Chapter 4 - the business environments

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Chapter 4 - the business environments

Characteristics of business environment

•The important characteristics are: oThe interrelatedness of the environmental variables oIncreasing Instability and change oEnvironmental uncertainty oThe complexity of the environment

Micro Environment

•It consists of internal environment of the business. •Management has full control over this environment •An analysis of the micro environment allows managers to determine the strength and weaknesses of the organization. •It has 3 sets of variables: •The vision, mission and objectives-they are the reason an enterprise exists. •Its Management- they play a role in structuring the organization •The are different types of management, e.g. Human Resource: they influence the employment policy and all that has to do with employees. Financial Management: Deals with taxes, interest rates and finance records that could influence the business decisions. Market Management; Deals with consumers and their preferences. It’s about customer satisfaction. •Its resources- they have certain interfaces with external environment. •The resources are; Tangible resources-they consist of property, raw materials, financial resources, etc............ oIntangible resources- they consists of brand names, trademarks, company reputations and so on. oOrganizational Capabilities- they refer to the ability of combining resources, people and process in a particular ways. •A business organization should be structured in a way that it will be able to deal with influences from the environment and operate productively within environment, especially the market.

Market environment

•Factors that affect the outside of the business •Management has no control over the environment but can influence it Factors consist of: •Consumers •Competitors •Intermediaries •Suppliers Variables give rise to opportunities and threats People need to satisfy their needs by financial means Management informed about: •Consumer needs, buying power. Variables directly influenced by the macro-environment •Interest rates control buying power of consumers •Cultural values uses certain influences on buying behaviour •Purchasing power characterised by consumers personal disposable income Consumer Market subdivided into products that are bought: •Durable products (Furniture, motor cars) •Semi-durable products (food, tobacco) •Services (insurance, rental)

Suppliers •Receives inputs(capital, labour, materials) and turns them into outputs (products and services) •Your products must be in the right quality, the right quantity and right price so it can achieve a success over your competitors •The business and its suppliers must have a good relationship for them to deliver the goods on time. • Businesses also depend on suppliers of capital (banks, shareholders) Intermediaries •Bridge gap between manufacturer and consumer •Wholesalers, retailers. Agents, brokers, representatives, spaza shops, bankers, asset managers and insurance brokers •Decision-making by management is complicated because of the dynamic and ever-changing nature of intermediaries. And involve long term agreements that may have implications in the marketing strategy. Competitors •Every business that sells their products and services in a market environment is competition. •Businesses compete for shares in the market, capital, labour and materials. •5 Competitive Forces determines the profitability of participants. •Weaker the forces better chance of survival

Organization and Environmental change

•In this we look at the dependence between community and organization and how environmental change affects them. •Community depends on business in terms of products and services and job creation. •Change is seen as moving from one system to another. •Certain variables such as technological innovation and others bring change that impacts the organization in different ways, this result in increase of complexity in their relationship. •Change occurs in different ways depending on the type of society and place. •All in all organizations must always have a backup plan to adjust to change.

macro environment

Environmental scanning

•Environments are changing continuously therefore you got to monitor it properly •Scanning with show what factors are present •Scanning determines what factors and treats pose threats in the environment •Business who scan the environments are said to be more successful Extent environmental scanning is determined by: •Basic relationship business and its environment •The nature of the environment where the business operates •The source and extent of change Guidelines for environmental scanning: •Update relevant secondary or published information obtainable from wealth of sources such as media •More advanced scanning is the addition to primary information or special investigation •Most level of scanning is creating a scanning unit within the business.

The international environment

Opportunities and threats are increased if there is an international dimension. The bigger the company operates in the bigger the business environment.

The institutional-governmental environment

Politics is the main course of management decisions. Legislation is influenced by the macro environment and the goverment influences the market through government expenditure.

Threats to a business organisation

The cost of energy •Will affect the business directly •The increasing of energy has launched a new drive to technology creating more opportunities for the entrepreneurs ahead. The growing cost of pollution •Destroying the environment as well as being an expense to prevent it from happening. Environmentalism •Opportunities are set up in the fields of ecotourism and conservation Scarce resources •Resources are being more and more scarce each day you make a product. •Shortages on products the higher the retail price becomes •Can create opportunities to having different ways of make the product

Physical environment

Physical resources that people need for support and development Population and health patterns •With population growth leads to more population, degradation, malnutrition, illness etc. Food •Main basic need therefore that’s why one –third are in danger of starving Water •The usage of water is outgoing the supply rate, which is therefore creating more pollution in the rivers etc. •Only 2.5% of the water is fresh on earth. Energy and climate •There is always a need for energy everywhere even though most people in rural areas are still sitting with no energy sources. •Oil and coal both lead to air pollution and this leads to global warming and climate disruptions. Biodiversity •Extinct or animals heading that way are now being used as medicine as well as food

social environment

•this environment is one of the most subject and inflential because it affects management indirectly in the form of consumers and directly in the form of employees •demographic graph-is change in growth and consumption of population Urbanisation •Movement of people from the rural to urban areas. •Common trends in the worlds population •Affects the businesses those health, sanitation etc. Level of education •More educated people = more skilled workers •Increases the amount of books •More education and training= happier customers The changing role of women •people preserceive the woman to be at home but its slowly by surely changing Consumerism •Protecting the customer from any danger that could arise •Rights that come in : The right to safety The right to be informed The right to freedom of choice The right to be heard Social responsibility and business ethics •For the social responsibility a business shouldn’t just get the shareholders involved, but consider the actions on the society Corporate social responsibility (CSR): Means that the business in not only looking for profits but helping the community. Linked with the King Report •Business ethics has a close link to social responsibility •It can be stated in a right or wrong manner, can based on cultural differences etc. HIV/Aids •Huge problem all over the world •25 million have died so far with Aids •Can affect the business loss of workers, means more recruiting and training to be done. Culture •New cultures are emerging therefore taking power over South Africa •HIV/Aids, poverty bring changes to the environment •Management therefore can’t ignore it.

economic enviornment

•the economic well-being and growth of a country is measured by the range of its products and services •management must take note of structural changes in the incomes of diffrent consumers groups and adjust their strategies •variables such as the technological,political and social environment then cross influences continuously causes changes in the economic growth rate,levels of employment,consumer income,the rate of inflation ,intrest and exchange •another economic variable affecting a business and the environment is the monetary and fiscal policy

technological environment

•businesses have to be technoloically advanced and innovative •new innomedical •transport •vation results in new machinery,products,methods •managers should assess technological trends that revolve around:water •mineral •marine •argricultural •medical •transport •power technology

composition of the macro environment

the environment has variables that directly or indirectly influence the business or environment •any business should observe or respond to the technological,economic,institutional,politica; and international environment •the variables in macro environment have an effect not only on the environment but the business aswell,so businesses have to be able to adapt to change