Business environments Flashcards
name the 3 business environments
micro
market
macro
name the internal inveronments
micro environment
name the external environmetns
market
macro
macro environment
=the business has no control over what happens in the maco environment
=the business needs to design strategies
what are the tools used to analyze the macro environment
an environmental scan
a SWOT-analysis, and
a PESTLE analysis or a PE²STLE analysis.
Environmental Scan
=Identify factors that may impact on the business
=then adjust existing plans or develop new plans to
deal with these factors / events.
A SWOT-analysis (Only O and T)
O and T are external factors of the business
PE²STLE-analysis:
Political
economic
ethical
social
technological
legal environmental
Political factors .This factor is important in relation to:
local political situation of the country
political situation of other countries in which the business may operate
world politics in general
Economic factors.Economic factors that may affect the business:
Economic growth and development in the country
Inflation rates
Interest rates
Exchange rates
High unemployment rates
Taxes such as income tax, VAT, import duties, etc.
Ethical factors that a business needs to consider
= What is the difference between ethical and legal
= Fair trade refers to respect and transparency in business dealings, acknowledging that one party will not attempt to exploit the other
=CSR is the responsibility towards the shareholders to make a profit vs the responsibility towards giving back to the community
=an employee’s privacy regarding the use of the internet vs the rights of the business to expect responsible behavior from employees.
Socio-economic factors
=Refers to the impact that social
trends have on the role players in the
economy.
other factors are :
=the average age of the population, the life expectancy, and people becoming more health conscious
= The number of single parents providing for a family.
=HIV/AIDS infection and diseases such TB and malaria
= levels of literacy/education
=unemployment rates
Technological factors
Technology refers to the equipment the
business uses to buy (or make), advertise or
sell the products or services.
think about how the following factors impact the business:
= rapid development of issues surrounding social media
=automation of different processes, requiring less use of lower-skilled
= Advances in online money transfers
=online shopping
= Product innovation through research and development
Legal factors
The legal environment refers to all
laws that impact the business.
these include:
= labor legislation such as the labor relations act
= Legislation introduced to protect the consumer
=laws that protect the environment against exploitation and pollution
=criminal justice that protects the business against piracy and rip-offs
=laws relating to paying tax, registering the business, health, and safety, and specifications for dealing with food
Physical environment and other Environmental factors
Environmental factors are important if one
thinks of the growing awareness to protect
the environment and to prevent negative
consequences such as global warming and
changes in weather patterns.
Tools used to analyse
the market environment:
an environmental scan
a SWOT-analysis O and T only
Porters Six Force model
Porters Six Force model
cureent competitors
threat of new entrants
availability of substitute products
the power of suppliers
the power of buyers
the power of complementary products
current competitors(view the following factors)
-size and financial resources
-market share
-quality of products and services
-consumer brand loyalty
-pricing of products and services
-convenience of location and distribution channels
-trading hours
Threat of new entrants
Not only current competitors “steal” customers, there may be a challenge from a new business that sees an
opportunity to make money by entering the market.
Availability of substitute products
A substitute product does NOT refer to a
different brand. A different brand is a
competitors in the market.
The power of suppliers
Any business that does not have a reliable supplier is certain to encounter problems more often than not - Consequently, it is critical that the business develops and maintains good relationships with suppliers.
The power of buyers
The buyer may be a wholesaler
ordering from a manufacturer, or a
retailer buying the products for his
shop or even the consumer who has
to spend his or her hard earned
money at your business.
The Power of complementary products
Where the use of one product is interrelated with the use of another product are paired together.
Tools used to analyse then micro environment:
An environmental scan
A SWOT-analysis (S and W only)
A resource-based analysis
A value-chain analysis
Eight functional areas of a business:
=Purchasing
=productions
=Financial
=Human Capital
=Marketing
=Public Relations
=Administration
=General management
Purchasing function
Buys goods and services needed by all departments
Production function
=Aim is to transform raw materials into a products to satisfy needs.
=It is NB to keep manufacturing cost low, while maintaining quality.
=Continuous product design is important to satisfy consumers.
Financial function
Business needs capital to start the business. Capital can be either
own or borrowed.
Financial Statements
Statement of Comprehensive Income (Income statement) and the Statement of Financial Position (Balance Sheet).
Figures from financial statements used
to explain four main objectives :
Maximise profits
Increase profitability
Ensure Liquidity
Remain solvent
Human Capital (HC) function /Human Resources (HR) function
labor is an important factor of production.
4 factors of production
capital
natural resources
salaries/wages
profit
what are the objectives of HC
determine how many workers and levels of skills
-workers must be recruited to fill vacancies
-train staff to improve productivity
Marketing function Illustration of the four policy instruments and the relevant sub-sections.
=Product policy
=Price policy
=Place (distribution)
=Promotion policy
Promotion policy
=Advertising
=Sales promotion
=Personal sales
=Publicity
Marketing communication mix (4 Ps)
Advertising
Sales promotion
Personal sales
Publicity
Public Relations function
To create and maintain a
favourable image of the
business with all relevant
interest groups and
stakeholders.
Administrative function
…is responsible for collecting all data in the
business and the business environment.
=The data will then be processed into
information.
=The information is stored and made
available to management as and when needed.
=Admin handles all the ‘paper work’ and
record keeping in the business to comply
with legislation.
General Management function
Planning,
Organising
Leading
Controlling
, Coordination,
Communication,
Delegation,
Disciplinary action
, Decision making
Motivation.
Overall business as an organisation
The business is the sum of individual components (Synergy)
The following have an effect on modern business:
Technology and IT
Logistics
competitive advantage
how the business has the edge in the market or over competitors
competitive advantage
how the business has the edge in the market or over competitors
advantages of automation
-lower labor costs
-more machines also do not need to take leave and if maintained well, do not go on trike
-usually results in higher-quality products
-re-training for skills development
disadvantages of automation
high capital investment
workers will suffer ob losses
worker dissatisfaction
additional costs because of retraining
advantages of quality control
-eliminate problems in the production process ad thereby reduce production costs
- encourage workers to deliver good quality products
-the basis for remuneration decisions
-retailers will be confident for receiving quality products
advantages of credit sales
-turnover increases as more goods can be sold to more customers
-customers will return to buy on credit, gain goodwill
-the seller will increase his selling price to compensate for the fact that he has to wait for his money and take the risk of bad debts
-stimulates the economy
disadvantages of credit sales
-credit trainer needs more working capital because capital is tied up in debt and consequently, there is a delay in payment from the debtors
-business needs to be aware of the risk of bad debt when granting credit
-admin expenses will be too much when it is time to call people to pay up
a resource based analysis has the potential to create a competitive advantage if
-durable
-difficult for competitors to copy
take me through the 3 steps in the value chain approach
-every activity in the chain is analyzed
-determine where the value is added and where insufficient value is added
-the activities that continue to create value are retained and those that do not add sufficient value are eliminated
