Influences on factors and challenges relating to macro environment

Question 1

Name the 7 macro environments.

Answer 1

1. Physical/natural environment.
2. Economic environment.
3. Legal and political environment.
4. Institutional environment.
5. Technological environment.
6. International/global environment.
7. Social, cultural, and demographic environment.

Question 2

Describe the physical/natural environment.

Answer 2

The physical/natural environment consists of:
- Natural resources - raw materials that are used as inputs to the business
- Physical location - where the business is situated.
- Infrastructure - man-made facilities and systems that support the functioning of the business (transportation systems, communication networks, utility supply and other services.)

Question 3

Describe the economic environment.

Answer 3

The economic environment refers to all the economic factors affecting businesses and consumers.

Question 4

What are the stages of economic growth?

Answer 4

• Stage 1: Expansion
• Stage 2: Peak
• Stage 3: Recession
• Stage 4: Recovery

Question 5

Describe the legal and political environment.

Answer 5

The legal environment consists of all the laws, policies, and regulations that ensure consumers, society, and businesses are protected.

The political environment refers to the politicians who create these laws, policies, and regulations.

Question 6

Describe the institutional environment.

Answer 6

The institutional environment includes government departments, municipalities, and other state institutions.

The government is a regulator, a consumer/customer, a supplier and an employer.

Question 7

Describe the technological environment.

Answer 7

The technological environment refers to all the tools and machines used in businesses.

Technology has improved business operations, communication, production and marketing.

Question 8

Describe the international;/global environment.

Answer 8

The effects of events that happen outside the borders of South Africa and factors that affect international trade (imports and exports).

Question 9

Describe the social, cultural, and demographic environment.

Answer 9

• The social environment refers to factors that affect society - poverty, HIV/AIDS, unemployment.
• The cultural environment refers to religion, traditions, and communities.
• The demographic environment refers to aspects of the population such as age, race, gender, etc.

Question 10

What control/influence does the business have over the macro?

Answer 10

No control/influence, however, can develop strategies to address factors.

Question 11

In a SWOT analysis, what addresses the internal and the external?

Answer 11

• Internal strengths and weaknesses (micro environment)
• external opportunities and threats (market and macro environment)

Question 12

What does PESTLE mean?

Answer 12

P: political
E: economic
S: scoiological
T: technological
L: legal
E: environmental

Question 13

What are the steps for conducting a PESTLE analysis?

Answer 13

1. Understand the PESTLE factors.
2. Gather information.
3. Analyse the findings.
4. SWOT or action plan.

Question 14

Why is political instability bad for business?

Answer 14

• discourage investment (foreign)
• have a negative effect on consumer confidence.

Question 15

What are some challenges for businesses that are involved in international exporting/importing?

Answer 15

• Fluctuating exchange rates.
• Must compete with international companies.

Question 16

What is a trade agreement?

Answer 16

An agreement between countries, to limit barriers to trade so that both countries can benefit from increased trade.

Question 17

What are trade sanctions?

Answer 17

Laws passed that make it difficult for a country(s) to trade with other countries.

Question 18

What are excise duties?

Answer 18

Levies imposed on high-volume daily consumable products. (petrol, alcohol, cigs)

Question 19

Name some sociological factors that affect businesses.

Answer 19

• Poverty.
• Unemployment.
• Education.
• HIV/AIDS.
• Crime.

Question 20

How can businesses use resources responsibly?

Answer 20

• Using water responsibly.
• Recycling materials.
• Sourcing sustainable materials.

Question 21

What is micro lending?

Answer 21

Micro lending is granting of small loans to people who cannot obtain credit from banks.

Question 22

What is the management information system? (MIS)

Answer 22

The process of controlling information in a business.

Question 23

What does management information systems involve?

Answer 23

People - employees who gather, analyse, distribute, and use the data and information.
Data - the data and information gathered from reliable sources.
Software - software used to capture and analyse the data and information.
Hardware - the computers, printers, and servers used to capture and store the data.

Question 24

What are the steps to developing a strategic response?

Answer 24

1. Identify the challenge.
2. Define the challenge.
3. Gather and analyse information.
4. Identify the stakeholders involved.
5. Develop an understanding of each of the stakeholders viewpoints and requirements.
6. Design a strategy to adapt to the challenges that meet the needs of the business and all stakeholders.

Question 25

What is a merger?

Answer 25

A merger is when two companies voluntarily join together to form one new legal entity.

Question 26

What is a takeover?

Answer 26

A takeover is when one company (bidder) purchases another company (target).

Question 27

What is an acquisition?

Answer 27

An acquisition takes place when one business buys another business at an agreed price. This usually occurs to private companies that are not listed.

Question 28

What is an alliance?

Answer 28

An alliance is a mutually beneficial agreement between two or more businesses with similar qualities to work together to achieve their objectives.

Question 29

How can businesses influence factors of the macro environment by creating a competitive environment?

Answer 29

• Sign long-term contracts with suppliers.
• Create new uses for existing products and services.
• Influence regulators through lobbying and bargaining.
• Enter into strategic alliance agreements to gain a competitive advantage.

Question 30

What is hedging?

Answer 30

Hedging is a type of insurance that businesses use to protect themselves from possible risks. (Ex. Car insurance hedges you against accidents and theft)

Question 31

How can businesses hedge against inflation?

Answer 31

• Invest surplus funds so that its value grows at a faster rate than inflation.
• Invest surplus assets/money in investments with intrinsic (natural) value.

Question 32

What is lobbying?

Answer 32

Lobbying is an organised process, where individuals/businesses/organisations that have similar motives/beliefs, try to influence government policy.

Question 33

What are the forms of lobbying?

Answer 33

• Bargaining sessions between management and unions.
• Influencing supervisory body/regulators

Question 34

How can networking benefit a business?

Answer 34

• Gain new perspectives and business ideas.
• Create opportunities for new business relationships.
• Generate new business opportunities.

Question 35

What are the 3 types of power relationships?

Answer 35

• Strategic alliance / Partnership agreements
• Persuasion of large investors
• Company representatives’ influence