Business Studies - Micro Environment Notes
Micro Environment
Learning Objectives
Define/elaborate on the meaning of the micro environment.
Outline/describe/explain/discuss the various components of the micro (internal) business environment.
Identify a vision/mission statement, goals, and objectives from given scenarios.
Formulate/evaluate a vision/mission statement, goals, and objectives of any business.
Outline/explain/discuss the purpose of the organizational culture.
Name/identify/outline the organizational resources from given statements/scenarios.
Outline/explain/describe/discuss the purpose/importance of a business organizational structure with specific reference to an organogram.
Explain the differences between leadership and management.
Briefly explain the purpose of the eight business functions.
Key Concepts
Vision: What the business wants to achieve in the long-term (the dream of the business).
Mission Statement: Describes what the business provides or produces.
Goals: The long-term plans of what the business wants to achieve.
Objectives: Describes how goals will be achieved.
Organizational Culture: The way the business goes about doing business, including dress code, norms, values, and beliefs shared by people in the business.
Organizational Resources: The people, equipment, and machinery that a business uses to produce its goods and services.
Management: The way the business is managed, entailing planning, leading, organizing, and controlling the people in the business.
Leadership: The way in which an individual can influence the behavior of others towards achieving the objectives of the business.
Organizational Structure: The different levels of authority in an organization; who does which tasks.
Business Functions: The tasks requiring specific knowledge and skills that are carried out by the various departments to achieve the goals of the business.
Introduction
All businesses, big or small, have their own internal environment, known as the micro environment.
The internal affairs of the business are managed by the directors or the owners of the business.
The business has full/complete control over its micro environment.
Businesses are also influenced by two external environments: the market environment and the macro environment.
These three business environments are interrelated and influence one another and can influence the success or failure of a business.
The meaning of the micro environment
The micro environment of a business includes everything inside the business.
The components of the micro environment
The components of the micro environment include the:
vision, mission statement, goals, and objectives
organizational culture
organizational resources
management and leadership
organizational structure
eight business functions.
Vision, mission statement, goals and objectives
Vision: Describes its long-term goal, where the business sees itself in the future.
Example: Olwethu Beauty Salon (OBS) wants to become globally competitive.
Mission Statement: Describes what the business provides or produces and why the business exists, explaining the aims and values of the business.
Example: Olwethu Beauty Salon (OBS) wants to provide professional services in hairdressing and also supply the beauty products.
Goals: Long-term plans that the business wants to accomplish, serving as guidelines to help businesses achieve what they set out to do.
Example: To open five more branches in the next five years.
Objectives: Short-term steps that will guide the business owner on how their set goals can be accomplished/achieved.
Example: In order to open up five more branches in the next five years:
Upskill current employees by offering specific and targeted employee training.
Increase efforts to reduce carbon emissions.
Set up specific marketing campaigns to gain greater market share and increase profit margins.
The purpose of organisational culture
Organizational culture refers to how things are done in the business, for example, how the employees communicate among themselves, their dress code, and their administration policy.
Organizational culture also includes the values, beliefs, norms, and standards that are shared among the employees and management.
The purpose of the organizational culture is to define the business' internal and external identity as well as its core values.
A strong business culture has the power to turn employees into ambassadors of the business.
It helps businesses to retain its employees and clients.
It breaks down boundaries between teams, guides decision-making, and improves productivity.
New words
Culture refers to the beliefs, values, norms, and ideologies of a group of people or a society.
Values are the morals that are shared by the employees in an organization.
Beliefs are what a business feels is true.
Norms are rules or expectations that are enforced by a business.
Standards are something used as a model to achieve a particular goal.
Organisational resources
The resources of a business can be classified into FOUR main groups. These are:
Human resources
Physical resources
Financial resources
Technological resources.
Human resources
Human resources are a set of people who make up the workforce of the business.
Physical resources
Physical resources are tangible items that are used in the operation of the business, for example, raw materials, building machinery, and vehicles.
Financial resources
Financial resources refer to the capital that the business owns or has borrowed from a financial institute. It includes all the funds that are available to the business, for example, bank overdraft, credit cards, long-term and short-term loans.
Technological resources
Technological resources are intangible resources such as software licenses and patents, that can help improve the performance of an organization.
Examples include computer software, laptops, computers, websites, internet facilities, cell phones, photocopy machines, and so on.
Management and leadership
Management
The management of a business is the process whereby an individual or individuals guide and direct the organization to achieve its goals and objectives. Good managers can plan properly, 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.
The purpose of the organisational structure
The organizational structure shows the different departments in the organization and how they are organized. The organizational structure is also known as an organogram.
An organogram shows the level of authority, responsibility, and tasks of the various departments in the business.
An organogram shows the hierarchical structure of the business.
The purpose of the organizational structure includes:
Helping to ensure the smooth and efficient functioning of the business.
Ensuring that work happens with precise coordination and minimum wastage of resources.
Helping the business to work towards its goals.
Show the connections between various positions and tasks in the business
It describes the coordination between various departments in the business.
The eight business functions
The eight business functions are all important components of a business. In large businesses, these functions may operate as separate departments, but in smaller businesses, some of these functions may be combined. Some businesses may not have all of the functions - it will depend on the nature and the size of the business.
The eight business functions are:
General management
Purchasing
Production
Marketing
Public relations
Human resources
Administration
Financial
General management
The general management in a business coordinates the other business functions to achieve the goals and objectives of the business. 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. It ensures that the business creates quality products to meet the demands of the target market.
Marketing function
The marketing function undertakes market research to determine the real needs of the target market. 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. It ensures that there is proper communication between the business and all its stakeholders.
Human resources function
The human resources function is responsible for attracting new employees into the business. It also manages all the people in the business by providing education and training for their employees.
Administration function
The administration function is responsible for collecting, processing, and storing all the data and information required by the business. The administration function has to be up to date with the latest information technology.
Financial function
The financial function is responsible for determining all the financial needs of the business. It ensures that the business's funds are used efficiently. It manages all the funds and financial assets of the business.