Business Studies - Business environments

what is the micro environment and what falls in it?

internal

full control

vision

mission

objectives

organisational culture of business

organisational structure of business

resources

business functions

what is the market environment and what falls in it?

external

some control

customers/consumers

suppliers

competitors

NGOs

Strategic alliance

Intermediaries

Industry regulators

trade unions

government

departments

what is the macro environment and what falls in it?

external

no control

political

physical

economic

ethical

social

technological

legal

environment

what is the tool for the micro environment?

SWOT

what is the tool for the market environment?

porters 6 forces

what is the tool for the macro environment?

P2e2stle

what is environmental scanning?

process of obtaining information about possible current and future events that may have a impact on the performance of the business.

why is environmental scanning done?

to ensure bs ready for developments internal and external environments

what is the purpose of environmental scanning?

to identify challenges, but also possible opportunities for the bs in a constantly changing environment.

define crisis

a quick, unexpected change. Bs probably not have contingency plan in place in place to deal with crisis

define trend

changes which occur over a period of time. Bs can be forewarned to adapt current strategies to deal with change

continuous environmental scanning?

vision mission

formulate a strategy

implement a strategy

evaluation and control

what are strengths and weaknesses?

internal factors

bs has control over

must be used to determine value of business

competitive advantage

tangible or intangible

opportunities and threats

emerge from competitive make-up of external environment

o- add value

t- destroy value

what is the value of swot?

swot matrix

how bs uses info and assesses the inter-relationships of the SWOT = strategies to be put in place (tactical planning)

look to implement strategies based on outcome swot analysis. illustrates inter-connectivity swot elements

what are examples of possible strengths?

(opposite true for weaknesses)

competitive price

location

patents

skilled workforce

business culture

good marketing + strong brand

asses to financing + other resources

operational efficency + good quality synonymous

Interplay between different elements of swot?

SO = strategies that use strengths to take advantage of opportunities

WO= strategies that take advantage of opportunities by overcoming weaknesses

ST= strategies that use strengths to avoid threats

WT= strategies that will minimize weaknesses and will also avoid threats

why do we use Porters 6 force analysis

used to asses the attractiveness of a market

(will be attractive potential high profits)

what is porters 6 forces

threat of new competitors

current competitors

threat of substitute products

power of suppliers

power of the buyer

impact of complementary products

what are following barriers that will make it difficult to enter the market?

capital to high

existing businesses have strong trademarks or patents protecting their product/service

strict government legislation that makes it difficult

customer-switching costs to change a new type of product are high

high level of customer loyalty

economies of scale are not easily achievable

when is rivalry amongst competitors is usually high when?

many competitors

competitors are more or less of equal size

exit barriers are high

limited potential for the market to growand all

competitors have to compete for same market share

when products in market are not differentiated (homogeneous)

goods can easily be substituted for another product

low level customer loyalty

When do buyers have strong bargaining power when?

buyer buying in bulk

many suppliers selling

few buyers

easy and not expensive to switch supplier

buyer has ability to integrate backwards in the distribution channel

When do suppliers have strong bargaining power?

few suppliers

supplier large enough to make it difficult to achieve forward integration in the distribution channel

limited options tosubstitute raw materials

process of switching = complicated

what are other challenges that may arise in the market environment

bs has no control butcan influence them?

customers\consumers

intermediaries

NGOs, CBOs and NPOs

strategic alliances

industory regulators

trade unions

local governmet

attractive markets : high level profit

high barriers to enter

low levels competition

few substitute products/services

weak supplier bargaining power

weak buyer bargaining power

unattractive market: low level of profits

low barriers to enter

high levels competition

many substitute products/services

strong supplier bargaining power

strong buyer bargaining power

different elements of pestle impact each other, give example of this?

interest rates decrease (economic)

the business can now afford equipment (technological)

production is increased and as a result more people are employed (social)

a higher standard of living (social)

more money available to spend leads to more profits (economic)

what are examples that fall into the political factor of pestle?

government interventions through legislation and protection on imported products; infrastructure, political climate, load shedding, xenophobia

what are examples that fall into the physical factor of pestle?

availability of natural resources, physical development or infrastructure of the area in which the business operates, load shedding

what are examples that fall into the economic factor of pestle?

economic growth, interest rates, exchange rates, inflation, general economic climate (investor confidence, currency value, world-wide recession), unemployment, poverty, crime, GDP forms part of this environment.

what are examples that fall into the ethical factor of pestle?

global businesses ethics, community ethics and attitudes and corruption risk, child labour, harsh labour conditions such as sweatshops

what are examples that fall into the social factor of pestle?

culture, health, consciousness, population rates, age distribution, social attitudes, poverty levels, unemployment rates, HIV and other diseases,low level of education, xenophobia

what are examples that fall into the technological factor of pestle?

policies and legislation e.g. Consumer Act. Companies Act, Skills Levies Act, Basic Conditions of Employment Act, Labour Relations Act

what are examples that fall into the environmental factor of pestle?

weather, climate change, soil erosion, land use, carbon footprint, energy consumption, waste disposal, demand for eco-friendly or recycled products.

possible strategies - political factors

- bs has no choice but to comply with the regulations and legislation set by parliament

- bs may however stand together (even with competitors) to influence government decisions by lobbying or signing petitions.

possible strategies - physical factors (responsibility for the bs to the physical environment)

- bs should decrease negative effects of population by for example finding safe ways of getting rid of waste

- find out energy sources e.g. solar energy and wind energy

- recycling materials and using wood from sustainable forests

possible strategies - economic factor

- during period of recession, bs follow a decline strategy to cut costs e.g. selling some of its assets off (divestiture)

- Also follow a low cost strategy by retrenching some of their workers or reducing cost of materials, facilities, logistics or admin processes

- During period of growth = growth strategy to increase its market share or follow an intensive strategy by penetrating the market, focusing on a product development or market development.

- if many workers have HIV/AIDS, bs organise voluntary testing and investigate the possibility of medical services; talks/training on HIV/AIDS might also be necessary

- Initiating sustainable social responsibility programes e.g. investing in training + education opportunities in community. Enable company members - purchase from bs - when able provide own needs

possible strategies - ethical factor

- read king reports + be informed by it

- Establish a corporate value system, including a code of conduct and code of ethics

- Code of conduct = stipulate ethical and professional conduct for employees whilst a

- code of ethics = stipulate the ethical conduct of the business towards its stakeholders.

- to reduce the number of employees who embezzle bs funds internal control measures need to be put in place to ensure that there is control over bs funds + stock control

- Insurance could be taken out to cover employees who are at risk, e.g. chief accountant. Insurance for such employees are expensive and is known as fidelity insurance

- shoplifting surveillance = cameras, having q "mysterious shopper" or installing mirrors at entrance to view underneath trolleys or security verifying cash register slips

- RFID -(radio frequency identification) tags on clothing/stock

possible strategies - social factor

- uplift communities with social responsibility programs.

programs = sustainable + effect lasting (even if bs withdraws)

- market research needs to be done to identify target market,keeping in mind demographics of particular population. Demographic segmentation can be used as a strategy.

possible strategies- technological factor

- budget to update info + tech regularly

- keep informed on latest developments in operation + info technology to create/maintain the competitive edge e.g. customer loyalty apps

possible strategies - legal environments

- familiarize with regulations + legislation to avoid court cases + hefty fines

- employ legal advisers who are experts in law

good stead = stakeholder relationships + compliance

possible strategies - environmental factor

reduce carbon footprint = reduce carbon emissions, energy saving light bulbs, less water-production processes use recycled materials earth friendly waste disposal transport systems used = omit less carbon

micro basic definition

internal challenges in the bs related to any micro environmental factor

market basic definition

external challenges arising in the environment in which the bs operates

macro basic definition

external challenges that affect all bs in SA/globally

micro challenge example: The marketing department overspent their budget when implementing their advertising campaign

what is a strategy to overcome this?

the financial department will have to ensure that one of the other departments spend less on their budget to compensate for the over spending of the market department/ The marketing department can increase the final price of the product to compensate for losses

market challenge example: Consumer spending for luxury products decreased due to a decrease in their buying power

what is a strategy to overcome this?

focus on products that satisfy the primary need of the consumer (food+ clothing)

or

Launch an aggressive advertising campaign to create awareness of the need for the product

macro challenge example: Environmental/physical factor: A natural disaster (fire/storm) damaged a part of the building.

what strategy to overcome this?

claim the damage from the insurance and start with repairs of the building.

Control

The power to influence or direct people's behaviour or the course of events.

Organisational structure

Framework for managers which shows the division of responsibilities and roles played by each stakeholder.

Organisational culture

Controls and influences the way in which the business is conducted.

Vision

Reflects or predicts what the future will look like.

Mission statement

Shows what one does best every day in the business and how one should go about doing it.

Human resources

The personnel of a business organization regarded as a significant asset in terms of skills and abilities.

Suppliers

Factories/providers of goods/services that businesses would obtain/buy from in order to operate their businesses.

Competitors

Businesses which sell the same/similar products/services.

Deforestation

Removal of trees to clear land to be used for another purpose, e.g. industrialization.

Redressing

To make amends or to set right.

Nepotism

The practise of showing favouritism towards one's family or friends in economic or employment terms.

Retrenchment

Involuntary ending of a service contract of an employee by the employer due to operational requirements.

Go-slows

When employees work more slowly and with less effort than usual to try to persuade an employer to agree to higher pay.

Trade union

An organized association of workers in a trade, group of trades, or profession formed to protect their rights and interest.

Strike

A work stoppage as a form of protest or to strengthen one's bargaining position.

Industrial action

These are actions that include strikes or go slows.

Open market

A market where there is no control over who may provide goods and services or over the prices that can be charged.

Demographics

Statistical data relating to the population and particular groups within it. Often includes age, gender, income groups and occupation.

Psychographics

The classification of people according to their attitudes, aspirations, and other psychological criteria.

Globalisation

Greater trade and collaboration between businesses or people in different countries which is enabled by technological advances and communication.

Physical environment

This is an environment that is comprising of the ecological elements such as natural disasters, air pollution, water pollution, deforestation, waste products or natural resources.

Institutional environment

These are private-public partnerships which are formed between government and private enterprise.

Lack of vision and mission

Will hamper meaningful guidance and leadership to employees, leading to a lack of focus and direction.

Lack of adequate management skills

Will result in the business not achieving its objectives and can affect productivity and profitability.

Difficult employees

May have a negative attitude on new employees and require a lot of supervision to complete tasks satisfactorily.

Impact of unions

May create tension between management and employees and lead to industrial disputes over grievances.

Strikes and go-slows

May negatively affect the business's ability to meet production targets due to employee absences or reduced work rates.

Skills shortages among employees

Businesses may struggle to find qualified employees, leading to poor decision-making by unqualified workers.

High employee turnover

Refers to employees resigning frequently, affecting productivity, continuity, and the recruitment process.

Employee absenteeism

Reduces productivity and affects profitability.

Competition

Other businesses selling similar products pose a threat to success, making it difficult to compete on quality and price.

Shortage of supply

Refers to a situation where the demand for a product exceeds its available supply.

Changes in consumer behaviour

Refers to shifts in how consumers make purchasing decisions and their preferences.

Demographics and psychographics

Refers to the statistical characteristics of populations and their psychological attributes.

Socio-cultural factors

Refers to the social and cultural influences that affect consumer behavior and business operations.

Change in income levels

Refers to fluctuations in the average income of consumers, affecting their purchasing power.

Political changes

Refers to shifts in government policies and regulations that can impact business operations.

Contemporary legislation

Refers to current laws and regulations that businesses must comply with.

Labour restrictions

Refers to regulations that limit the flexibility of businesses in hiring and managing employees.

Micro lending

Refers to small loans provided to individuals or businesses that lack access to traditional banking services.

Globalisation/international challenges

Refers to the complexities and competition that arise from operating in a global market.

Social values and demographics

Refers to the collective beliefs and statistical characteristics of a population that influence business practices.

Socio economic issues

Refers to challenges that arise from the intersection of social and economic factors.

Socio economic challenges

Refers to difficulties faced by businesses due to social and economic conditions.

Raw materials availability

Raw materials may be unavailable when drought causes poor harvest.

Imported goods delays

Imported goods may not arrive when the country of origin has transport/political problems.

Consumer unpredictability

Consumers are influenced by many factors and are mostly unpredictable in their buying behaviour.

Changing consumer preferences

Consumers' preferences and tastes can change as fashions change and as technology advances.

Ongoing challenges for businesses

Changes in consumer behaviour, spending habits, tastes and preferences present an ongoing challenge to businesses.

Research and advertising

The challenges include keeping up with changes in consumer tastes and demand by doing research, finding ways to influence consumer demand, and conducting advertising campaigns/consumer surveys.

Market diversity

The consumer market is diverse in the cultural and social background which has a direct influence on the choices they make.

Target market challenges

The challenges include collecting/interpreting information about the target market and to use the data to develop a marketing strategy.