Chapter 1: Business Environments Flashcards
Environmental scanning
- Obtaining info on possible events that may affect the business
- Used to check both internal and external environments
- Makes sure that the business is ready for any developments needed to adjust to changing events
- Identifies possible challenges in order to gain a better ubderstanding of them
- Helps management decioher the impact of their decisions based off of what is happening around us
Crisis
- A change that happens very suddenly and unexpectedly where the business did not plan for it
Trend
- A change that happens gradually over a period of time and that the business can easily adapt to
Environmental scanners per environment
- Micro- (SW)OT
- Market- SW(OT) + Porter’s 6 forces
- Macro- SW(OT) + PESTLE
Porter’s Six Forces
Used to assess whether the market is attractive or not
Porter’s Six Forces
Used to assess whether the market is attractive or not
Attractive and unattractive markets
Attractive
Attractive
* High barriers of entry
* Low competition
* Few substitute products
* Weak supplier bargaining power
* Weak buyer bargaining power
Attractive and unattractive markets
Unattractive
Unattractive
* Low barriers to entry
* High levels of competition
* Wide variety of substitute products
* Strong buyer bargaining power
* Strong supplier bargaining power
Threat of new entrance
Threat of new entance is low when:
* The expense of entering that market is too high
* The already exisitng business have patents and trade marks
* There is strong customer loyalty
* There is strict government legislation that makes it challenging to enter that market
Rivalry amongst competitors
Rivalry amongst competitors is high when:
* There are many competitors in the market
* Competitors are more or less the same size
* Low customer loyalty
* Exit barrier is high
* Buyer can switch between substitute products at little to no expense
* Market growth is low
Bargaining power of the supplier
The bargaining power of the supplier is high when:
* There are not many suppliers in that market
* Switching to a different supplier is too complicated or expensive
* Limited number of substitute suppliers
Bargaining power of the buyer
The bargaining power of the buyer is high when:
* The buyer is buying in bulk
* There are multiple other substitute products for the buyer to choose from
* There are not many buyers to sell to
* It isnt expensive for the buyer to switch to another business
(P)ESTLE
Politics
*War- damage to infastructure, import/exports disrupted, deaths
* Political parties- Nationalisation
* Grants- Government grants like development grant and relief grant
P(E)STLE
Economics
- Inflation- More spent expenses and less supporting businesses
- Disposable income- higher the disposble income then the more will be spent on the business instead of taxes
- Exchange rate- The weaker the currency, the more expensive imports will be
- Tax- If tax rate increases then profits decrease
- Labour costs- If minimum wage increases then more money has to be spent on salaries/wages and not on the running of the business
PE(S)TLE
Social
- Unemployment- Higher unemployment rate means less employees and less customers
- CSR- CSR could be expensive to maintain and may be at the cost of employee’s salaries or shareholders
- Lifestyle changes- Business must make sure they are keeping up to date with trends to make sure their product/service is still relevant to customer’s lifestyle
- Religious/cultural differences- Religious differences may cause ignorance and lead to conflict
- Socio-economics- Crime, HIV, poverty, education
