MICRO-ENVIRONMENT
MICRO-ENVIRONMENT
The Micro-Environment/Internal Environment.
• It consists of the business itself.
• It's the decision making environment that helps the business achieve its goals.
• The business has full control over its Micro-Environment.
Components/Features/Elements of the Micro-Environment
• Vision, Mission, Objectives,Goals, Strategy
• Organisation Resources
• Leadership and Management
• Eight Business Functions
• Organisational Structure
• Organisational Culture
MAIN Components/Features/Elements of the Micro-Environment
- Vision
- Mission (Statements)
- Goals - Objectives
- Organisational Resources
Explanation of the Components/Features/Elements of the Micro-Environment.
☆VISION :
• The vision of a Business describes where the business sees itself in the future.
• Explains what a business aims to achieve.
• Answer to the question where are going from here.
☆MISSION STATEMENT :
• It explains the reason for the business's existence.
• Explain what the business does to achieve its vision.
• Gives clear direction.
☆GOALS :
• Can be defined as long-term objectives of what the business wants to achieve.
• Goals give the business a sense of direction.
☆OBJECTIVES :
• Steps to reach goals.
• Contain a deadline for achievement.
• Explains how the goals of the business will be reached.
☆ORGANIZATIONAL RESOURCES :
• These are assets that the business uses to produce goods/ services and to achieve its goals.
The following four groups of resources are controlled by management :
➯ PHYSICAL RESOURCES
• Natural resources
• Machinery
• Vehicles
• Buildings
➯ FINANCIAL RESOURCES
• Capital
• Own capital
• Cash
• Bank overdraft
➯ HUMAN RESOURCES PEOPLE
• Employees
• Contractors
➯ INFORMATION AND TECHNOLOGICAL RESOURCES
• Technology and the use of computers
• Research
EXPLANATION OF TYPES OF ORGANIZATIONAL RESOURCES
HUMAN RESOURCE
• People such as employees/consultants/managers etc.
• The people needed to perform the work.
NATURAL RESOURCES
•Assets from nature such as minerals, water and wood.
PHYSICAL RESOURCES
• Include raw materials/office furniture/equipment/ machinery necessary to operate the business successfully.
FINANCIAL /CAPITAL RESOURCES
• Money invested in the business.
• Can be in the form of cash/bank overdraft.
HUMAN RESOURCE
• People such as employees/consultants/managers etc.
• The people needed to perform the work.
NATURAL RESOURCES
•Assets from nature such as minerals, water and wood.
PHYSICAL RESOURCES
• Include raw materials/office furniture/equipment/ machinery necessary to operate the business successfully
FINANCIAL /CAPITAL RESOURCES
• Money invested in the business.
• Can be in the form of cash/bank overdraft.
TECHNOLOGICAL RESOURCES
• Resources that include computers/emails that give the business an advantage over its competitors.
ENTREPRENEUR RESOURCES
• The person responsible for combining the factors of production in such a way that the business will make a profit.
MANAGEMENT AND LEADERSHIP
MANAGEMENT
• The management of a business guides and directs the organization to achieve its goals and objectives.
• Good managers plan, organize,lead,and control all the resources in the business.
LEADERSHIP
• Leadership is the ability of an individual to inspire, influence or motivate their subordinates to achieve the goals and objectives of the business.
DIFFERENCES BETWEEN LEADERSHIP AND MANAGEMENT
LEADERSHIP
• Leaders inspire other people
• People oriented
MANAGEMENT
• Task oriented
• Mange by planning/organising/leading and controlling
THE EIGHT BUSINESS FUNCTION
THE BUSINESS FUNCTIONS
- HUMAN RESOURCES FUNCTION
- MARKETING FUNCTION
- ADMINISTRATION FUNCTION
- FINANCIAL FUNCTION
- GENERAL MANAGEMENT
- PURCHASING FUNCTION
- PRODUCTION FUNCTION
- PUBLIC FUNCTION
THE EIGHT BUSINESS FUNCTIONS AND ACTIVITIES OF THE BUSINESS
GENERAL MANAGEMENT
• The general management function, plans, organizes leads, and controls resources in the business.
PURCHASING FUNCTION
• The purchasing function is responsible for buying all the resources that the business needs in order to produce its goods and services.
PRODUCTION FUNCTION
• The production function is responsible for changing/processing raw materials into finished or semi-finished products.
MARKETING FUNCTION
• It is also responsible for the advertising/promotion of goods and services to customers.
PUBLIC RELATIONS
• The public relations function is responsible for creating a good public image for the business.
HUMAN RESOURCE FUNCTION
• The human resource function is responsible for attracting new employees into the business.
ADMINISTRATION FUNCTION
• The administration function is responsible for collecting, processing and storing all the data and information required by the business.
FINANCIAL FUNCTION
• It ensures that the businesses funds are used efficiently.
Purpose Of The Eight Business Functions
- The eight business functions work together to achieve the business goals
Importance of the Business Functions
GENERAL MANAGEMENT
• This function leads, organises and controls all the other functions
• Management has three different levels, each with its own roles and responsibilities
MANAGEMENT
LEVELS OF MANAGEMENT
TOP MANAGEMENT
• Reports to a board of directors
• Take long term strategic decisions
• Act of getting people together to accomplish certain goals
MIDDLE MANAGEMENT
• Responsible for specific departments within the business
• Takes medium term tactical decisions
• Implements the vision and plans of the top management
LOWER MANAGEMENT
• Takes short term routine/Tactical decision
• Carry out instructions given by middle management
LEVELS OF MANAGEMENT : EXAMPLES
TOP MANAGEMENT
- CEO
- Directors
MIDDLE MANAGEMENT
- Marketing Manager
- Financial Manager
LOWER MANAGEMENT
- Foreman
- Supervisor
- Team Leaders
Management Tasks
• The are five basic management
- Planing
- Organising
- Leadership
- Controlling
- Risk Management
PLANNING
• The process of setting goals and developing strategies
• Top management formulates strategic plans
• Middle management formulates tactical plans
• law management formulates operational plans
ORGANIZING
• Involves breaking a plan into action
• The way in which people are grouped together
• Organizing the jobs within specific functions or
departments
LEADING
• The process of leading is to guide motivate and inspire others to achieve goals
• Establishing a productive working climate
• Motivating employees to achieve the goals set
CONTROLLING
• Ensures that the business achieve its goals
• Ensures that standards are met
• Ensures activities are carried out as planned
• Continuous control ensures that the business runs smoothly
RISK MANAGEMENT
• Identifies activities which could go wrong (within the organization)
• handles the risk by determining what actions to take should the event happen sing available resources and and contingency plan and communication with stakeholders
Administration Function
Meaning of the administration function.
• Handling of information and data.
• Administration is responsible for collecting, processing, and distributing information.
• Stores/Records information by using recent technology.
Activities of the administration function
COLLECTING INFORMATION
• Information is collected from both outside and inside the business.
• correct and reliable information should be available for meaningful decision-making
HANDLING OF INFORMATION
• It is important for the administrative staff to handle information correctly to avoid making wrong decisions based on wrong information
The administration function is responsible for dealing with the following types of information :
• Accounting records - can be used to draw up financial statements and reports keep an up to date all business transactions
• Cost Accounting - Determines whether the product can be sold at competitive price considering the manufacturing or production costs
• Budget - A plan of estimated expenses and income for a specific period
• Statistics - The collected and classified numerical data
Informational technology
• It is the use of electronic equipment to assist with various administrative tasks
• Technology is used to both communicate and handle information and referred to as ICT (information and communication technology)
Office Practice
• Refers to how the administrative staff should handle their duties.
• It covers matters such as the dress code for employees, proper filing of documents, telephone etiquette, internet usage by staff, etc.
The Difference Between Data and Information
DATA
• Refers to raw/unprocessed facts.
• Data can be controlled from or by other business functions within the business.
INFORMATION
• Refers to process/analyzed data
• Information can be stored manually in files / boxes /shelves / computers etc.
FINANCIAL FUNCTION
Meaning Of The Financial Function
• The financial function is responsible for planning and managing all the funds and assets of the business
Purpose of the financial function
• Determines how much capital the business needs
• Establishes the sources for acquiring the capital
• Decides how to invest
Reason why businesses may need finance
• Businesses need to find the best investment
• Businesses need to source funding
• Plants so that finances are spent in the most efficient way
• Allocate the necessary funds to the different departments
Sources of financing
BANK LOANS
• This is money borrowed from the bank and will be repaid over a period of time
• The money is repaired with an interest
• Bank loans are usually used for long-term financing
BANK OVERDRAFT
• It is the short-term loan added onto the amount of the entrepreneur, it is also repaired with an interest over a set period of time
ASSET-BASED LOAN
• The money lent to successful businesses that want to expand further
• The loan is used to purchase an asset and that asset belongs to the lender until it is fully paid off
GRANTS
• This is money provided by the government to small businesses that are developing
• The money does not have to be paid back if it benefits the community
RECEIVABLE FINANCE
• This is a loan provided to businesses while waiting for payment of the good/services provided to avoid a cash flow shortage
• This loan is equal to the outstanding invoices that are due
ANGEL FUNDING
• This is money offered by wealthy entrepreneurs to the business for a share in that business
VENTURE CAPITAL
• This is money offered by individuals or organizations to start up or expand the business
• This is done in exchange of a share in the business
BUDGETING
• It is a planning tool that estimates the money that will be received (income) and how it will be used (expenditure)
• Assist business to keep track of its finances and ensures better profitability
• Each department within the business should have its own budget
Types of budgets
CAPITAL BUDGET
• It estimates the fixed capital
• It is drawn up every 5 to 10 years and received annually
CASH BUDGET
• It estimates the working capital
•It is drawn up at the end of the financial year for the start of the New year and revised monthly
INVESTMENTS
• Businesses invest some money from its profit to generate wealth and income
• Invested money increases without labor effort
• Businesses can choose to invest in financial institution, government bonds or public companies
Types of capital
FIXED CAPITAL
• Money pays fixed assets, for example land and buildings etc...
• Finance long-term capital needs of the business
OWNED CAPITAL
• It is money provided by the owners of the business
BORROWED CAPITAL
• It is money borrowed from financial institutions like banks or person
Differences between a fixed and working capital
FIXED CAPITAL
• Money pays fixed assets example land and buildings etc
• Financial long-term capital needs of the business
WORKING CAPITAL
• Money pays for day-to-day activity example trading stock raw materials etc
• Finance the short-term capital of the business
PURCHASING FUNCTION
Meaning of the purchasing function
• The purchasing function plays an important role in buying quality raw materials and services for the business
• It should continuously look for suitable new and better suppliers
Purpose of the purchasing function
• Manage stock to ensure sufficient levels of stock
• Continuously looking for the best suppliers
• Send damaged goods back to the supplier and see to it that it is replaced
• Negotiate the best possible term of payment with supplier
ORGANISATIONAL CULTURE
THE ORGANISATIONAL CULTURE
THE PURPOSE OF ORGANIZATIONAL CULTURE
• Organizational culture refers to how things are done in a business employees communicate among themselves their administration and their dress code.
• Organizational culture also includes the values beliefs norms and standards are shared among the employees and management.
THE PURPOSE OF THE ORGANIZATIONAL CULTURE
• It helps businesses to retain their employees.
• It guides decision-making and improves productivity.
• It influences people's actions and attitudes.
• The culture determines how things are done.
• It is the "personality" of the business.
ORGANISATIONAL STRUCTURE
BUSINESS ORGANIZATIONAL/STRUCTURE ORGANIZATIONAL CHART
• Every business must be organized into a structure that shows each person's task the level of authority and responsibilities.
• The structure shows the flow of instruction and feedback in the business.
It shows who reports to whom.
TYPES OF ORGANIZATIONAL STRUCTURES
FUNCTIONAL ORGANIZATIONAL STRUCTURE
• Employees get instructions from more than one manager.
• This structure confuses employees as they report to more than one manager.
PROJECT ORGANIZATIONAL STRUCTURE
• This is structured around project teams.
• It is a temporary structure because employees are drawn from different departments.
• Employees are then grouped together to form a project team which will carry out a particular project.
MATRIX ORGANIZATIONAL STRUCTURE
• The structure is structured around projects but employees stay in their departments.
• A project must be completed up to a certain point.
• The project is then passed on to the next team which will carry out the next phase of the project.
LINE ORGANIZATIONAL STRUCTURE
• Employees report to only one person.
• Only the director can give instructions to employees.
LINE AND STAFF ORGANIZATIONAL STRUCTURE
• Experts act as advisors to top and middle management.
FACTORS THAT INFLUENCE THE ORGANIZATIONAL STRUCTURE
➢The size of the company
➢Technology
➢Resources
➢Strategic goals of the company
PURPOSE IMPORTANCE OF BUSINESS ORGANIZATIONAL STRUCTURE WITH SPECIFIC REFERENCE TO AN ORGANOGRAM
• It shows who reports to whom.
• The structure shows the flow of instruction.
• It is the hierarchy that shows the position of management of the department and its employees.
Quality
Meaning of quality
Ability to satisfy customer needs.
It refers to the features/characteristics of a product / service that meet. customer requirements.
Meaning of quality control
Inspection of the final product to ensure that it meets the required standards.
Include setting targets/measuring performance and taking corrective measures.
Meaning of quality assurance
Carried out during and after the production process to ensure required standards have been met at every stage of the process.
Ensure that every process is aimed at getting the product rights the first time and prevent mistakes from happening again.
The importance of quantity for businesses
Effective customer services are rendered resulting in increased customer satisfaction.
Time and resources are used efficiently.
Product/services are constantly improved resulting in increased levels of customer satisfaction.
Vision/missions/business goals may be achieved.
Businesses have a competitive advantage over their competitors.
Quality in products
Methods used to indicate quality include the following.
Trademark : Special signs,marks or names used by manufacturers.
Samples : A small portion of product given to customers to test quality.
Grades : Agricultural products are classified quality.
Commercial standards : The SABS approved commercial standards of products.
The relation between quality and human resource function :
Higher the correct type of labor
Ensure quality environment for employees
Help to define employee job descriptions
Pay wages , salaries and benefits on time
The relation between quality and the administration function
Store and retrieve information correctly and quickly
Manage reception services effectively and efficiently
The relation between quality and the financial function :
Quality financial recording and reporting to general management
Do regular internal and external audits of records against source documents
The relation between quality and the general management
Create high quality plans for the future activities of the business.
Promote a culture of striving for quality, clear and accurate communication and strong ethical leadership.
Quality indicators of the business functions
Quality indicators of the human resources function
Low rate of staff turnover in the business
Maintain a healthy relationship between employees and employer
Provide good working conditions
Motivate and reward employees
Quality indicators of the administration function
Use modern technology efficiently
All systems and processes are documented
Easy to recall/find information/documentation
Handle complaints quickly and effectively
Quality indicators of the financial function
Ensuring a healthy cash flow through ensuring payments are made on time
Effective management of cash budgeting
Financial records to be kept up-to-date
Accountability through tight financial processes
Quality indicators of the general management functions
Develop/implement /monitor effective strategic plans
Set direction and established priorities of their business
Effectively communicate shared vision mission and values
Importance of quality in promoting the image of the business
It enables business to have a good reputation and promotes brand awareness
Customers associate image of the business with quality of the product
Quality products increase sales, profits, business growth and attracts prospective investors
Businesses gain goodwill and support from the community
The correlation between management and the success of business in achieving its objectives, strengths and weaknesses
Management play an important role in making the correct decisions and motivating employees to be productive
Businesses require ongoing decisions making and problem solving
Problems that cannot be solved and decisions that are not made appropriately can lead to a decrease in productivity
MACRO ENVIRONMENT
Meaning of the Macro Environment/External Environment
• This is the environment that is located outside the business. The business cannot control this environment but it can influence it. It is also known as the external environment.
Features of the Macro Environment
Physical/natural environment Economic environment Social, cultural and demographic environment Technological environment legal environment and political environment International environment Institutional environment
Reasons Why The Macro Environment Can Be A Challenge To Businesses
• The macro environment is always developing and changing Management in businesses have no control over the macro environment
Physical Environment
Description
These are forces that are present in the natural environments such as the natural resources/pollution/increased cost of energy/infrastructure
Challenges For Businesses
Manufacturing businesses dump their waste materials that impact negativity on the physical environment Some natural resources are scarce and expensive example sources of energy are expensive
Economic Environment
Description
• The economic environment includes all these factors that affect financial matters examples: interest rates/ inflation/business cycle etc
Challenges For businesses
• If interest rates increase it means the business will pay more monthly installments to the bank for the loan taken If taxation goes up businesses will be charged more on their profit and people will have less money to spend on buying goods and services
Social Cultural And Demographic Environment
Description
• The social environment involves people. The cultural and social environment can be defined as the sum total of language/values/cultural norms/preferences/religions and beliefs
Challenges For businesses
• Social issues can affect consumer spending South Africa has a large number of people who are poorly educated and unskilled this means that businesses may have few customers
Technological Environment
Description
These factors include the development of new technological products and services
Challenges For Businesses
Many businesses may not be able to succeed without internet connectivity IT systems can be hacked by fraudsters
Legal Environment And Political Environment
Description
• The legal component of the micro environment consists of the legislation that has been passed The legal system through the courts has power to oversee: comployment, tax, trademark rights, patent rights, intellectual property
Challenges For Businesses
• Some political decision such as government levels tax interest rates and inflation influence businesses Businesses are affected by legislation such as the National Credit act, consumer protection act, employment equality act, basic conditions of employment act, etc
Internal Environment
Description
Globalization refers to an increase in trade and investment between countries
Challenges For Businesses
• Globalization result in increased in competition from businesses around the world which cell they are goods to South Africa Businesses are expected to understand the cultures of foreign people
Institutional Environment
Description
This refers to the three spheres of government local provincial and national government
Challenges For Businesses
The provincial government has an indirect impact on businesses through its role in providing services such as housing and education.