Business Enviroments Flashcards
What are the three business environments
Macro, market, and micro
What does the micro environment consist of
- the 8 business functions
- resources
- business policy
- organisational structure
- strategy
- Management and Leadership
What does the market environment consist of
- customers
- suppliers
- competitors
- regulators
- unions
- intermediaries
- NGOs
- CBOs
- strategic alliance
- employer organisations
What does the macro environment consist of
PESTLE
- Physical
- Economical
- Social, cultural, demographic
- Technological
- Legal and political
- International
- institutional
How much control do we have over the micro environment
Total control
How much control do we have over the market environment
We have no control but we can influence it
How much control do we have over the macro environment
No control
What does the Vision of the business consist of
The dream that an entrepreneur wants to achieve (long term)
What is the mission of the business
It is the action plan which gives clear directions on how to achieve the vision of the business (long term)
What are the goals of the business
The medium term achievements
What are the objectives of the business
The daily functioning of the business (short term things you need to do to reach your dream)
What are the 8 business functions
Human Resources, Public Relations, Production, Purchasing, Marketing, Admin, Finance, General management
What is the organisational structure of the business
The hierarchy of the business
What is organisational culture
It is the way the company goes about doing business. It’s values and beliefs that are shared within the business
What determines the performance of the business
3p’s (profit, people, planet)
Describe the purchasing function
Procurement of goods and services needed by other departments in the business
Describe the production function
Making of a product that consumers are willing to pay for by combining the factors of production which are natural resources, labour, capital and entrepreneurship
Describe the Human Resources function
Employment of people according to the requirements of the business
Describe the administration function
Collects data to process into useful information
What is a demographic
A measurable characteristic of the consumer (eg. Race, gender, location, age )
What is a psychographic
A value system ( a characteristic you tell just by looking at the consumer eg. Why do you buy a product)
What is the difference between services and goods
( services are intangible while goods are tangible)
Describe the marketing function
All the activities related to getting the product/ service from the producer to the consumer
Deceive the public relations function
Responsible for keeping all stakeholders happy by maintaining a favourable public image at all times
Describe the financial function
Handles all the money matters of the business
Describe the general management function
Coordinates and oversees all the other functions
What are resources
Everything that is available in the business to produce goods or deliver a service
What are the different resources in a business
Human, physical, financial, technological and time resources
What does Human Resources consist of
Employees
What does physical resources consist of
Raw materials and infrastructure
What does financial resources consist of
Capital
What does technological resources consist of
Internet
What influences the hierarchy of a business
Size of the company, type of operation/business, and organisational culture
What are the three types of organisational structure
Functional, project and matrix structure
Describe the functional structure
CEO at the top followed by department managers then department team members
Describe the project structure
Employees from different departments are brought together to carry out a project
Describe the matrix structure
Similar to a project structure, except employees don’t move out of their departments for a project
What organisational structure do bigger businesses normally use
Functional structure
What type of organisational structure do smaller businesses normally use
Project or matrix structure
What is the strategy of the business
It is a very specific plan of action that defines the processes to be used to achieve a desired outcome.
What tool can a business use to come up with the best strategy
A SWOT analysis
What are the four activities of general management
Planning, organising, leading and controlling
Describe a swot analysis
It is a chart which has four blocks (two rows and two columns) the top two blocks contain strengths and weaknesses. The bottom two blocks contain the opportunities and threats. The first column contains positive aspects, the second column contains negative aspects. The top two blocks contain the micro environment and the bottom two blocks contain the macro and market environment
What is another word for the micro environment
Internal environment
What is another word for the market environment
The industry environment
What are customers
They are potential buyers of the product or service
What does the business need to know about the customers
The needs, behaviour patterns and preference trends in order to keep customers satisfied.
What tools are used to persuade potential customers to buy the product or service
Marketing and advertising
Describe suppliers
They provide raw materials, services, trading stock, machinery, equipment and packaging to the business
How can business influence suppliers
By buying in bulk and negotiating price discount
What do business need to ensure their suppliers provide
The best quality and price at the correct quantity and time
Describe competitors
Other Businesses that sell the same/similar products or services to the same target market.
What are the benefits of environmental scanning
✓ Identifies threats before they are
imminent
✓ Identifies possible opportunities and gaps in the market.
✓ Keeps finger on pulse of competitors.
✓ Allows entrepreneur to make both long and short term strategies to protect their business.
When is environmental scanning done
Done BEFORE business is started and DURING running of business.
What do we look at when doing environmental scanning before a business is started
- Viability of product
- Strength of competitors
- Size of potential market to allow new player in industry.
- Stability of resources such as suppliers, financiers, staff, premises and investors.
What tools are used to scan the micro environment
- SWOT Analysis
- Resource Based Approach
- Value Chain Analysis
- Balanced Scorecard
What are the elements of the Market environment
- Customers
- Suppliers
- Competitors
- Regulators
- Unions
- Intermediaries
- Non-governmental Organisations
(NGOs) - Community based organisations (CBOs)
- StrategicAlliances
- Other Organisations
What tools can be used to scan the market environment
OT of SWOT and porter’s 6 Forces model
What are the questions that a porters 6 Force model include
- Level of rivalry
- threat of new entrants
- availability of substitute products
- power of suppliers
- power of buyers
- power of complementary products
What should we consider when commenting on level of Rivarly
- Size and financial resources of business - market share
- quality of products/services
- consumer brand loyalty
- pricing of products/services
- convenience of location and distribution channels
- trading hours
What are strategies to deal with level of rivalry
- Customer loyalty programs
- Reduction of prices to make business more attractive than competitors
- Improve quality of service and products
What should we consider when commenting on availability of substitute products
It does not refer to another brand. It is a different product that satisfies the same need. Eg margarine vs butter
What are the negative effects of not having any stock
- customer frustration
- bad publicity
- decrease in sales
- decrease in profits
What should we consider when commenting on power of buyers
- What type of product/service is being offered?
- Is the consumer brand loyal or are they prepared to swop brands for a better deal?
- How price sensitive are consumers?
What should we consider when commenting on power of complementary products
They are services or products that add value to the main product eg. At mc Donald’s a complementary service is the drive through.
What does P2E2STLE stand for
Political, Physical environment
Economic, Ethical
Social
Technological
Legal
Environmental
What does the political factor of PESTLE address
Political stability of country impacts on investor confidence and value of exchange rate. Consider: Looting in KZN, fraud, corruption, stealing of money intended for COVID impacted businesses and citizens; Crises at Eskom……Discuss the impact of these occurrences on businesses
What does the physical environment factor of PESTLE address
✓ Geographical locations
✓ Physical location
✓ Weather
What does the physical environment factor of PESTLE address
✓ Geographical locations
✓ Physical location
✓ Weather
What does the Economic environment factor of PESTLE address
➢ Inflation rates: general price increase
➢ Interest rates: rate at which people
borrow money from banks.
➢ Exchange rates: strength/weakness of Rand
➢ Unemployment
➢ Taxes
What does the social/ Socio-economic factor of PESTLE address
Refers to impact that social trends have on the economy, businesses and consumer behaviour/lifestyle eg Personal safety and crime
What does the technological factor of PESTLE address
➢ Development of social media
➢ Automation of different processes
➢ Advances in online money transfer
➢ Online shopping
What does the environmental factor of PESTLE address
- Environmental rules and regulations
- Global warming
- Natural disasters
What does the legal factor of PESTLE address
Refers to all laws that impact the business.
1. Labour legislation
2. Consumer protection Act
3. National Credit Act
4. Environmental Laws
5. Laws protecting the business against white collar crimes(financially motivated, non violent crimes by people usually from higher social class)
6. Lockdown laws
Strategies are used for trends and crises. What is trend.
predictable changes the business can plan for to some extent.
Strategies are used for trends and crises . What is a crises
unexpected and unplanned- for happenings that can throw an economy/ industry/business into unstable conditions.
What are the advantages of a strategy
➢ Gives direction to the business through precise plans
of action.
➢ Ensures consistency in decision-making.
➢ Differentiates management roles and areas of responsibility.
➢ Anticipates changes in both internal and external environment.
What are the different corporate strategies
- Growth/ intensive strategies
- Decline/ defensive strategies
- corporate combination
What is the growth corporate strategy
It is a strategy used to increase the businesses market share/turnover. Things like product development, diversification, market penetration and market development are examples of using the corporate growth strategy
What is the decline corporate strategy
When the business starts to scale down for various reasons. Strategies include retrenchment, divestiture, harvesting and liquidation
What is retrenchment done for
done in order to reduce expenses and improve financial position of business.
What is divestiture done for
Involves the business selling some of its operations as the assets in these operations may be under-utilised.
What is harvesting done for
involves termination of investments in a product, product line or line of business so that the entities involved can reap/harvest the maximum profits.
Example: a soft-drink company may terminate investments in its established carbonated product to reallocate funds to its new line of energy drinks.
What is liquidation done for
happens when a business is bankrupt. All assets of business is sold to pay for debt of business
What is corporate combination
Forming an alliance with another business to improve functioning or to form a new business. This includes joint ventures, mergers, and take overs
What is a joint venture
when two or more businesses enter into an agreement to improve their functioning. Example, Pick n Pay and BP Garage
What is a merger and takeover
individual businesses no longer exist separately. They combine to form a new business. Example, ABSA was formed from the merger of the banks Volkskas, Allied, Trust Bank and United.
What are examples of generic strategies
- low cost strategy
- differentiation strategy
- focus strategy
- revise business mission/ and or objectives
- allocate resources differently
- benchmarking
- financial ratios
- 360 ° analysis
- total quality management.
What does a low cost strategy entail
Having lowest cost in the industry by savings costs. Thus explaining your profit margin.
This can be achieved if:
✓ Business has access to cheap raw materials.
✓ There is low cost manufacturing through technology and efficient use of resources.
✓ Activities that are costly must be either discontinued or outsourced.
What does the differentiation strategy entail
▪ Providing a unique product/service to ensure customer loyalty.
▪ Gives business opportunity to charge premium price.
Essentially standing out
What does the focus strategy entail
All efforts aimed at a specific market segment. Based on criteria that makes that segment unique (geography, culture, age, hobbies)
Expert knowledge of niche market is required by the business for successful implementation.
Eg LUSH cosmetics/toiletries does not sell an image but rather a viewpoint on how they define beauty. Environmentally friendly, no animal testing
What are the different integration strategies
- forward vertical integration
- backward vertical integration
- horizontal integration
What is forward vertical integration
business takes over retailer to get rid of the middleman in distribution process. This reduces selling price to consumers. Done also to have direct contact with customers.
What is backward vertical integration
business buys out supplier to secure source of raw materials. (Starbucks owns coffee farms, McDonalds owns potato farms, Ferrero owns a hazelnut processing company.)
What is horizontal integration
Takingover competitor. (Facebook acquisition of Instagram. Disney’s acquisition of Pixar Studios)
What is the total quality management strategy
Process where everyone in business is committed to thinking about how all actions impact on quality of all tasks and overall customer satisfaction. Therefore it is in the interest of the business to get customer feedback AND respond to feedback to improve quality of product/service. Quality improvement methods include inspections, sampling, quality,
What are inspections
Process of measuring, examining/testing products/service. Results compared to predetermined specifications
