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Chapter 4 - the business environments

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THE BUSINESS ENVIRONMENTS

MACRO ENVIRONMENT 2

Instittitional-govermental environment This is decisions that are affected by the government. Reason for company act brought in: To replace the outdated legislation of the original acts Define relationships with companies and their shareholders Respond to globalisation and the advent of democracy Simplify company registration maintenance

Consumerism Is the social force that protects the consumer. They develop by nature as the consumers are more educated. Social responsibility and business ethics This is the responsibility the business have outside their work environment and also the way they operate. HIV/Aids Many businesses have to deal with HIV in the workplace. Culture Business have now to cater for differences cultures. Also there are some changes in the business culture. The shape of the market influence of the culture that is currently enjoys political power.

The social environment Link to the demographic, social and cultural aspects that influence the market Population growth The size and composition of the market are directly influenced by the population growth of a country. Urbanisation The growth of population leads to where families must move to rural areas to survive. This is called urbanisation. I Level of education Where the level of educating is increasing, there will be better skilled managers and workers. With better education the consumers the will have definite demands, what mean management will then make sure quality of products, advertisement, and working conditions will be much better. The changing role of woman The woman’s opinion matters now, a lot of woman is being put in to top management positions.

MARKET ENVIRONMENT

Competitors These are businesses that sell the same or similar products and services. The result of competition is higher productivity and technological innovations. The following determine the nature and intensity of competition 1. The possibility of new entrance 2. The bargaining power of clients and consumers 3. The bargaining power of suppliers 4. The availability or non-availability of substitute products and services 5. The number of existing competitors

Intermediaries These bridge the gap between the manufacturer and the consumer. They include wholesalers and retailers, agents and brokers, representatives and spaza shops. New trends and markets are responsible for the development of new kinds of intermediaries. Evidence of the above reasons is, for example, extended shopping hours, increased advertising by shopping centres, the importance of black retailers townships increased the number of franchises and spazas.

Suppliers Businesses that provide other business with inputs, e.g. raw material, equipment, energy, capital and labour. They should provide the right inputs of the necessary quality in the right quantity and at the right price for the business to achieve success in a competitive market environment. Banks and shareholders are suppliers of capital. Trade unions can be regarded as suppliers of human resources (labour).

The market Refers to people who have needs to satisfy and financial means to do so. Management must be fully informed of consumer needs, purchasing power and buying behaviour. Management also has to understand that the macro-environment has influence over this environment. E.g. demographic trends have influence in the number of consumers, economic factors influence the buying power of consumers. To determine the market for its market offering, the management analyses the total number of consumers in a specific area and the purchasing power of those consumers. Purchasing power refers to the consumers’ personal disposable income, a portion of personal income that remains after direct taxes and credit payments.

MICRO ENVIRONMENT

A SWOT ANALYSIS This is the tool used by the micro business environment to analyse the internal strengths and weaknesses of the business. It changes its own workforce due to changes and alignment of workforce in changing environment. The resources Tangible resources are the resources used internally by this environment for example raw materials and production facilities. Intangible resources such as the brand names and technological knowledge are being maintained by this environment.

The vision This is what the environment asks before they establish their enterprise as to what the business wants in future. The mission A mission statement is developed after the vision statement and answers the question: what is our business? A mission statement is an enduring statement of purpose that distinguishes one business from other similar firms. It serves as the foundation for the development of long-term objectives.

The micro environment This is the business itself that management has complete control over its organisational activities. It is responsible in the vision, mission, the objectives and the functions of the business. Management has complete control and influence in the market environment.

MACRO ENVIRONMENT

The physical environment refers to the physical resources that people and businesses need to support life and development, such as water, air, climate, forests and so on. If the biomass, which maintains a life-sustaining balance, is damaged beyond repair, human beings will simply cease to exist. Issues of most concern include food, water, energy and climate, pollution, scarce resources and so on.

The Economy is influenced by technology, politics and the social and international environment, while in turn also influencing these variables. These influences continuously cause changes such as economic growth rate, employment levels, inflation, rates etc. The economic growth rate is measured by the range and number of products and services it produces.

Changes in the environment are generally caused by technological innovation by mainly businesses, universities and government. Not only does this result in new machinery or products, but also new processes, methods, services and even approaches to management, which bring about a change in the environment. Examples can be cell phones, nanotechnology and the Internet.

The Macro Environment consists of variables that directly or indirectly influence a business and its market environment. These variables constitute the uncontrollable forces in the external environment that are sometimes referred to as “mega-trends”. Macro-variables not only have an effect on the market environment and on decision-making by management, but also on each other, which constantly cause change in the business environment.