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LU4 - The business environment

The document discusses the dynamic nature of the business environment, emphasizing the need for management to adapt to constant changes and emerging opportunities and threats. It outlines the composition of the business environment, including the micro, market, and macro environments, and highlights key factors such as competition, suppliers, and technological advancements. Environmental scanning is presented as a crucial process for businesses to navigate these changes effectively and ensure survival in a competitive landscape.

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Asanda Madlala
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2 views

LU4 - The business environment

The document discusses the dynamic nature of the business environment, emphasizing the need for management to adapt to constant changes and emerging opportunities and threats. It outlines the composition of the business environment, including the micro, market, and macro environments, and highlights key factors such as competition, suppliers, and technological advancements. Environmental scanning is presented as a crucial process for businesses to navigate these changes effectively and ensure survival in a competitive landscape.

Uploaded by

Asanda Madlala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BUSINESS MANAGEMENT 1A

BMNG5121
Learning Unit 4

Chapter 4
The business environment
The business and environmental
change
´ Change is the only constant reality of our time
´ Environmental variables are constantly changing the environment in which
businesses operate
´ New opportunities and threats emerge daily and management must adapt
to changes to ensure survival in a competitive environment.
The business and environmental
change (continued)
The composition of the business
environment
´ The micro-environment consists of the business itself, over which
management has complete control
´ The market environment is encountered immediately outside the business
organisation and consists of four key variables
´ The macro-environment is outside the organisation and the market
environment and consists of six distinct variables
The composition of the business
environment (continued)
The composition of the business
environment (continued)
Characteristics of the business environment:
´ Environmental factors or variables are interrelated
´ Increasing instability and change
´ Environmental uncertainty
´ Complexity of the environment
The composition of the business
environment (continued)
Characteristics of the business environment:
´ Environmental factors or variables are interrelated
´ Increasing instability and change
´ Environmental uncertainty
´ Complexity of the environment
Theme 1: Activities from VCLearn (None)
The micro-environment

Internal environment of the business consisting of three sets of variables:


´ Vision, mission, strategies and objectives of the business
´ Management and organisational functions
´ Resources
The market environment

The task environment that can be found immediately outside of the business
and consists of five sets of variables:
´ The market
´ Suppliers
´ Labour markets and labour unions
´ Intermediaries
´ Competitors
The market environment (continued)

The market
´ ‘Market’ consists of people who have needs to satisfy and the financial
means to do so
´ To be successful, management must be informed regarding consumer
needs, purchasing power and buying behaviour
´ Directly influenced by variables in the
macro-environment
´ Purchasing power is represented by consumers’ personal disposable
income
The market environment (continued)

The market (types of markets)


´ The consumer market can be sub-divided according to the products that
are bought:
´ Durable products
´ Semi-durable products
´ Services
´ Industrial markets
´ Government markets
´ International markets
The market environment (continued)

Suppliers
´ A business organisation is a system that receives inputs from the
environment and converts them into outputs in the form of products and
services
´ Inputs include materials (raw materials, equipment and energy), capital
and labour
´ Suppliers provide these inputs to businesses
´ Without the correct suppliers a business can not achieve success in a
competitive market environment
The market environment (continued)

Labour markets and labour unions


´ Businesses need a supply of human resources
´ The SA business environment is faced with high unemployment rates and
unskilled workers
´ A growing gap is caused by graduates who have no basic workplace skills
who enter the market
´ Trade unions are promoting skills training and development to supply skilled
workers to the SA labour market
The market environment (continued)

Intermediaries
´ Intermediaries play an vital role in bridging the gap between the
manufacturer and the consumer
´ Includes wholesalers, retailers, agents, brokers, representatives and spaza
shops
´ Decision-making in respect of intermediaries is complicated by:
´ The dynamic and ever-changing nature of intermediaries
´ Relationships with intermediaries
The market environment (continued)

Competitors
´ Businesses are constantly facing competition and competitors often
determine at what price products can be sold.
´ Businesses compete for a share of the market and also compete with other
businesses for productive resources
´ Competition is defined as the situation in the market environment in which
several businesses, offering more or less the same kind of product or service,
compete for the patronage of the same customers
The market environment (continued)

Competitors
´ The nature and intensity of competition can be determined by:
´ The possibility of new entrants
´ The bargaining power of clients and consumers
´ The bargaining power of suppliers
´ Availability or non-availability of substitute products or services
´ The number of existing competitors
The macro-environment

Composition of the macro-environment


´ Consists of the wider environment in which the business operates
´ Has a direct or indirect influence on the business and its market
environment
´ Management is unable to control the variables/’mega-trends’ in this
environment
´ Each variable has an effect on the other variables in the macro-
environment
The macro-environment (continued)

Technological environment
´ Technological innovation originates in research and development
´ Includes the development of new processes, methods, services and
approaches to management
´ Continued assessment of the technological environment is vital for the
success of the business
The macro-environment (continued)

Important areas of technological development:


´ Water technology
´ Mineral technology
´ Marine technology
´ Agricultural and veterinary technology
´ Medical technology
´ Transport technology
´ Power technology
The macro-environment (continued)

The economic environment


´ The following needs to be considered:
´ Economic growth rate
´ Levels of employment
´ Consumer income
´ The rate of inflation
´ Interest rates
´ Exchange rate
´ Monetary and fiscal policy
The macro-environment (continued)

The social environment


´ The following needs to be considered:
´ Demographic change
´ Urbanisation
´ Level of education
´ The changing role of women
´ Consumerism
´ Social responsibility and business ethics
´ HIV/Aids
´ Culture
The macro-environment (continued)

The physical environment


´ Issues of concern
´ Overpopulation
´ Food
´ Water
´ Energy and climate
´ Biodiversity
´ Opportunities and threats for business
´ The cost of energy
´ The growing cost of pollution
´ Environmentalism
´ Scarce resources
The macro-environment (continued)

The institutional-governmental environment


´ Political pressure affects management decisions
´ Government intervenes through legislation, annual budget, taxation, import
controls, promotion of exports, import tariffs, price controls, and health
regulations
´ The market is influenced by government expenditure
´ Labour laws and the Employment Equity Act have significant implications
for businesses
The macro-environment (continued)

The international environment


´ Presents more complex issues for the business manager to consider
´ Each country has its own distinctive set of environmental variables
´ Globalisation is presenting businesses with many opportunities and threats
´ Global threats must be constantly assessed
Opportunities and threats in the market
and macro environment
´ Environmental opportunity – a favourable condition or trend in the market
environment that can be exploited to the business’ advantage by a
deliberate management effort
´ Environmental threat – an unfavourable condition or trend in the market
environment that can, in the absence of deliberate effort by management,
lead to the failure of the business, its product or its service
Environmental scanning

´ Known as the process of measuring, projecting and evaluating the


changes in the different environmental variables
´ The extent of environmental scanning is determined by the following
factors:
´ The basic relationship between a business and its environment
´ The nature of the environment within which the business operates
´ The source and extent of change
Environmental scanning (continued)

Methods of environmental scanning


´ Updating relevant secondary or published information from a variety of
sources
´ Adding primary information or special investigations on particular aspects
of the environment
´ Establishing a scanning unit within the business
Summary

´ A business and its environment depend on each other for survival


´ Change determines success or failure
´ Adapt the organisation to change in the environment
´ Sustained environmental scanning is a prerequisite for taking advantage of
opportunities and averting threats
Theme 2: Activities from VCLearn
Sources Acknowledged:

Erasmus B.J.; Strydom, J.W. and Rudansky-Kloppers, S. 2019. Introduction to Business Management.
11th ed. Cape Town: Oxford University Press
Erasmus B.J.; Strydom, J.W. and Rudansky-Kloppers, S. 2019. Introduction to Business Management.
Lecturer Resources. 11th ed. Cape Town: Oxford University Press
IIE 2022. Business Management 1A, Module Outline, BMNG5121. 1st ed 2018

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