGraw-Hill/Irwin, 2011.
Wetherly, P. and Otter, D. (eds) The Business Environment: Themes and Issues, 3rd edition, Oxford
University Press, 2014.
Worthington, I., Britton, C. and Rees, A., Economics for Business: Blending Theory and Practice,
2nd edition, Financial Times/Prentice Hall, 2004, Chapter 1.

M01_The_Business_Environment-A_Global_Perspective_9e.indd 16 10/02/2023 08:04

 2 Business organisations:
the internal environment

The systems approach to the study of business organisations stresses the

interaction between a firm’s internal and external environments. Key aspects of
the internal context of business include the organisation’s structure and
functions and the way they are configured in pursuit of specified organisational
objectives. If the enterprise is to remain successful, constant attention needs to
be paid to balancing the different influences on the organisation and to the
requirement to adapt to new external circumstances. This responsibility lies
essentially with the organisation’s management, which has the task of blending
people, technologies, structures and environments.

Learning Having read this chapter you should be able to:

outcomes ● outline the broad approaches to organisation and management, paying
particular attention to the systems approach
● identify alternative organisational structures used by business organisations
● discuss major aspects of the functional management of firms
● illustrate the interaction between a firm’s internal and external environments

Key terms Bureaucracy Human relations approach Project team

Classical theories of Human resource Public sector
organisation management Re-engineering
Contingency approach Management Scientific management
Divisional structure Marketing Sub-systems
Downsizing Marketing concept Systems approach
Formal structures Marketing mix Theory X and Theory Y
Functional organisation Matrix structure Theory Z
Functional specialisation Organisation chart Virtual organisation
Hierarchy of needs Private sector Voluntary (or third) sector
Holding company Profit centre

M02_The_Business_Environment-A_Global_Perspective_9e.indd 17 10/02/2023 08:05

 18 Chapter 2 · Business organisations: the internal environment

Introduction
Under the systems approach to understanding business activity presented in Chapter 1, the
organisation lies at the heart of the transformation process and tends to be seen as a kind of
‘black box’ which contains a multitude of elements – including structures, processes, people,
resources and technologies – that brings about the transformation of inputs into outputs (see
below). While the study of the business environment rightly focuses on the external context
of business organisations, it is important to recognise that firms also have an internal environ-
ment that both shapes and is shaped by the external context in which they operate and make
decisions. This notion of the interplay between an organisation’s internal and external environ-
ments is a theme that runs through many of the chapters in this book.
As students of business and management will be aware, the internal features of busi-
ness organisations have received considerable attention from scholars researching these
fields, and a large number of texts have been devoted to this aspect of business studies.
In the discussion below, the aim is to focus on three areas of the internal organisation that
relate directly to a study of the business environment: approaches to understanding
organisations, organisational structures, and key functions within the enterprise. Further
insight into these aspects and into management and organisational behaviour generally
can be gained by consulting the many specialist books in this field, a number of which
are mentioned at the end of this chapter. Issues relating to a firm’s legal structure are
examined in detail in Chapter 11.
A central theme running through any analysis of the internal environment is the idea of
management, which has been subjected to a wide variety of definitions. As used in this
context, management is seen both as a system of roles fulfilled by individuals who man-
age the organisation (e.g. entrepreneur, resource manager, coordinator, leader, motivator,
organiser) and as a process that enables an organisation to achieve its objectives. The
essential point is that management should be seen as a function of organisations, rather
than as a controlling element, and its task is to enable the organisation to identify and
achieve its objectives and to adapt to change. Managers need to integrate the various
influences on the organisation – including people, technology, systems and the
environment – in a manner best designed to meet the needs of the enterprise at the time
in question and be prepared to institute change as and when circumstances dictate.

The concept of the organisation: an initial comment

According to Stoner and Freeman (1992: 4), an organisation can be defined as two or
more people who work together in a structured way to achieve a specific goal or set of
goals. Defined in this way, the term covers a vast array of structures in the:

● private sector – that part of the economy where ownership and control of the organ-
isation is in the hands of private individuals or groups and where profit-seeking is a
central goal;
● public sector – that part of the economy under the control of government and its
agencies and where the state establishes and runs the different types of organisation
on behalf of its citizens and for their general well-being;

M02_The_Business_Environment-A_Global_Perspective_9e.indd 18 10/02/2023 08:05

Another Random Scribd Document
with Unrelated Content
 [141] Maxime Du Camp asserts in his Souvenirs littéraires (i,
118) that this anæmia was due in part to the copious blood-
letting to which the physicians of the time, disciples of Broussais,
were addicted.
[142] This perversion was not unknown to classical antiquity.
Cf. Seneca, To Lucilius, xcix: “Quid turpius quam captare in ipso
luctu voluptatem; et inter lacrymas quoque, quod juvet,
quærere?”
[143] Nouvelle Héloïse, Pt. iii, Lettre vi.

[144] Confessions, Livre iv.

[145] The New Laokoon, ch. v.

[146] Franciscae meæ laudes, in Les Fleurs du mal.
[147] Architecture and Painting, Lecture ii. This diatribe may
have been suggested by Byron’s Don Juan, Canto xiii, ix-xi:

Cervantes smiled Spain’s chivalry away:

A single laugh demolished the right arm
Of his own country, etc.

[148] “Nondum amabam, et amare amabam, quærebam quid

amarem, amans amare.”
[149] Cf. Shelley’s Alastor:

Two eyes,
Two starry eyes, hung in the gloom of thought
And seemed with their serene and azure smiles
To beckon.

[150] “Some of us have in a prior existence been in love with

an Antigone, and that makes us find no full content in any mortal
tie.” Shelley to John Gisborne, October 22, 1821.
[151] Confessions, Livre xi (1761).
[152] Mémoires d’Outre-Tombe, November, 1817.
[153] “Je me faisais une félicité de réaliser avec ma sylphide
mes courses fantastiques dans les forêts du Nouveau Monde.”
Mémoires d’Outre-Tombe, December, 1821.
[154] Peacock has in mind Childe Harold, canto iv, cxxi ff.
 [155] Rousseau plans to make a nympholept of his ideal pupil,
Emile: “Il faut que je sois le plus maladroit des hommes si je ne le
rends d’avance passionné sans savoir de quoi”, etc. Emile, Liv. iv.
[156] Cf. René’s letter to Céluta in Les Natchez: “Je vous ai
tenue sur ma poitrine au milieu du désert, dans les vents de
l’orage, lorsque, après vous avoir portée de l’autre côté d’un
torrent, j’aurais voulu vous poignarder pour fixer le bonheur dans
votre sein, et pour me punir de vous avoir donné ce bonheur.”
[157] The romantic lover, it should be observed, creates his
dream companion even less that he may adore her than that she
may adore him.
[158] Walter Bagehot has made an interesting study of the
romantic imagination in his essay on a figure who reminds one in
some respects of Gérard de Nerval—Hartley Coleridge.
[159] Don Juan bids his servant give a coin to the beggar not
for the love of God but for the love of humanity.
[160]

Demandant aux forêts, à la mer, à la plaine,

Aux brises du matin, à toute heure, à tout lieu,
La femme de son âme et de son premier voeu!
Prenant pour fiancée un rêve, une ombre vaine,
Et fouillant dans le cœur d’une hécatombe humaine,
Prêtre désespéré, pour y trouver son Dieu.
A. de Musset, Namouna.

“Don Juan avait en lui cet amour pour la femme idéale; il a

couru le monde serrant et brisant de dépit dans ses bras toutes
les imparfaites images qu’il croyait un moment aimer; et il est
mort épuisé de fatigue, consumé de son insatiable amour.”
Prévost-Paradol, Lettres, 149.
[161] See Scott’s (2d) edition of Swift, xiii, 310.
[162]

Aimer c’est le grand point. Qu’importe la maîtresse?

Qu’importe le flacon pourvu qu’on ait l’ivresse?

[163] It has been said that in the novels of George Sand when
a lady wishes to change her lover God is always there to facilitate
the transfer.
 [164] “Tous les hommes sont menteurs, inconstants, faux,
bavards, hypocrites, orgueilleux ou lâches, méprisables et
sensuels; toutes les femmes sont perfides, artificieuses,
vaniteuses, curieuses et dépravées; le monde n’est qu’un égout
sans fond où les phoques les plus informes rampent et se tordent
sur des montagnes de fange; mais il y a au monde une chose
sainte et sublime, c’est l’union de deux de ces êtres si imparfaits
et si affreux. On est souvent trompé en amour; souvent blessé et
souvent malheureux; mais on aime et quand on est sur le bord de
sa tombe, on se retourne pour regarder en arrière, et on se dit:
J’ai souffert souvent, je me suis trompé quelquefois, mais j’ai
aimé. C’est moi qui ai vécu, et non pas un être factice créé par
mon orgueil et mon ennui.” (The last sentence is taken from a
letter of George Sand to Musset.) On ne badine pas avec l’Amour,
ii, 5.

[165] Table-Talk. On the Past and Future.

[166] The Plain Speaker. On Reading Old Books.
[167] The Round Table. On the Character of Rousseau.
[168] “Aujourd’hui, jour de Pâques fleuries, il y a précisément
cinquante ans de ma première connaissance avec Madame de
Warens.”
[169] Even on his death-bed the hero of Browning’s
Confessions gives himself up to impassionated recollection:

How sad and bad and mad it was—

But then, how it was sweet.

In his Stances à Madame Lullin Voltaire is at least as poetical

and nearer to normal experience:

Quel mortel s’est jamais flatté

D’un rendez-vous à l’agonie?

[170] See especially Lyceum fragment, no. 108.

[171] A well-known example of the extreme to which the
romanticists pushed their Fichtean solipsism is the following from
the William Lovell of the youthful Tieck: “Having gladly escaped
from anxious fetters, I now advance boldly through life, absolved
from those irksome duties which were the inventions of cowardly
fools. Virtue is, only because I am; it is but a reflection of my
inner self. What care I for forms whose dim lustre I have myself
brought forth? Let vice and virtue wed. They are only shadows in
the mist,” etc.
[172] Beyond Good and Evil, ch. iv.

[173] On Contemporary Literature, 206. The whole passage is

excellent.
[174] M. Legouis makes a similar remark in the Cambridge
History of English Literature xi, 108.
[175] I scarcely need say that Wordsworth is at times genuinely
ethical, but he is even more frequently only didactic. The
Excursion, as M. Legouis says, is a “long sermon against
pessimism.”
[176] “Quia fecisti nos ad te et inquietum est cor nostrum,
donec requiescat in te.”
[177] Eth. Nic., 1177 b.
[178] Cf. the chapter on William Law and the Mystics in
Cambridge History of English Literature, ix, 341-67; also the
bibliography of Boehme, ibid., 560-74.
[179] See Excursion, i, vv. 943 ff.
[180] In his attitude towards sin Novalis continues Rousseau
and anticipates the main positions of the Christian Scientist.
[181]

Prune thou thy words,

The thoughts control
That o’er thee swell and throng.
They will condense within the soul
And change to purpose strong.
But he who lets his feelings run
In soft, luxurious flow,
Shrinks when hard service must be done
And faints at every foe.

[182] Wesley had no liking for Boehme and cut out from
Brooke’s book the theosophy that had this origin.
[183] Writing was often associated with magic formulæ. Hence
γράμμα also gave Fr. “grimoire.”
[184] Thus Spake Zarathustra, lxix (The Shadow to
Zarathustra).
 [185] Katha-Upanishad. The passage is paraphrased as follows
by P. E. More in his Century of Indian Epigrams:

Seated within this body’s car

The silent Self is driven afar,
And the five senses at the pole
Like steeds are tugging restive of control.

And if the driver lose his way,

Or the reins sunder, who can say
In what blind paths, what pits of fear
Will plunge the chargers in their mad career?

Drive well, O mind, use all thy art,

Thou charioteer!—O feeling Heart,
Be thou a bridle firm and strong!
For the Lord rideth and the way is long.

[186] See Brandes: The Romantic School in Germany, ch. xi.

[187] Alfred de Musset saw his double in the stress of his affair
with George Sand (see Nuit de Décembre), Jean Valjean (Les
Misérables) sees his double in the stress of his conversion. Peter
Bell also sees his double at the emotional crisis in Wordsworth’s
poem of that name.
[188] Thus Spake Zarathustra, lxix.

[189] F. Schlegel: Lyceumfragment, no. 42.

[190] E.g., canto iii, cvii-cxi.

[191] Confessions, Livre xii (1765).

[192] Cf. Th. Gomperz, Greek Thinkers, i, 402.
[193] Wordsworth: Miscellaneous Sonnets, xii.

[194] In much the same spirit the Japanese hermit, Kamo

Chōmei (thirteenth century), expresses the fear that he may
forget Buddha because of his fondness for the mountains and the
moon.—See article on nature in Japan by M. Revon in
Encyclopedia of Religion and Ethics.
[195] Confessions, Bk. x, ch. ix.

[196] Cf. Cicero: “Urbem, urbem, mi Rufe, cole et in ista luce

vive.” (Ad Fam., ii, 22.)
 [197] March 23, 1646.
[198] It was especially easy for the poets to go for their
landscapes to the painters because according to the current
theory poetry was itself a form of painting (ut pictura poesis).
Thus Thomson writes in The Castle of Indolence:

Sometimes the pencil, in cool airy halls,

Bade the gay bloom of vernal landskips rise,
Or autumn’s varied shades embrown the walls:
Now the black tempest strikes the astonish’d eyes;
Now down the steep the flashing torrent flies;
The trembling sun now plays o’er ocean blue,
And now rude mountains frown amid the skies;
Whate’er Lorrain light touch’d with softening hue,
Or savage Rosa dash’d, or learned Poussin drew.
(C. i, st. 38.)

[199]

Disparaissez, monuments du génie,

Pares, jardins immortels, que Le Nôtre a plantés;
De vos dehors pompeux l’exacte symmétrie,
Etonne vainement mes regards attristés.
J’aime bien mieux ce désordre bizarre,
Et la variété de ces riches tableaux
Que disperse l’Anglais d’une main moins avare.
Bertin, 19e Elégie of Les Amours.

[200] Pt. iv, Lettre xi.

[201] Nouvelle Héloïse, Pt. iv, Lettre xi.

[202] Ibid.
[203] Ibid., Pt. iv, Lettre xvii.

[204] Confessions, Livre v (1732).

[205] See especially Childe Harold, canto ii, xxv ff.
[206] Ibid., canto ii, xxxvii.

[207] Ibid., canto iii, lxxii.

[208] Ibid., canto iv, clxxvii.

 [209] See La Perception du changement, 30.
[210]

ASIA
My soul is an enchanted boat,
Which like a sleeping swan, doth float
Upon the silver waves of thy sweet singing;
And thine doth like an angel sit
Beside a helm conducting it,
Whilst all the winds with melody are ringing.
It seems to float ever, for ever
Upon that many-winding river,
Between mountains, woods, abysses,
A paradise of wildernesses!
…
Meanwhile thy spirit lifts its pinions
In music’s most serene dominions;
Catching the winds that fan that happy heaven.
And we sail on away, afar,
Without a course, without a star,
But by the instinct of sweet music driven;
Till through Elysian garden islets
By thee, most beautiful of pilots,
Where never mortal pinnace glided
The boat of my desire is guided;
Realms where the air we breathe is love—
Prometheus Unbound, Act ii, Sc. v.

[211] “Si tu souffres plus qu’un autre des choses de la vie, il ne

faut pas t’en étonner; une grande âme doit contenir plus de
douleurs qu’une petite.”
[212] Cf. Shelley, Julian and Maddalo:

I love all waste

And solitary places; where we taste
The pleasure of believing what we see
Is boundless, as we wish our souls to be.

[213] Cf. for example, the passage of Rousseau in the seventh

Promenade (“Je sens des extases, des ravissements
inexprimables à me fondre pour ainsi dire dans le système des
êtres,” etc.) with the revery described by Wordsworth in The
Excursion, i, 200-218.
[214] O belles, craignez le fond des bois, et leur vaste silence.
[215] Faust (Miss Swanwick’s translation).
[216] Artist and Public, 134 ff.
[217]

Make me thy lyre, even as the forest is:

What if my leaves are falling like its own!
The tumult of thy mighty harmonies

Will take from both a deep, autumnal tone,

Sweet though in sadness. Be thou, Spirit fierce,
My spirit! Be thou me, impetuous one!
Drive my dead thoughts over the universe
Like withered leaves, etc.

Cf. Lamartine:

Quand la feuille des bois tombe dans la prairie,

Le vent du soir s’élève et l’arrache aux vallons;
Et moi, je suis semblable à la feuille flétrie;
Emportez-moi comme elle, orageux aquilons.
L’Isolement.

[218] Cf. Hettner, Romantische Schule, 156.

[219] See appendix on Chinese primitivism.
[220] G. Duval has written a Dictionnaire des métaphores de
Victor Hugo, and G. Lucchetti a work on Les Images dans les
œuvres de Victor Hugo. So far as the ethical values are
concerned, the latter title is alone justified. Hugo is, next to
Chateaubriand, the great imagist.
[221] The French like to think of the symbolists as having
rendered certain services to their versification. Let us hope that
they did, though few things are more perilous than this transfer
of the idea of progress to the literary and artistic domain.
Decadent Rome, as we learn from the younger Pliny and others,
simply swarmed with poets who also no doubt indulged in many
strange experiments. All this poetical activity, as we can see only
too plainly at this distance, led nowhere.
[222] Grant Allen writes of the laws of nature in Magdalen
Tower:

They care not any whit for pain or pleasure,

That seems to us the sum and end of all,
Dumb force and barren number are their measure,
What shall be shall be, tho’ the great earth fall,
They take no heed of man or man’s deserving,
Reck not what happy lives they make or mar,
Work out their fatal will unswerv’d, unswerving,
And know not that they are!

[223] Fragment de l’Art de jouir, quoted by P.-M. Masson in La

Religion de J.-J. Rousseau, ii, 228.
[224] If nature merely reflects back to a man his own image, it
follows that Coleridge’s celebrated distinction between fancy and
imagination has little value, inasmuch as he rests his proof of the
unifying power of the imagination, in itself a sound idea, on the
union the imagination effects between man and outer nature—
and this union is on his own showing fanciful.
[225] If I had had this consecration Wordsworth says,
addressing Peele Castle,

I would have planted thee, thou hoary Pile,

Amid a world how different from this!
Beside a sea that could not cease to smile;
On tranquil land, beneath a sky of bliss.
…
A Picture had it been of lasting ease,
Elysian quiet, without toil or strife, etc.
Elegiac Stanzas suggested by a picture of Peele Castle in a
storm.

[226] Cf. Doudan, Lettres, iv, 216: “J’ai parcouru le Saint-Paul

de Renan. Je n’ai jamais vu dans un théologien une si grande
connaissance de la flore orientale. C’est un paysagiste bien
supérieur à Saint-Augustin et à Bossuet. Il sème des résédas, des
anémones, des pâquerettes pour recueillir l’incrédulité.”
 [227] In his Mal romantique (1908) E. Seillière labels the
generations that have elapsed since the rise of Rousseauism as
follows:
1. Sensibility (Nouvelle Héloïse, 1761).
2. Weltschmerz (Schiller’s Æsthetic Letters, 1795).
3. Mal du siècle (Hugo’s Hernani, 1830).
4. Pessimism (vogue of Schopenhauer and Stendhal, 1865).
5. Neurasthenia (culmination of fin de siècle movement, 1900).
[228] Eckermann, September 24, 1827.
[229] See La Nuit de Mai.
[230] These lines are inscribed on the statue of Musset in front
of the Théâtre Français. Cf. Shelley:

Our sweetest songs are those that tell of saddest thought.

[231] Translation by J. E. Sandys of fragment cited in Stobæus,

Flor. cix, i.
[232] Pythian Odes, iii, 20 ff.
[233] Pythian Odes, iii, 81-82.
[234] Song of the Banjo, in the Seven Seas.
[235] xvii, 446-47.
[236] A brief survey of melancholy among the Greeks will be
found in Professor S. H. Butcher’s Some Aspects of the Greek
Genius.
[237] The exasperated quest of novelty is one of the main
traits both of the ancient and the modern victim of ennui. See
Seneca, De Tranquillitate animi: “Fastidio illis esse cœpit vita, et
ipse mundus; et subit illud rabidorum deliciarum: quousque
eadem?” (Cf. La Fontaine: Il me faut du nouveau, n’en fût-il plus
au monde.)
[238] “A quoi bon m’avoir fait naître avec des facultés exquises
pour les laisser jusqu’à la fin sans emploi? Le sentiment de mon
prix interne en me donnant celui de cette injustice m’en
dédommageait en quelque sorte, et me faisait verser des larmes
que j’aimais a laisser couler.” Confessions. Livre ix (1756).
[239] Nouvelle Héloise, Pt. vi, Lettre viii.
 [240] “Encore enfant par la tête, vous êtes déjà vieux par le
cœur.” Ibid.
[241] See the examples quoted in Arnold: Essays in Criticism,
Second Series, 305-06.
[242] This is the thought of Keats’s Ode to Melancholy:

Ay, in the very temple of Delight

Veil’d Melancholy has her sovran shrine,
Though seen of none save him whose strenuous tongue
Can burst Joy’s grape against his palate fine.

Cf. Chateaubriand: Essai sur les Révolutions, Pt. ii, ch. lviii:
“Ces jouissances sont trop poignantes: telle est notre faiblesse,
que les plaisirs exquis deviennent des douleurs,” etc.
[243] See his sonnet Les Montreurs. This type of Rousseauist is
anticipated by “Milord” Bomston in La Nouvelle Héloïse. Rousseau
directed the engraver to depict him with “un maintien grave et
stoïque sous lequel il cache avec peine une extrême sensibilité.”
[244] “Qui es-tu? À coup sûr tu n’es pas un être pétri du même
limon et animé de la même vie que nous! Tu es un ange ou un
démon mais tu n’es pas une créature humaine. … Pourquoi
habiter parmi nous, qui ne pouvons te suffire ni te comprendre?”
G. Sand, Lélia, i, 11.
[245] See p. 51.
[246] See Lara, xviii, xix, perhaps the best passage that can be
quoted for the Byronic hero.
[247] Cf. Gautier, Histoire du romantisme: “Il était de mode
alors dans l’école romantique d’être pâle, livide, verdâtre, un peu
cadavéreux, s’il était possible. Cela donnait l’air fatal, byronien,
giaour, dévoré par les passions et les remords.”
[248] Hugo, Hernani.
[249]

Lorsque, par un décret des puissances suprêmes,

Le Poète apparaît dans ce monde ennuyé,
Sa mère épouvantée et pleine de blasphèmes
Crispe ses poings vers Dieu, qui la prend en pitié.
Fleurs du mal: Bénédiction.
 Cf. Nouvelle Héloïse, Pt. iii, Lettre xxvi:

“Ciel inexorable! … O ma mère, pourquoi vous donna-t-il un fils

dans sa colère?”
[250] Coleridge has a side that relates him to the author of Les
Fleurs du mal. In his Pains of Sleep he describes a dream in
which he felt

Desire with loathing strangely mix’d,

On wild or hateful objects fix’d.

[251] Keats according to Shelley was an example of the poète

maudit. “The poor fellow” he says “was literally hooted from the
stage of life.” Keats was as a matter of fact too sturdy to be
snuffed out by an article and had less of the quivering
Rousseauistic sensibility than Shelley himself. Cf. letter of Shelley
to Mrs. Shelley (Aug. 7, 1820): “Imagine my despair of good,
imagine how it is possible that one of so weak and sensitive a
nature as mine can run further the gauntlet through this hellish
society of men.”
[252] Euripides speaks of the Χάρις γόων in his Ἱκέτιδες (Latin,
“dolendi voluptas”; German, “die Wonne der Wehmut”).
[253] Chesterton is anticipated in this paradox by Wordsworth:

In youth we love the darksome lawn

Brushed by the owlet’s wing.
Then Twilight is preferred to Dawn
And autumn to the spring.
Sad fancies do we then affect
In luxury of disrespect
To our own prodigal excess
Of too familiar happiness.
Ode to Lycoris.

[254] Souvenirs d’enfance et de jeunesse, 329-30.

[255] “[Villiers] était de cette famille des néo-catholiques
littéraires dont Chateaubriand est le père commun, et qui a
produit Barbey d’Aurevilly, Baudelaire et plus récemment M.
Joséphin Peladan. Ceux-là ont goûté par-dessus tout dans la
religion les charmes du péché, la grandeur du sacrilège, et leur
sensualisme a caressé les dogmes qui ajoutaient aux voluptés la
suprême volupté de se perdre.” A. France, Vie Littéraire, iii, 121.
[256] Première Promenade.
[257] Ibid.
[258] E.g., Hölderlin and Jean Polonius.
[259] A striking passage on solitude will be found in the Laws
of Manu, iv, 240-42. (“Alone a being is born: alone he goes down
to death.” His kin forsake him at the grave; his only hope then is
in the companionship of the Law of righteousness [Dharma].
“With the Law as his companion he crosses the darkness difficult
to cross.”)
[260] “Be good and you will be lonely.”
[261] In the poem by the Swiss poet C. Didier from which
Longfellow’s poem seems to be derived, the youth who persists in
scaling the heights in spite of all warnings is Byron!

Et Byron … disparaît aux yeux du pâtre épouvanté.

(See E. Estève, Byron en France, 147).

[262] In the Mémoires d’Outre-Tombe Chateaubriand quotes
from the jottings of Napoleon on the island of Elba. “Mon cœur se
refuse aux joies communes comme à la douleur ordinaire.” He
says of Napoleon elsewhere in the same work: “Au fond il ne
tenait à rien: homme solitaire, il se suffisait; le malheur ne fit que
le rendre au désert de sa vie.”
[263] The solitude of the “genius” is already marked in Blake:

O! why was I born with a different face?

Why was I not born like the rest of my race?
When I look, each one starts; when I speak, I offend;
Then I’m silent and passive and lose every friend.

[264] Froude’s Carlyle, ii, 377.

[265] No finer lines on solitude are found in English than those
in which Wordsworth relates how from his room at Cambridge he
could look out on
 The antechapel where the statue stood
Of Newton with his prism and silent face,
The marble index of a mind for ever
Voyaging through strange seas of thought alone.
(Prelude iii, 61-63.)

Cf. also the line in the Sonnet on Milton:

His soul was like a star and dwelt apart.

[266] Eth. Nic., 1109 b.
[267] James Thomson in The City of Dreadful Night says that
he would have entered hell

gratified to gain
That positive eternity of pain
Instead of this insufferable inane.

[268] R. Canat has taken this phrase as the title of his

treatment of the subject: La Solitude morale dans le mouvement
romantique.
[269] Decadent Rome had the equivalent of Des Esseintes.
Seneca (To Lucilius, cxxii) speaks of those who seek to affirm
their originality and attract attention to themselves by doing
everything differently from other people and, “ut ita dicam, retro
vivunt.”
[270] Tennyson has traced this change of the æsthetic dream
into a nightmare in his Palace of Art.
[271] Contemporains, i, 332.
[272] Génie du Christianisme, Pt. ii, Livre iii, ch. ix.

[273]

L’orage est dans ma voix, l’éclair est sur ma bouche;

Aussi, loin de m’aimer, voilà qu’ils tremblent tous,
Et quand j’ouvre les bras, on tombe à mes genoux.

[274]
 Que vous ai-je donc fait pour être votre élu?
…
Hélas! je suis, Seigneur, puissant et solitaire,
Laissez-moi m’endormir du sommeil de la terre!
[275]

Le juste opposera le dédain à l’absence

Et ne répondra plus que par un froid silence
Au silence éternel de la Divinité.

[276] See Sainte-Beuve’s poetical epistle A. M. Villemain

(Pensées d’Août 1837).
[277] See Masters of Modern French Criticism, 233, 238.
[278] Wordsworth writes

A piteous lot it were to flee from man

Yet not rejoice in Nature.
(Excursion, iv, 514.)

This lot was Vigny’s:

Ne me laisse jamais seul avec la Nature

Car je la connais trop pour n’en avoir pas peur.

[279] Madame Dorval.

[280] La Maison du Berger. Note that in Wordsworth the “still
sad music of humanity” is very closely associated with nature.
[281] La Bouteille à la Mer.
[282] See Book ix of the Nicomachean Ethics.
[283] “All salutary conditions have their root in strenuousness”
(appamāda), says Buddha.
[284] See Masters of Modern French Criticism, Essay on Taine,
passim. Paul Bourget in his Essais de Psychologie contemporaine
(2 vols.) has followed out during this period the survivals of the
older romantic melancholy and their reinforcement by scientific
determinism.
[285] “Le pauvre M. Arago, revenant un jour de l’Hôtel de Ville
en 1848 après une épouvantable émeute, disait tristement à l’un
de ses aides de camp au ministère de la marine: ‘En vérité ces
gens-là ne sont pas raisonnables.’” Doudan, Lettres, iv, 338.
[286] See Preface (pp. viii-ix) to his Souvenirs d’enfance et de
jeunesse and my comment in The New Laokoon, 207-08.
[287] Most of the political implications of the point of view I am
developing I am reserving for a volume I have in preparation to
be entitled Democracy and Imperialism. Some of my conclusions
will be found in two articles in the (New York) Nation: The
Breakdown of Internationalism (June 17 and 24, 1915), and The
Political Influence of Rousseau (Jan. 18, 1917).
[288] Reden an die deutsche Nation, xii.

[289] I should perhaps allow for the happiness that may be

experienced in moments of supernormal consciousness—
something quite distinct from emotional or other intoxication.
Fairly consistent testimony as to moments of this kind is found in
the records of the past from the early Buddhists down to
Tennyson.
[290] I scarcely need say that I am speaking of the man of
science only in so far as he is purely naturalistic in his point of
view. There may enter into the total personality of Edison or any
particular man of science other and very different elements.
[291] M. René Berthelot has written a book on pragmatism and
similar tendencies in contemporary philosophy entitled Un
Romantisme utilitaire. I have not read it but the title alone is
worth more than most books on the subject I have read.
[292] Dedication of the Æneis (1697).
[293] Adventure of one Hans Pfaal.
[294] His attempt to rewrite Hyperion from a humanitarian
point of view is a dismal failure.
[295] There is also a strong idyllic element in Paradise Lost as
Rousseau (Emile, v) and Schiller (Essay on Naïve and Sentimental
Poetry) were among the first to point out. Critics may be found
even to-day who, like Tennyson, prefer the passages which show
a richly pastoral imagination to the passages where the ethical
imagination is required but where it does not seem to prevail
sufficiently over theology.
[296] xii, 74.
[297] Three Philosophical Poets, 188.
 [298] After telling of the days when “il n’y avait pour moi ni
passé ni avenir et je goûtais à la fois les délices de mille siècles,”
Saint-Preux concludes: “Hélas! vous avez disparu comme un
éclair. Cette éternité de bonheur ne fut qu’un instant de ma vie.
Le temps a repris sa lenteur dans les moments de mon désespoir,
et l’ennui mesure par longues années le reste infortuné de mes
jours” (Nouvelle Héloïse, Pt. iii, Lettre vi).
[299] The Church, so far as it has become humanitarian, has
itself succumbed to naturalism.
[300] Sutta of the Great Decease.
[301] If a man recognizes the supreme rôle of fiction or illusion
in life while proceeding in other respects on Kantian principles, he
will reach results similar to the “As-if Philosophy” (Philosophie des
Als Ob) of Vaihinger, a leading authority on Kant and co-editor of
the Kantstudien. This work, though not published until 1911, was
composed, the author tells us in his preface, as early as 1875-78.
It will be found to anticipate very strikingly pragmatism and
various other isms in which philosophy has been proclaiming so
loudly of late its own bankruptcy.
[302] “C’est en vain qu’on voudrait assigner à la vie un but, au
sens humain du mot.” L’Evolution créatrice, 55.
[303] Metaphysics, 1078 b.
[304] In the beginning was the Word! To seek to substitute,
like Faust, the Deed for the Word is to throw discrimination to the
winds. The failure to discriminate as to the quality of the deed is
responsible for the central sophistry of Faust (see p. 331) and
perhaps of our modern life in general.
[305] “J’adore la liberté; j’abhorre la gêne, la peine,
l’assujettissement.” Confessions, Livre i.
[306] Analects, xi, cxi. Cf. ibid., vi, cxx: “To give one’s self
earnestly to the duties due to men, and while respecting spiritual
beings, to keep aloof from them, may be called wisdom.” Much
that has passed current as religion in all ages has made its chief
appeal, not to awe but to wonder; and like many humanists
Confucius was somewhat indifferent to the marvellous. “The
subjects on which the Master did not talk were: extraordinary
things, feats of strength, disorder and spiritual beings” (ibid., vii,
cxx).
 [307] One of the last Chinese, I am told, to measure up to the
Confucian standard was Tsêng Kuo-fan (1811-1872) who issued
forth from poverty, trained a peasant soldiery and, more than any
other one person, put down the Taiping Rebellion.
[308] See J. Barthélemy Saint-Hilaire’s Introduction to his
translation of the Nicomachean Ethics, p. cxlix.
[309] Eth. Nic., 1122-25.
[310] I have in mind such passages as P., viii, 76-78, 92-96; N.,
vi,1-4; N., xi, 13-16.
[311] “II n’y eut jamais pour moi d’intermédiaire entre tout et
rien.” Confessions, Livre vii.
[312] Some wag, it will be remembered, suggested as an
alternative title for this work: Wild Religions I have known.
[313] Letters, ii, 298; cf. ibid., 291: “I have never known a life
less wisely controlled or less helped by the wisdom of others than
his. The whole retrospect of it is pathetic; waste, confusion, ruin
of one of the most gifted and sweetest natures the world ever
knew.”
[314] Nic. Eth., 1145 b. The opposition between Socrates or
Plato and Aristotle, when put thus baldly, is a bit misleading.
Socrates emphasized the importance of practice (μελέτη) in the
acquisition of virtue, and Plato has made much of habit in the
Laws.
[315] Analects, ii, civ.

[316] This belief the Oriental has embodied in the doctrine of

Karma.
[317] “La seule habitude qu’on doit laisser prendre à l’enfant
est de n’en contractor aucune.” Emile, Livre i.
[318] Emile was to be trained to be a cabinet-maker.
[319] Eth. Nic., 1172 b.
[320] Doctrine of the Mean (c. xxxiii, v. 2).
[321] See his poem Ibo in Les Contemplations.
[322] La. 55, p. 51. (In my references La. stands for Lao-tzŭ,
Li. for Lieh-tzŭ, Ch. for Chuang-tzŭ. The first number gives the
chapter; the second number the page in Wieger’s edition.)
[323] Ch. 22 C, p. 391.
 [324] Ch. 12 n, p. 305.
[325] Ch. 11 D, p. 291. Ibid. 15, p. 331. See also Li. 31, p. 113.
[326] Ch. 19 B, p. 357.
[327] Ch. 19 L, p. 365.
[328] Ch. 10, pp. 279-80.
[329] Ch. 9, pp. 274-75.
[330] Ch. 29, pp. 467 ff.
[331] Ch. 2, p. 223.
[332] La. 27, p. 37.
[333] Ch. 8 A, p. 271.
[334] Li. 5, p. 143.
[335] Ch. 14 C, p. 321.
[336] For an extreme form of Epicureanism see the ideas of
Yang-chu, Li. 7, pp. 165 ff. For stoical apathy see Ch. 6 C., p. 253.
For fate see Li. 6, p. 165, Ch. 6 K, p. 263.
[337] Ch. 33, pp. 499 ff.
[338] Ch. 33 C, p. 503.
[339] Bk. III, Part 2, ch. 9.
[340] Li. 3, p. 111. Ch. 24, pp. 225-27.
[341] Ch. 6 E, p. 255.
[342] See The Religion of the Samurai: a Study of Zen
Philosophy (1913) by Kaiten Nukariya (himself a Zenist), p. 23.
 INDEX OF NAMES

Abelard, 238.
Addison, 12, 35, 37, 38, 202 n.
Æschylus, 292, 359.
Ajax, 144.
Allen, Grant, 299 n.
Amiel, 315.
Ananda, 370.
Angélique, Mother, 123.
d’Angoulême, Marguerite, 251.
Antisthenes, 244.
Apollonius of Rhodes, 104.
Aquinas, St. Thomas, 101, 112.
Arago, 244 n.
Ariosto, 264.
Aristophanes, 181, 243, 285.
Aristotle, xv n., xix, xxi, xxii, 4, 12 n., 15-19, 24, 28 n., 29, 33,
47, 148, 166, 171, 173, 202, 205 n., 211, 222, 237, 253,
254, 295, 329, 330, 343, 349, 354, 355, 363, 365, 372,
374, 381, 382, 385, 386, 389, 390.
Arnold, Matthew, xi, 281, 308, 315 n., 323, 325, 351.
Augustine, St., 116, 213, 224, 252, 273, 304 n.
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