Topic 3 Market Environment Flashcards
Define the market environment
The market environment refers to the
**immediate external components **
that directly affect the ability of the business to operate.
For the business to be successful it
**must be able to influence the components in this environment. **
The 5 components of the market environment
- Consumers
- Suppliers
- Intermediaries
- Competitors
- Other organisations / Civil Society
Market Environment Component 1
Consumers/customers/market
(3)
** 1. Consumers/customers refer to individuals or other businesses that purchase products and services from a business.
- Consumers are the final users of the product/service
- The market is the new and old customers who have money to buy goods/services.**
- Customer’s preferences and taste does change as time goes by, so it is essential for businesses to conduct market research to ensure that their target market’s changing needs are continuously met.
- If customers are not happy with the products or services of a business, they will turn to a competitor.
Market Environment Component 2
**Suppliers **
(1)
**1. Suppliers are individuals or other businesses that provide/supply businesses with the inputs or resources that they need in order to produce/manufacture
their product or services.
**
* If suppliers fail to provide businesses with quality resources/inputs or if the suppliers don’t deliver these resources/inputs on time or at the right prices, then the businesses will not be able to meet their goals/objectives.
- Businesses need to ensure that they identify reliable suppliers in the market.
- Businesses can establish a good relationship with their suppliers by signing long-term contracts for their raw materials at fixed prices.
Market Environment Component 3
Intermediaries
(3)
**1. These are individuals or businesses that distribute and sell the products/ services of a business.
- Intermediaries bridge the gap between producers and consumers.
- Intermediaries include: wholesalers, retailers, agents, brokers, transportation services, etc. **
- Some intermediaries assist businesses with packaging and advertising of their products and services.
- Examples of intermediaries include stores like Spar, Pick ‘n Pay, Big Daddy, Woolworths, and CNA.
Market Environment Component 4
Competitors
(1)
**1. Competitors refer to businesses/organisations
that provide or sell more or less the same
goods/services. **
- Businesses will be forced to offer quality products
or services at the lowest possible prices or else they will lose their customers to their competitors. - Businesses should monitor the activities of their competitors so that they could produce goods or services that are of better quality than their competitors.
- Examples of competitors in the retail market include: Spar and Shoprite, Woolworths and Truworths, MTN and Vodacom, etc.
- New entrants to the market.
- Power of suppliers:The following Porter’s Five Forces influence competition:
– Power of consumers.
– Threats of substitute products/services.
– Competitive rivalry.
– Competition is beneficial to customers because it keeps prices down.
Market Environment Component 5
**Other organisations that form part of
the market environment **
(3)
Other organizations in the market environment include groups that provide essential goods or services to the community at no charge.
These organizations often step in where the government has failed to provide these goods/services.
- Community Based Organisations (CBO)
- Non-govermental Organisations (NGO)
- Regulators
- Strategic Allies
- Unions
Market Environment Component 5
Name the 5 types of Other organisations that form part of the **market environment **
(3)
- Community Based Organisations (CBO)
- Non-govermental Organisations (NGO)
- Regulators
- Strategic Allies
- Unions
**Community-based organisations (CBOs) **
CBOs: these are community-based organisations that provide certain ** essential** goods/services to the members of the community.
- Community-based organisations (CBOs) are established to assist the community with job creation, socio-economic development, and becoming self-sufficient.
- They are local oganisations that operate in the community to provide social services with aim of social upliftment.
- They focus on socio-economic issues such as:
– HIV/AIDS
– unemployment
– crime
– illiteracy.
**Non-governmental organisations (NGOs) **
**NGOs: these are non-governmental organisations that are established to provide for certain needs of the people in the community without the aim of making a profit. **
- Non-governmental organisations (NGOs) are non-profit
organisations that operate separately from the government.
They are established to fulfill important needs in the
community by addressing some socio-economic issues. - They are part of the market environment because they
supply consumer goods and services and they are concerned about the welfare of others.
**Regulators **
Regulators: government bodies/institutions that make rules and regulations to monitors the operations of businesses, for example, SABS , ACSA, and so on.
- Regulators are government bodies that make rules and
regulations to control the activities of businesses. - These rules and regulations are put in place to ensure that businesses do not exploit their customers or employees.
- Examples of these government bodies/organisations include the South African Bureau of Standards
(SABS), Airports Company South Africa (ACSA), etc.
**Strategic allies **
Strategic allies: businesses that join their resources together to undertake a project that will benefit all the members in the alliance.
- Strategic allies are businesses that combine their resources to undertake a project that will benefi t all of them. They may share their expertise and information to benefi t all their members.
- These relationships help businesses to explore new markets and also gain competitive advantage.
Unions
Unions: an organised group of workers that protect the interest of their members in a particular industry.
- Unions are established bodies that protect the
interest of workers. They have the right to call for
industrial actions such strikes or go-slows if their demands
are not met by organisations or the government. - They constantly negotiate for better wages and salaries for their members and also safeguard their members against unfair dismissal.
- They also negotiate for better working conditions for their members and may represent them during disciplinary hearings.
**Meaning of opportunities **
Opportunities are any factors in the external environment that will contribute or is already contributing to the success of the business.
Examples of opportunities
* Decrease in taxes, closing down of a competitor’s business, decline in interest rate and favourable legislation by the government.
**Meaning of threats **
Threats are any factors in the external environment that will stand in the way or is already standing in the way of businesses achieving their goals.
Examples of threats
* Increase in taxes, new businesses entering the market, increase in interest rate, inflation, and changes in government legislation.
SWOT Analysis
(4)
Businesses need to identify the opportunities and threats in their environment by conducting a SWOT Analysis.
- Strengths
- Weaknesses
- Opportunities
- Threats
