CH3: Environmental Analysis Flashcards
Why is environmental scanning important in business?
It helps managers detect external threats and opportunities early, so they can adjust strategies proactively and maintain competitiveness.’’’,
What defines the macro-environment?
It consists of broad, uncontrollable external factors like the economy, political conditions, and international trends, which influence strategy and risk.’’’,
How does international activity affect local businesses?
Global inflation, interest rates, exchange rates, and political developments can directly impact local costs, demand, and business viability.’’’,
What skills must managers have to operate internationally?
Cultural awareness, legal compliance, economic understanding, and adaptability to foreign business systems and management practices.’’’,
How does inflation affect business decisions?
It complicates pricing, reduces purchasing power, and increases the need for tight working capital management (stock, debtors, creditors).’’’,
What is the business cycle?
A pattern of economic expansion and contraction over time. It influences consumer behavior, investment, and strategic planning.’’’,
What role does GDP play in the business cycle?
GDP is a key indicator of economic activity and helps track peaks and troughs in the cycle, guiding business strategy.’’’,
What is the impact of high interest rates on business?
Increases cost of debt.’, Reduces consumer demand for financed goods., ‘Lowers business expansion due to expensive borrowing.’’’,
How are productivity and profitability related?
Higher productivity usually leads to greater profitability, but SA faces a gap between rising wages and stagnant productivity.’’’,
What role does employee participation play in social responsibility?
Labour democracy promotes worker involvement in decision-making, and businesses are expected to support education, health, and well-being initiatives.’’’,
Why must businesses be concerned with the ecological environment?
Because they rely on natural resources for production, and unsustainable use can lead to shortages, cost increases, and regulatory pressure.’’’,
Why is the political environment difficult to manage?
Because it’s highly unpredictable, and policy changes (e.g., taxation, regulation) can dramatically impact business operations.’’’,
What role should government play in the economy?
It should create a conducive environment for business through sound policy, infrastructure, and market support.’’’,
What is the institutional environment?
It includes government and industry institutions (e.g., SARS, DTI, labour unions) that influence or support business through policy, regulation, or advocacy.’’’,
What is the function of the market environment?
It links the business to the broader macro-environment, directly influencing competitiveness and performance.’’’,
What is the role of interest groups in the market environment?
These groups (e.g., NGOs, media) can influence public opinion and pressure businesses toward more ethical and transparent practices.’’’,
Why is understanding consumers critical for businesses?
Because consumer needs, behaviours, and perceptions directly impact product demand and marketing strategy.’’’,
How do businesses gain an edge in a competitive environment?
By developing unique value propositions, adapting strategy, and innovating faster than rivals.’’’,
Why are suppliers strategic stakeholders?
Because supply chain efficiency, cost, and quality directly affect production and customer satisfaction.’’’,
What is the purpose of strategic alliances?
To access expertise or resources not available internally and to exploit opportunities or reduce market threats collaboratively.,
Why is capital important for entrepreneurial ability?
Because it funds all operations and determines whether business goals are financially realistic and sustainable.,
How do raw materials impact entrepreneurial capacity?
They directly affect production. Proper sourcing ensures the right quality and quantity to avoid disruptions.,
What is the role of management skill in the micro-environment?
Skilled management drives success by effectively coordinating people, capital, and resources. Without it, even strong potential may fail.’’’,
How can SWOT help decision-making?
It provides a structured framework to convert threats into opportunities and weaknesses into strengths.,
What are the 4 strategic responses from environmental analysis?
- Maintenance Strategy â Stay the course’, 2. Growth Strategy â Expand, 3. Combination Strategy â Mix of both, ‘4. Activity-Specific Strategy â Focus on one area (e.g., HR, production)’’’,
How can management stay aligned with environmental shifts?
Through environmental exploration such as scanning, SWOT analysis, and scenario planning to anticipate changes and adapt accordingly.’’’, ,
What is a SWOT analysis, what does it stand for, and how is it used in planning?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses are internal, while opportunities and threats are external. SWOT helps businesses identify strategic actions by aligning internal capabilities with external conditions.
What is environmental analysis and how do scanning and scenario planning contribute to it?
Environmental analysis helps businesses understand external influences. Environmental scanning involves monitoring trends, while scenario planning explores possible future outcomes. Together, they inform strategic decision-making and risk preparation.
What are the layers and key characteristics of the business environment?
The business environment consists of three layers: micro, market, and macro. Its key characteristics are complexity, change, uncertainty, and interrelatedness.
What is the micro-environment, its functions, and how does it shape business structure?
The micro-environment (internal environment) includes management, capital, raw materials, and entrepreneurial ability. It directly influences business structure, processes, and daily functioning.
How does technology influence business operations, and why must companies keep up?
Technology drives efficiency, innovation, and competitiveness. Businesses must stay current to maintain relevance, improve products, and meet customer expectations.
What socio-demographic factors affect business in South Africa?
Key factors include income distribution, language diversity, low education levels, HIV/AIDS prevalence, and urbanisation. These influence marketing, labour availability, and strategic positioning.
What labour market challenges affect businesses in South Africa?
Challenges include high unemployment, skills shortages, trade union influence, and labour market rigidity. These impact productivity, cost structures, and operational flexibility.
