Chapter 4 Summary

The society depends on businesses for their products/services. The businesses obtain the resources from the community which includes money which allows for the business to run and succeed.
The influence of environmental change has a huge effect of the business as it can limit or even destroy the resources the business needs to produce or it can build the business up and make it successful due to the influx of natural resources.

Change has become the only constant reality of our time and that it is the only definite phenomenon in management.
Definition of change is “Moving from one system or situation to another.”

The environmental variables are constantly changing the environment in which business organisations operate include technological innovations, economic fluctuations, new laws and social factors.
Over the past 16 years the structure of South African Society and its lifestyles, values and expectations have changed visibly, especially since 1994 when the “New” South Africa began.
The interaction between the environment and a business organisation is an on-going process that often results in a new environment with new threats and new opportunities.

The effective management of the business organisation required management to take careful note of environmental changes.
The business environment is therefore defined as all the factors of variables that influence the business internally and externally, which may influence the chances of the business continuing and being successful.

The three sub environments

The micro-environment

This consists of the business itself, the manger has full control over this. The micro environment includes the vision, business functions and the resources of the business. What ever decisions made by the manger influences the market enviroment.
Analysing the micro environment gives the manger an idea of what he/she has to change to make the business successful.

Subtopic

Market environment

This consists externally of the business. The business faces the competitors and the environment. The main variables in this environment includes the consumers, competitors, intermediaries and suppliers.
These variables mentioned give the chances to opportunities as well as threats.
The Managers have no influence over the market environment but they are able to influence it, to try and compete against the competitors and keep the customer happy.

macro-environment

The macro environment is external to the business as well as the market environment. Threats or opportunities can happen to the business in the macro environment it all depends on the variables.
The macro environments consist of six distinct variables/components. These are: Technological environment, economic environment, social environment, physical environment, institutional environment and international environment.

external to both the organisation and the market environment. There is little to no control of this environment and its threats or opportunities that fall on the business.

technological environment

continuously brings changes and innovation

economic environment

factors such as inflation, exchange rates, recessions, and monetary and fiscal policy influence the prosperity of a business organisation

social environment

consumer lifestyles, habits and values make demands on the business, through consumerism

physical environment

consists of natural resources,( e.g. mineral wealth, flora and fauna) and manufactured improvements (e.g.roads or bridges )

institutional environment

the government and its political and legislative involvement being the main components

international environment

local and foreign political trends and events affect the micro and market environment.

Characteristics of the business environment

very necessary for management to monitor these characteristics continuously

the interrelatedness of the environmental factors or variables

means a change in one of the external factors may cause a change in the micro environment and possibly affect another external factor in the process

increasing instability and change

although the general rate of change in the environment accelerates, this could vary in fluctuation depending on different types of industries

Environmental uncertainty

dependent on how much a business will know about the given environmental variables and is the information is reliable. Uncertainty of the environment will increase if little information is gathered or it is unreliable

the complexity of the environment

indicates the number of external variables and the less variables the less complex the environment

micro-environment in three sets of variables

responsible for outputs of the business and under direct control of management. Analysing these variables gives the strengths and weaknesses of a business.

The vision, missin or objective

the reason for existence. The mission statement helps separates it from other firms and serves as the foundation of long term objectives which need to be achieved. The objectives and mission statement is influenced by external environments. A mission can be later changed depending on the change of an external environment changing.

Management

there many different areas of management which constitute another set of variables in the micro that have interfaces with external environment. E.g.: marketing management keeping eye on consumerism.

Resources

risk of from external threats but have positive impact from its external opportunities

Resources of a business

Tangible resources

production facilities, raw materials

Intangible resources

names, patents and trademarks

Organisational capabilities

ability to combine resources, people and processes in particular ways.

the market

people who have needs to satisfy and have the financial means to do and this is called their purchasing power… sub topic under market

Consumer market

Durable products

Semi-duriable products

Services

Subtopic

Suppliers

supply businesses inputs such as materials and then converts them into outputs being products or services

other form of input would be banks supplying capital for a business

rising capital is harder for smaller businesses starting out

companies can also input things such as human resources e.g. labour brokers.

Intermediaries

bridges the gap between the manufacturer and the consumer

include: wholesalers, retailers, agents, etc

new trends and markets are reason for new kinds of intermediaries

relationships with intermediaries complicate the decision making of management in a long-term effect

new trends among intermediaries provide management with certain opportunities, but also hold out possibility of threats for the business.

Competitors

A Market environment in which several businesses offering more or less the same product / service for patronage of the same consumers

Nature and intensity of compitition

possibility of new departures

Bargaining power of clients

Bargaining power of suppliers

Availability of substitute products

number of existing competitors

For successful defending against competitors, constant monitoring, market scanning for threats/opportunities and strategic development is required

Final market environment comments

Management must be aware of trends for profitable business exploiting opportunities

the business and the community and environment depend on each other

environmental changes are constant and are often beyond the business's control

managements task to adapt the organisation to the environmental change

knowledge of the changing environment is an advantage when taking opportunities and avoiding threats

the environment depends on the type of business and the goals and objectives. environmental influences differ from management to management.

environmental scanning

the process of measurement, projection and evaluation of change regarding the different environmental variables

importance of environmental scanning

environment is always changing, therefore good monitoring is required

scanning is used to detect patterns and threats to the present business strategy

scanning also needed to identify opportunities for more effective goals and objectives to be attained

sustematic scans make for a more successful business

100 of USA's largest businesses failed between 1920 and 1970, because they didnt scan the environment properly

extent of environmental scanning

basic relationship between businesses andtheir environment

the nature of the environment

the source and content of change

successful scanning

secondary scans to keep records, data and information up to date

additional primary scans can be done by members and/ or outside consultants

establish a scanning unit within the business

trends that develop the macro-environment

changes tht offer an opportunity

changes that pose a threat

environmental opportunity

a favourable condition or trand in the market environment that can be exploited to the business's advantage. possibilities inherent an opportunity to assess the organisations resources and capabilities

environmental threat

unfavourable condition or trend in the market environment.a businesses course of development is determined by the identified issues.

The composition of the macro -environment

Macro variables

Existing variables in the macro environment

Democratically elected state - Community values and culture decide government structure and affairs in the community that results in standard living with influences from technology, social trends and international environment acts

The technological environment

The means of improvement through either human capabilities or technological innovation
Can result in new machinery, products, processes, methods, services and new management approaches
Technology has changed our lives, from transportation(trains, cars, jets) all the way to the internet(social media, communication media) it has evolved and will continue to do so.

Nanotechnology may just hold the key to the future, functional systems that are molecular in scale, resulting in stronger, lighter and far more advanced materials, and systems

Continued assessment of the technological environment

Identify important technology trends

analysis of potential change

analysis of impact

analysis of organisations technological strengths and weaknesses

list of priorities in a technological strategy

technological trends to solves

Water technology

Mineral technology

Marine technology

Agricultural and veterinary technology

Medical technology

Power technology

The economic environment

Is mainly influenced by technology, politics, social and international environment

cross influence each other

Economic growth rate

Employment levels

Consumer income

Inflation and interest rates

Economic growth rate or Gross Domestic Product (GDP) = range and number of products/services produced by the country in question

Management is required to take note of changes in income, economic growth, business cycles, upward and downswing phases and make strategic decisions to adjust accordingly

Inflation

Increases cost of import/export

Government Monetarily policy

Influences money supply, interest rates and currency strength

Government fiscal policy

Government fiscal policy

Social Environment

Demographic change

change in the growth and compositi of populationson

population growth is becominga growing consern in society today

a third of the world is in danger of starving

Urbanisation

population growth is changing the worlds mobility ability

the movment ofpeople from rural areas to cities

Level of education

level of education is increasing in the world.

education in south africa in not rising anymore

the is a skills shortage in south africa

The changing role of women

women are starting to take on more managerial positions

Consumerism

rights of the consumer

Right to safety

right to be informed

right to freedom of choice

right to be heard

Social responsibility and business ethics

coperate social responsibility is known as the broad concept that businesses are more than just profit-seeking entities and therefore also have obligations to benefit society

businesses perform an annual audit

HIV/Aids

33 million people live with aids and climbing

45% of people who are newly infected are between 15 and 24

people who wish to invest in the country worry about the climbing of Aids in south africa

HIV/Aids has inpacted on businesses as the employees are reguarly absent, which decreases productivity

a plan needs to be produced soon to deal with aids in the workplace

Cultue

many new cultures are emerging in South Africa

these cultures can affect organisations

The physical environment

physical issues

Population and health patterns

population growth leads to pollution, land degradation and malnutrition

food

2 billion people are starving

water

increased water usage is damaging the amount of supply.
1 billion people lack access to clean water

Energy and climate

energy demand is drastically growing
2,5 billion people have no access to electricity
The world is dependant on fossil fuels for power
air pollution increased, creates global warming
billions are being invested into cleaner energy sources

Biodiversity

over 17000 species of plants and animals are on the edge of extinction
these species provide food and medicine for humanity

Cost of energy

fluctuations in fuel and energy affect organisations and political and economic landscape
dramatic cost increase has led to widespread innovations
Research on solar, wind and nuclear have increased

Growing cost of pollution

pollution is destroying living space as well as large costs to reduce pollution
to comply with minimum pollution standards is expensive

Environmentalism

many opportunities exist for ecotourism and conservation

Scarce resources

a large range of resources are becoming scarce

The institutional-governental environment

management decisions are continuelly changed by politics
the government affects the business environment and intervenes on a large scale. the government influences the market through government expenditure.

reasons for implementing the companies act

replace the outdated legislation

define the relationship between companies and their respective members

respond to globalisation

simplify company registration and maintenance

The international environment

businesses in the international environment have a complex operation as each country has its own technology, economy, culture, laws, politics, markets and competitiveness. Globalisation does not present opportunities and it also poses threats.