External Business and Environmental Planning
3.1.1 Why It Is Important
Businesses operate within internal and external environments, both affecting business planning.
This topic focuses on how external environment factors influence business planning.
3.2 Overview of the External (Macro and Operating) Environment
The business environment includes surrounding conditions in which the business operates, divided into internal and external categories.
These environments consist of stakeholders with varying and sometimes conflicting interests and demands.
Management must balance stakeholder interests in decision-making and planning.
The internal environment (micro environment) includes factors the business controls:
Employees
Managers
Management style
Type of business model
Business location
External Environment
Consists of elements outside the business that exert pressures or forces on operations.
Includes legal, political, social, economic, technological, global, and corporate social responsibility factors.
Divided into operating environment and macro environment.
These factors are continually changing, creating pressure on business operations.
3.2.1 The Operating Environment
Made up of stakeholders external to the business that directly impact operations.
The business has less control over these factors than internal environment factors.
The business has some influence over these stakeholders, but considerably less than over the internal environment. This is especially true for overseas suppliers. The four main stakeholders are:
Customers: Purchase goods and services, expecting high quality at competitive prices.
Competitors: Other businesses selling rival goods or services.
Suppliers: Provide materials and resources needed for operations.
Special Interest Groups: Influence business policies and procedures (lobby groups, business associations, unions).
3.2.2 The Macro Environment
Refers to broad forces, conditions, and trends in the economy and society.
Changes can affect all businesses, and businesses have no control over these factors.
Managers must adjust business planning in response to changes.
Example: New government regulations requiring pollution-control devices.
Example: Changing social attitudes leading to family-friendly and fewer discriminatory policies.
Macro Environment Factors
Legal and government regulations: Laws and regulations affecting business operations.
Societal attitudes and behaviour: Changes in attitudes, behavior, tastes, and lifestyles.
Economic conditions: Influences related to economic activity, including interest rates, wages, unemployment, exchange rates, and inflation.
Technological considerations: Issues related to the growing use of tools, techniques, or systems.
Global considerations: Pressures from operating in worldwide markets and competing globally.
Corporate social responsibility considerations: Pressures to consider environmental factors and broader social welfare.
Key Ideas
The external environment is made up of the macro environment and the operating environment.
The macro environment consists of factors outside the business, over which the business has no control, such as key legal, political, social, economic, technological, global and corporate social responsibility factors.
The operating environment consists of factors outside the business, over which the business has little control, including customers, competitors, suppliers and special interest groups.
3.3 Key Legal and Government Regulations
Society expects businesses to abide by laws made by parliaments, local councils, and court rulings.
Each level of government in Australia (federal, state, and local) imposes direct and indirect regulations.
Elected governments also attempt to make or change laws impacting businesses.
Changes in Legal Framework
Significant changes have occurred in the legal framework over the past two decades.
New statutes have been introduced, impacting business planning significantly.
These include laws on taxation, industrial relations, occupational health and safety, equal employment opportunity, anti-discrimination, and environmental protection.
Business owners need sound knowledge of laws affecting their operations.
Failure to obey the law can result in losing customers and reputation, fines, or loss of trading rights.
3.3.2 Laws Related to Establishing a New Business
Business name registration is required with ASIC unless trading under the owner's own name (optional in that case).
New registrations require an Australian Business Number (ABN).
Partnerships or companies need their own tax file number.
Companies must register with ASIC for a Certificate of Registration and an Australian Company Number (ACN).
Aspects Affected by Legislation and Government Regulation
Health regulations (Food Act 1984 (Vic))
Weights and measures
Ownership (sole trader, partnership, company)
Consumer protection (refunds, misleading advertising, unconscionable conduct, product labeling)
Building permits
Development applications
Trading hours
Taxation (PAYG tax, GST, company tax, payroll tax)
Employment of people (Awards, superannuation, occupational health and safety, unfair dismissal, workers compensation, equal employment opportunity)
Safe food handling
Patents
Signage
Trade practices and fair trading
Licenses
Business registration
Copyright
Zoning
3.3.3 Laws Related to Location
Local government zoning and building regulations influence business premises.
Regulations also relate to signage, fire safety, and parking.
3.3.4 Health Regulations
Local government imposes regulations under the Food Act 1984 (Vic).
Regulations apply to businesses dealing with food (cafés, restaurants, butcher shops, bakeries).
Regulations include:
Temperature for food storage
Kitchen layout
Employee clothing requirements
Correct food handling
Health inspectors regularly assess premises and can close down businesses that do not meet standards.
3.3.5 Employment Regulations
Businesses employing staff must comply with employment laws.
Legislation covers:
Conditions of employment
Unfair dismissal
Dispute settling methods
Protection of human rights
Employer responsibilities for tax payments
Employee welfare is provided through occupational health and safety legislation.
Businesses must be aware of legal responsibilities during recruitment, especially regarding discrimination and equal employment opportunities.
Larger businesses employ human resource professionals to ensure compliance.
Anti-Discrimination Regulations
Federal and state laws aim to end workplace discrimination.
The Equal Opportunity Act 2010 (Vic) prohibits discrimination based on:
Age
Disability
Gender identity
Marital status
Parental status
Physical features
Political belief
Race
Religious belief
Sex
Sexual orientation
Employers must take reasonable steps to eliminate discrimination, sexual harassment, and victimization.
Employers have a ‘positive duty’ to prevent these behaviors.
Employers may be liable if discrimination occurs or adjustments are not met.
Work Health and Safety Regulations
Each state and territory in Australia has its own health and safety laws.
In Victoria, the Occupational Health and Safety Act 2004 (Vic) is the main legislation.
3.3.6 Taxation Laws
Apply to all businesses.
Businesses must prepare a business activity statement (BAS) at regular intervals.
The BAS details the collection and payment of goods and services tax (GST) and pay-as-you-go (PAYG) income tax instalments.
Businesses may also have to pay state government payroll tax and tax on their earnings.
3.3.7 Trade Practices and Consumer Protection
Legislation promotes fair trade, competition, and provides consumer protection.
The Australian Consumer Law, in Schedule 2 of the Competition and Consumer Act 2010 (Cwlth), states that consumers have rights to goods of good quality and fitness for purpose.
Faulty goods result in breach of contract, entitling the consumer to a replacement or refund.
The Act also covers product safety, labeling, unfair market practices, price monitoring, and industry codes.
3.3.8 Environmental Protection Legislation
Federal, state, and local governments administer environmental protection laws through bilateral agreements.
The Environment Protection and Biodiversity Conservation Act 1999 (Cwlth) covers protection and management of matters of national environmental significance.
In Victoria, the Environment Protection Act 1970 (Vic) applies to noise emissions and prevents pollution and environmental damage.
Etiko, as a case study, operates a ‘Take Back Program’ for recycling used footwear.
Key Ideas
Business owners must ensure compliance with legal and government regulations.
Important regulations include business name registration, company registration, local government regulations, employment regulations, trade practices, consumer protection laws, and environmental protection regulations.
3.4 Societal Attitudes and Behaviours
Businesses should consider societal attitudes and behaviors.
Societal attitudes are ideas, values, and beliefs held by people.
Behavior expresses these ideas, values, and beliefs.
Societal attitudes and behaviors change constantly, affecting individuals, businesses, and stakeholders.
3.4.1 Values and Beliefs
Values and beliefs are shared principles and morals.
These are often learned and passed on, influencing behavior and priorities.
Values and beliefs affect what people do, wear, eat, and how they live.
Attitudes towards work, leisure, and customer service are based on values and beliefs.
Businesses must consider these attitudes.
Change in Societal Attitudes
Society’s attitudes about right and wrong are constantly changing, affecting business planning and management.
Global access to information has increased awareness of business actions.
Pressure from society forces businesses to protect the environment.
Supermarkets like Coles, Woolworths, IGA, and Aldi respond to customer pressure for sustainable seafood.
The Marine Stewardship Council (MSC) certifies sustainable seafood.
Coles has full MSC certification, while Woolworths, IGA, and ALDI sell MSC-certified frozen and canned seafood.
Contribution to Society
Businesses are expected to contribute positively to communities.
AGL Energy’s ‘Energy for Life’ program supports families struggling to pay energy bills.
Employees can be involved in giving to causes, volunteering, or fundraising.
3.4.2 Trends
A trend is the general direction of changing attitudes or behavior.
Businesses should consider demographic trends.
Australia’s ageing population might provide healthcare opportunities but could lead to labor shortages.
Businesses planning for changing demographics are likely to thrive.
Family-Friendly Workplaces
Businesses are expected to provide family-friendly and flexible workplaces.
Better childcare options and flexible hours are increasingly considered.
Working from home is now expected to remain an option for those who find it more productive or convenient.
Key Ideas
Businesses must consider changing social values, beliefs, and trends when planning.
Social values and beliefs include environmental protection and contributing positively to society.
A trend is the general direction of changing attitudes or behavior in society.
Trends can be seen in changing demographics and workplace culture.
3.6 Economic Conditions
Economic conditions refer to influences related to economic activity, including:
Interest rates
Wages
Unemployment
Exchange rates
Inflation
Economic forces impact both businesses and customers.
They influence a business’s capacity to compete and customers’ willingness to spend.
Economies experience fluctuations between growth (‘boom’) and recession (‘bust’).
Phases of the Business Cycle
Expansion (increasing consumer spending, optimistic business expectations, rising investment, sales, profits, and employment, decreasing unemployment)
Peak (high wages, full business capacity, highest sales and profits, high employment, low unemployment)
Contraction (decreasing consumer spending, pessimistic business expectations, falling investment, sales, profits, and employment, increasing unemployment)
Trough (low wages, business operating below capacity, lowest sales, profits, and consumer spending, lower employment, high unemployment)
Economic downturn means reduced customer spending, translating to reduced business opportunities.
Economic boom means lower unemployment, rising incomes, and increased spending overall, allowing businesses to expand.
Economic Indicators
Information on economic growth, inflation, earnings, confidence, interest rates, spending, and unemployment provide businesses with insights into economic trends.
This information allows businesses to predict threats and opportunities during planning.
3.6.2 Interest Rates
An interest rate is the cost of borrowing money, expressed as an annual percentage.
Interest represents a cost involved in generating revenue.
Interest rates rise during inflation and increased credit demand.
Rising interest rates stifle business activity by making credit more expensive.
Changing interest rates affect business planning and loan repayments.
High interest rates reduce profit likelihood and opportunities for business expansion.
Falling interest rates make business loans more affordable, encouraging expansion.
Lower interest rates increase consumer spending, resulting in increased sales and profitability.
3.6.3 Employment Levels
The Australian Bureau of Statistics defines people as ‘employed’ if they work one hour or more per week.
Employment levels fluctuate with the business cycle.
Expansion: Employment rises, unemployment falls.
Contraction: Employment falls, unemployment rises.
Changing employment levels affect business planning.
Economic expansion: Businesses find it difficult to hire suitable employees due to labor shortages, increasing wages or requiring overseas employees.
3.6.4 Tax Rates
Taxes represent a cost for businesses.
A tax rate is the percentage of income or value paid as tax.
Income tax and company tax are imposed as a percentage of net income.
Land tax is levied on the value of an asset.
Activities offering tax deductions may be attractive during planning.
Tax rates can be classified as progressive, proportional, or regressive.
Progressive tax: Rate rises as the taxable amount increases (e.g., income tax).
Proportional tax: Rate stays the same as the amount rises (e.g., company tax).
Regressive tax: Low-income earners pay the same rate as high-income earners. The relative tax rate increases as a person’s ability to pay it decreases.
3.6.5 Business and Consumer Confidence Levels
Refer to how businesses and customers feel about the economy.
High consumer confidence: Consumers are optimistic about their financial situation and likely to make purchases.
Positive business owner sentiment and high consumer confidence are reflected in planning decisions.
High confidence: Business owners may plan to expand the business, take on more debt, or employ more workers.
Government Economic Policies
Governments use monetary and fiscal policies to stabilize the economy.
Recessionary cycle: Rising unemployment, decreased economic growth, stabilising or falling inflation, cost-cutting, reduced consumer confidence, consumer caution, falling spending, reduced business profits.
Boom cycle: Falling unemployment, increased economic growth, rising inflation, increased production, increased business profits, returning consumer confidence, increased spending.
Exam Tip
Application of business management knowledge to practical or simulated business situations.
Ability to describe economic conditions and explain how they affect a contemporary or simulated business.
Key Ideas
Economic conditions need to be considered when planning a business.
Economic conditions include interest rates, employment levels, tax rates, and consumer confidence.
3.7 Technological Considerations
Technological considerations relate to the growing use of tools, techniques, or systems to solve problems or serve a purpose in operations.
Innovation in technology increases efficiency and productivity, creates new products, and improves quality.
Businesses must monitor and adapt rapidly to technological innovations to survive.
Failure to adopt new technology could result in products and businesses becoming obsolete.
3.7.1 Developments in Technology
Hi-tech robotics in manufacturing industries improves productivity, reduces operating costs, and eliminates repetitive tasks.
Declining cost of global communications and easy-to-use information technology tools.
New communication technologies and global communications systems coordinate design, production, and distribution worldwide.
The internet, mobile phones, interactive video, and electronic funds transfer drive global trade.
Shortcomings of Technological Development
Technological change has led to a decrease in the number of employees required by many businesses because they have been replaced by the technologies that reduce costs and improve quality and delivery speed.
Speed of change has shortened product life cycles.
Businesses need to spend more on research and development to remain competitive.
Changing technology opens up new markets and provides business opportunities.
Businesses must consider the benefits and limitations of technology during planning.
3.7.2 The Future of Business Technology
Businesses and consumers will continue to increase their use of technology, devices, including computers, phones, appliances, vehicles and robotics.
Living and interacting with more internet-connected devices.
Potential for gathering and analysing huge amounts of data presents opportunities for businesses.
Technology will become smarter, meaning robots and computers will replace more workers who do dangerous, repetitive or mundane jobs.
Driverless vehicles, 3D printing, wearable technology, and robotics are already in use.
Key Ideas
Technological considerations relate to the growing use of tools, techniques or systems by businesses to solve problems or serve a purpose.
Technological considerations, including changing markets and technological developments, need to be addressed when planning a business.
3.8 Global Considerations
Elements within the macro environment can combine and operate at a global level.
Globalisation means that businesses now operate in a worldwide market due to better technologies, transportation, and unrestricted trade.
This presents both challenges and opportunities.
The major challenge faced by many businesses is competing on a global scale.
Globalisation allows businesses to buy and sell goods and services internationally, opening the door to increased sales to overseas customers and increased profits.
Successful business owners understand the necessity to adapt to the constant and rapid changes in the global environment.When planning a business, the business owner needs to consider many global issues, including overseas competitors and overseas markets, offshoring of labour, exchange rates, patenting, copyrights and trademarks at a global level and online sales.
3.8.1 Overseas Competitors and Overseas Markets
Business owners must take into account the fact that it is highly likely they will face competitors from overseas.
Global competition exists because of rival, or competing, businesses that serve customers internationally.
Business owners planning to compete against overseas competitors know that they must build a competitive advantage based on the strengths of the business, as well as by reducing costs and improving the quality of the product.
It is also important to have knowledge of all competitors — whether they are found in a local market, nationally or overseas.
Business owners who are aware that they will face overseas competition must stay informed of their rivals’ strategies, and their strengths and weaknesses.
Businesses may plan to differentiate their goods and services from other businesses in order to be competitive.
Just as overseas competitors can sell their goods and services locally, local businesses can also sell their products in overseas markets. Selling goods and services to overseas markets spreads the business’s risk and allows it to grow.
Selling goods and Services to overseas markets spreads the businesses risk and allows to grow. However, there are unique issues for the business owner to consider, such as transportation and distribution, conversion of currency, taxes and duties, marketing and packaging requirements and legal considerations.
When planning to sell to overseas markets, business owners need to consider the different requirements of these markets, such as customs and cultures.
The product that they sell locally may need to be modified or tailored to suit the needs of an overseas market.
It is always a good idea for the business owner to speak to someone who has experience in exporting to overseas countries.
The Australian Trade Commission (Austrade) supports businesses in growing overseas markets, and can provide information, assistance and advice about exporting, understanding foreign regulations and best business practices.
3.8.2 Offshoring Labour
Business owners need to consider the opportunity to use labour in overseas countries during planning.
Offshoring refers to moving some of a business’s processes or services to the same or another business located in an overseas country.
Businesses do this to take advantage of lower costs, including labour and transportation, as well as more favorable economic conditions in other countries.
Many businesses choose to offshore their labour-intensive stages of production, such as the assembly of car engines or the manufacture of clothing items.
Similarly they will offshore labour-intensive services. (e.g. using call centres in overseas countries to assist Australian customers).
Offshoring has historically been a contentious issue because it has resulted in the loss of local jobs.
Groups such as workers’ unions argue that offshoring labour to nations with lower wages and working conditions often leads to the exploitation of foreign workers and local unemployment.
3.8.3 Exchange Rates
An exchange rate is the price of one country’s currency expressed in terms of another country’s currency.
The exchange rate determines how much of one currency has to be given up in order to buy a given amount of a different currency.
Australia’s exchange rate is commonly measured using the US dollar.
Exchange rates are affected by interest rates, the rate of inflation, the balance of trade, political stability, the general state of the economy, and the quality of a country’s governance.
The exchange rate plays an important part in the planning of businesses that intend to export goods and services or import materials.
A depreciation (a fall in the value of a country’s currency in relation to another currency) will usually make exports cheaper and imports more expensive, benefiting exporting businesses and increasing costs for manufacturers or retailers importing materials or goods.
Conversely, an appreciation (an increase in the value of a country’s currency in relation to another currency) makes exports more expensive and imports cheaper, and reduces the competitiveness of businesses that export.
Business owners may pay overseas suppliers for materials and furthermore need to be aware of exchange rates because they may pay overseas suppliers for materials.
The supplier is likely to invoice the business in the currency of the supplier’s country. Furthermore, businesses may need to locate or develop a method for converting payments they have received from overseas customers.
3.8.4 Patenting, Copyrights and Trademarks
It is important to ensure that competitors do not copy any creations of the mind that a business has developed, such as new inventions, new technologies brands, designs or artistic creations, as these can provide a competitive advantage.
As it is likely that businesses will face overseas competitors, it is essential to protect intellectual property at a global or international level. This can be done through the use of patenting, copyrights and trademarks. Patenting.
A patent is an exclusive right granted or any device, substance, method or process that is new, inventive and useful. This is legally enforceable and gives the owner exclusive rights to use the invention for commercial purposes for the life of the patent. However, an Australian patent will generally only protect the rights of the patent owner in Australia.
At present there is no ‘international patent’. A patent must be obtained in each country in which the business seeks protection for its invention, in accordance with the laws of that country. A second option for businesses seeking patent protection in several countries is to file an international application under the Patent Cooperation Treaty (PCT), administered by the World Intellectual Property Organization (WIPO). IP Australia supports businesses in making this application.
Copyright is a free and automatic protection of original works such as writing, music, art, films, sound recording, broadcasts and computer programs.
Copyright is generally obtained automatically without the need for registration or other formalities. Although it is not necessary to do so in Australia, and in a majority of countries, placing a copyright notice in a prominent place on any work can act as a reminder to competitors. To date, 179 out of 190 countries have ratified the Berne Convention — an international treaty that sets a minimum set of standards for the protection of the rights of creators of copyrighted works around the world.
However, some countries have not signed the treaty, so a business owner must be aware that it can be a requirement in some countries to establish copyright.
Trademarks is the right granted over a letter, word, phrase, number, sound, smell, shape, logo, picture or aspect of packaging that a business will use to represent its products.
However, an Australian trademark only provides protection within Australia. Similarly to patenting, trademark owners can seek trademark protection overseas by applying for protection in each separate country. Another option is to make a single international application filed through IP Australia nominating the Madrid Protocol countries in which protection is required. The Madrid Protocol is a treaty that provides a solution for registering and managing trademarks worldwide.
3.8.5 Online Sales
When planning, a business owner will need to consider the options of selling through a physical store, an online store or both.
Online sales present many opportunities for businesses. Firstly, long-term costs will be reduced as the business is not required to pay for premises and expenses such as electricity and water. In addition, the business will reach a wider market, as customers can purchase the business’s products from around the world. However, the business owner needs to realize that setting up and maintaining a professional-looking website or mobile app can be expensive, and some expertise may be required.
Websites still crash, and when the site is down customers will not be able to make purchases. Nevertheless, when planning the business, a business owner needs to be aware that failing to go online could result in the business being uncompetitive.
Key Ideas
Globalisation is the effect of hi-tech communications, lower transport costs and unrestricted trade and financial flows, which have transformed the world into a single market, producing a more integrated global economic system. Globalisation means businesses now operate in a worldwide market.
During the planning stage of a business, global issues, including overseas competitors and markets, offshoring labour, exchange rates, protection of intellectual property (patenting, copyrights and trademarks) at a global level and online sales, must be considered.
3.9 Corporate Social Responsibility Considerations
3.9.1 Corporate Social Responsibility
The traditional view of business is that that it exists to create products, earn a profit and provide employment. As society’s expectations of acceptable business behaviour change, socially aware business owners recognise the importance and necessity of planning business objectives that incorporate corporate social responsibility.
Planning business objectives that incorporate corporate social responsibility. Businesses today are very much concerned with planning for the triple bottom line. This means that they are no longer focused only on the pursuit of profit and financial performance, but rather, they recognise that environmental and social performance are also important.
Customers will purchase products from socially responsible businesses. Planning to incorporate socially responsible practices can result in the business becoming more competitive. The relationships that the business has with stakeholders such as other businesses, governments, the media, suppliers, specific interest groups and the community are also much more likely to be positive.
Obviously, socially responsible behaviour costs money in the short term, as the contemporary case study on Etiko has demonstrated. It can also can be very time consuming and complicated to introduce policies and practices that are socially responsible. However, in the long run, corporate social responsibility does turn out to be in the business’s, and society’s, best interests.
*Triple bottom line business planning incorporates economic, environmental and social aspects.
Socially Responsible Approaches to Business
Avoid conflicts of interest.
Ensure that a fair price is paid for all materials.
Minimize waste and pollution.
Deal with employees honestly and fairly, and with respect.
Develop the skills of employees.
Work with suppliers to ensure that they have socially responsible policies in place.
Ensure that the business is free of corruption.
Conserve the use of energy.
Protect the health and safety of customers.
Become involved in the community.
3.9.2 Environmental Considerations
A business owner will need to address environmental considerations when planning their business. It is important to ensure that the business’s production process will not have a serious or negative impact on the environment.
For example, a business could plan to incorporate renewable energy initiatives, such as solar or wind power, into its operations; source sustainable ingredients; implement waste- reduction strategies, such as recycling; or support suppliers who use environmentally friendly methods of production.
3.9.3 Planning the Production of Goods and Services in a Way That Benefits Society
In addition to environmental considerations, when planning a business the business owner should also ensure that the production process does not have serious or negative impacts on community health and social conditions.
A business could plan to purchase materials and other resources from local suppliers (rather than from overseas) to demonstrate support for the local community by providing employment.
The business owner must also ensure that the business’s facilities and technology will contribute to the health and welfare of staff (above and beyond what is required by legislation and regulations).
The business owner will need to make sure that the product is of the required quality — that it is safe and reliable. A dangerously defective or harmful good could result in the injury or death of consumers.
The product delivery can also raise issues around the socially responsible behaviour of managers, such as fair and equitable treatment of customers.
Key Ideas
Corporate social responsibility refers to managing a business in such a way that the broader social welfare of the community, including its employees, customers, suppliers and the environment, is taken into consideration when making business decisions.
When planning a business, corporate social responsibility issues will need to be considered. These issues include environmental considerations and planning the production of goods and services that are in society’s best interests.
Corporate social responsibility management practices have benefits and costs.
3.11 Apply Your Skills
A socially responsible business will take its obligations to the community seriously.
It will seek to perform actions that go above and beyond making a profit, obeying laws and honoring contracts
provide for the greater good of society.
3.12.1 Customers
Customers are the reason that businesses exist. They buy a business’s goods or use its services, expecting high quality at competitive prices.
Businesses must respond to the needs of customers, making sure that the right product is delivered at the right time. High levels of customer service result in improved customer satisfaction. Successful business owners are aware that the consumer is a powerful stakeholder in the external environment. They will take this into account when planning their business.
Businesses that sell products that do not live up to customer expectations are not likely to continue running for long. To ensure its future viability and profitability, a business needs to recognise and assess changes in consumer tastes so it can constantly satisfy consumers’ needs and wants.
Businesses are also prepared to mount publicity campaigns aimed at embarrassing those businesses that do not act ethically or responsibly.
*Consumers are increasingly putting pressure on businesses (through their spending decisions) to be environmentally aware, demanding products that are ‘clean, green and safe’ Examples include recycling, environmentally friendly packaging, reduced packaging and lower factory emissions.
As we know, customer pressure has also forced businesses in the fast-food industry to change their product offerings.
Customers expect products that are low in sugar, salt and fat, and free from allergens, colourings and flavourings.
Oliver’s Real Food is a growing health food chain that was started by founder Jason Gun in response to not being able to find any healthy food to eat while driving.
3.12.2 Competitors
Competitors are the businesses or individuals that offer rival goods or services. Not only do businesses need to be aware of existing competitors, but they also have to monitor the environment for potential newcomers. Businesses must respond to any change in the actions of competitors.
From a planning point of view, the awareness of competition can stimulate the necessity for efficiency and for ongoing development of the product or service on offer.
To achieve a sustainable competitive advantage, the business owner will need to plan to produce a high-quality good or service at the lowest cost, or aim to provide a superior offering.
Netflix
Netflix has disrupted the media industry, resulting in the demise of competitors such as Blockbuster. However, by providing customers with the convenience of a wide selection of high-quality streamed media at a low price, the company appealed to a mass market. Netflix now serves over 190 countries, with more than an estimated 150 million subscribers, and earns billions of dollars in revenue.
Key Ideas Customer needs and expectations
Customers are the people who purchase goods and services from the business, expecting high quality at competitive prices.
The needs and expectations of customers, including that businesses be socially responsible, must be considered when planning a business. Competitors’ behaviour
Competitors are other businesses or individuals that offer rival, or competing, goods or services to the ones offered by the business.
During the planning stage, business owners need to be aware of existing competitors, and also monitor the environment for potential newcomers.
3.13.1 Suppliers
A business’s suppliers provide the resources that are needed for use in the production process. Examples of such resources are raw materials, equipment, machinery, finance and information. Suppliers may be individuals or other businesses.
Good relations with suppliers are important to guarantee the efficient running of the business, so it is important for any business to develop a reliable supplier network.
Having a number of suppliers means a business is less vulnerable to supply difficulties and the impact of price rises. For a business to rely on just one supplier puts it at a distinct disadvantage.
The Supply Chain
A supply chain is the network of suppliers from which the business purchases resources. It typically starts with the sourcing of natural resources, followed by manufacturing activities such as component construction and assembly. The supply chain moves on to storage facilities before finally reaching the consumer.
The supply chain needs to be well managed because production of the business’s good or service depends on resources. Supply chain management is critical for the following reasons:
If resources required are not on hand, then nothing can be produced
If resources are of inferior quality, it is difficult or costly to produce quality products
If the right quantities of resources are not available, the business cannot meet demand for its products
During the planning stage, a business must consider where the resources it obtains for production are sourced and how they reach the business.
In doing so, the business owner must not only assess the location of the business in terms of distance to suppliers, but also consider the efficiency of delivery, the rate that stock is used, consistency in quality, and pricing and comparisons with other suppliers of similar products. This is to identify whether they can better meet the business’s needs
In recent years, many businesses have had to develop more sustainable supply chains or ‘greener’ supply chains. Businesses expect their suppliers to behave in a socially responsible manner.
3.13.2 Special Interest Groups
The operating environment is affected and influenced by a number of associations, organisations and interest groups. These special interest groups are groups of people who attempt to convince a business to change or adopt particular policies or procedures.
Some common groups that attempt to influence business decision-making and planning are:
Issue groups
Business association
Unions
Consumer groups
Key Ideas Suppliers and the supply chain
Suppliers are the businesses or individuals that provide the materials and other resources