Unit 1.4 (the Business Environment Analysis) Flashcards
List the two types of factors that influence business
Internal Factors and External Factors
Define Internal Factors (internal environment)
Conditions and forces within the organization, can be controlled.
Define the External Factors (external environment)
Uncontrollable, occur outside the organization (e.g. COVID, recession)
Outline how an external environmental analysis is done.
1.) Monitor the external factors (economic, gov/legal, competition, social/cultural, technological) so gather data on PESTEL factors
2.) Develop decisions based on gathered data
Define the acronym of PESTEL analysis
Political, Economic, Social, Technological, Environmental, Legal
- a macro-analysis of the external factors
Outline the use of the PESTEL analysis
To identify dangers and opportunities for the company
Explain the Political Factor of PESTLE
Account for the political landscape of a country, region and the world that may change the business environment
- Gov. changes
- political conflict
- Foreign pressure
- Peace and order
- Trade agreements
- Market regulations (e.g. import costs)
GPFPTM
Explain the Economic Factor of PESTLE
Anything to do with economy/finance
- Disposable income
- Unemployment levels
- Foreign exchange rates
- Trade tariffs
- *Interest rates
- Inflation rates
- Other monetary issues*
Define disposable income
Money that can be used for things that are non-essential to our survival
Explain the Social Factors of PESTLE
Focus on the company’s customers and consumers.
- Ethnic/Religious Factors
- Major World events
- Demographics
- Consumer opinion and attitudes
- Trends, fads
- Purchase patterns
- Fashion and Role Models
Explain the Technological Factor of PESTLE
Looks into technology that can directly and indirectly effect the business
(e,g. AI)
Explain the Environmental Factor of PESTLE
Looks into the environment
- Ecological
- Environmental Issues
- Environmental Regulations
- Conservation issues
- Waste management
- Bio degradability concerns
(e.g. smog)
Explain the Legal Factor of PESTLE
Laws and regulations prevailing within an economy
- Employment laws
- Consumer protection (protecting local businesses)
- Industry-specific regulations
- Competitive regulations
- Environmental laws
COMMON INFLUENCES OF PESTEL FACTORS (paste from managebac)
Define the acronym of the 6 M’s
Man, Money, Machinery, Method, Measurement and Market
Define Man - Manpower in the 6 M’s
Referred to as human resource and how the organization manage them
- Training
- Compensation
- Evaluation and Development
- Organizational behavior and coordination
- Morale and motivation
Explain Money - Finance In the ^ M’s
Refers to the finances of the company and its management
- Sourcing
- Condition and situation
etc.
Explain Machine in 6 M’s
Regards the physical capital/tools to create the goods/services
Explain the Material in 6 M’s
BASIC INGREDIENT USED TO produce a product or give services
Explain Method in the 6 M’s
The process to produce goods/services
Explain the Market in the 6 M’s
The composition of consumers of the product that the org is focusing on
Define a “share”
part of the company — could be shared thus “share”
Define stakeholders.
any party/person that has:
- an interest in an organization/linked to the company (pos or neg? see pres. duterte and abs cbn matrix)
- e.g.: study cafes during transition to online learning (not related to schools, but depend on the schools aka interest)
- can be affected by the organization (they have stakes for their interest in the company)
they could be:
- organizations
Define and explain the two types of stakeholders
1.) Primary stakeholders - directly linked to business, part of economic transactions
(- employees
- customers
- suppliers
- owners
- creditors)
2.) Secondary stakeholders - affected indirectly — affected by or affect the business in some way
(e.g. government, stock investors)
Outline the internal stakeholders
Employees, bosses, investors, board of directors
Outline the interest of external stakeholders
Costumers - best product and service
Suppliers - beneficial relationship between themselves and the firm
Financiers/creditors - returns of their investments
Government - focus on the conduct of the business within the business environment
Local community - focuses on various aspects of the locality
Pressure groups - how business has impact on their areas of concern
Media - impact of business
Explain stakeholder conflict
stakeholders oppose the interest of one another.
Explain how mistrust between departments could affect a business
Because of their interests, they may target a specific department/grp/person. With that, they focus on bringing that department down with them than actually serving the business well.
Explain stakeholder analysis
It is the process of examining how certain stakeholders could get affected by a proposed action.
- Can be done once or on a regular basis.
EXPLAIN THE STAKEHOLDER MATRIX’s POWER INTEREST GRID
Distinguish internal and external stakeholders
Internal stakeholders - people within the company (e.g. managers, CEOs, employees, shareholders.)
External stakeholders - people outside the company (e.g. suppliers, customers, creditors, government, etc.)
Define the term “shareholders”
Shareholders are people who own a share/part of the company.
(different from stakeholders though they are stakeholders! all shareholders are stakeholders but not all stakeholders are shareholders!!!)
Outline some of the interests of internal stakeholders (Recheck?)
Mainly to gain some sort of profit.
- e.g. salary/adequate compensation, for investors to see the returns of their investments, etc;
What is the formula of price?
cost + markup
Describe what a SWOT analysis is.
A method of analysis that combines the 6 M’s (internal) and external (PESTEL)
- relates to the product
- stands for “Strength Weakness Opportunity Threat”
Explain the concepts in the SWOT matrix.
Internal (can be controlled by the company):
- Strength: Core capabilities of the company — edge over competition
- Weaknesses: Points of improvement
External (cannot be controlled by company):
- Opportunities: environmental condition that can improve an organization’s competitive placement
- Threats = any environmental condition that could harm the business
Outline and describe the two types of strengths
-
Tangible strengths (can be sensed and is/or quantifiable)
- plant and equipment
- uniqueness of product
- cost advantages (produced cheaper)
-
Intangible Strengths
- Strong recognized brands
- your reputation (related to above)
- patents or proprietary products
- managerial experience
Outline and describe the two types of weaknesses
-
Tangible weaknesses
- old plant and equipment
- narrow product line (depends)
- insufficient finance
-
Intangible weaknesses
- weak brand
- poor customer relationship
- lack of industry knowledge
Outline and describe the two types of opportunities
-
Industry opportunities
- expand product range
- diversify
- vertical integration (forward or backward)
- Export or increase geographic cover
-
Macro opportunities
- favourable legislative changes
- positive economic outlook
Outline and describe the two types of weaknesses
-
Industry threats
- low cost imports
- substitute prodycts
- market decline
-
Macro threats
- exchange rates
- demographic changes
- increasing regulation
Define brand equity
how people see a business
Define a market as a business term
About the consumers and their demands
Define backward, forward, horizontal integration and vertical integration
Backward integration = resources
- called “backward” cuz it goes back in the former areas of the supply chain
Forward integration = retail
- forward because it goes forward to the later areas of the supply chain
Horizontal integration = acquiring competition to eliminate them (working for them — still there)
- same level and same industry
- you have to take into account how it would fit in your own company (e.g. if forward, backward…)
- integrating = putting something in the company
Vertical integration = acquisition strategy of other companies and the responsibilities.
- usurped company retained identity but operates under the mother company
- Not necessarily acquiring competition.
