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Business environments summary

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g
...

This environment is the business itself, it consists of all the
elements inside the business
...

This environment exists outside the micro and the market
environments
...

An acronym used for the elements to identify challenges
posed by the Macro environment: Political, Economic, Social,
Technological, Legal, Environmental
...


Fluctuations in foreign
currency
Profit margins

Changes in the value of international money
...

Taking a lot of or too much time
...
Makes buying and selling easy
...

•
A business decides on the culture and goals by compiling a vision, mission statement,
goals and objectives
...

Explain the reasons why businesses have LESS CONTROL over the MARKET environment
• All components of the market environment work independently of the business
...

•
Management of a business has absolutely no control over the components of the
macro environment
...

•
•
•

Business has full control over the micro environment
...

Management of a business has absolutely no control over the components of the
macro environment
...

•
•

It helps the management to have a complete understanding of the external or
bigger environment
...


3

Recommend/Suggest ways in which businesses can be involved in the macro
environment (PESTLE ANALYSIS)
Describe/Discuss/Explain the challenges of the MACRO environment
...

Government
...

and employees
...

it sets up appropriate trading
channels
...

negatively impact on business
...

day
...

changes in exchange rates,
•
seasonal price changes, and
government tax concessions if
they have the requisite
information
...

have all the information they can • Businesses may not be conversant
find about the people they are
with the local language of their
dealing with
...

• Information will allow the business
to:
- project an image appropriate to
the target
- market;
- compete effectively, because it
understands the competition;
- attract investors effectively and
- negotiate successfully with
suppliers
...

• Business need to keep up with the
latest technologies
...

• The latest technology must also
be used to promote products and
services
...

• Business needs to comply with
various laws, both domestically
and internationally
...

• Business being sustainable and
environmentally aware
...

• The internet has made the world
a very accessible market
...

• Business using the internet can
increase their markets
tremendously
...

• Employees may not be skilled to
operate / maintain new
technology / equipment
...

• May not be able to cater for /
afford online transactions / ecommerce
• Consider certain Acts that may
have a direct impact on a
business, e
...
the CPA/BCEA
...

• High legal costs involved in
obtaining a licence/trade mark /
patent may prevent some
establishments
...

• Measures to dispose of business
waste may be expensive
...


• Language and cultural barriers
hamper communication
• If you expand into new territories,
you’ll inevitably come into
conflict with local competition /
some new businesses
...


5

TOPIC 2: CHALLENGES OF THE BUSINESS ENVIRONMENT
TERM
Managing styles

DEFINITION
Different ways to manage a business
...
They can be strict or more lenient
...


Political stability

When the government is stable – no rioting
...
Example 10% extra on the amount
...

When a business has a bad image, it could happen due to
poor service, poor publications of poor management
...


International trade

To do trading across the world (global)

Consumer loyalty

When customers are coming back to buy from your business of
keep on using your services
...


Acceptable
employment practices

Fair hiring of workers and workplace conditions
...


Description of the term ‘CHALLENGE’
•

A challenge is something new and difficult which requires great effort and
determination
...

•
•
•

Difficult employees
Lack of vision and mission
Lack of adequate management skills
6

Outline/Discuss/Explain the challenges of the MICRO environment
...
Difficult employees

2
...
Lack of adequate
management skills

• The micro environment involves people with diverse
lifestyles, values and ideas who work together in a confined
space
...

• Employees create a number of different challenges:
− They cannot work in a team
...

− They have a poor work ethic and low productivity
...

• A clear focussed vision and mission statement is essential for
the success of a business
...

• The business then lacks direction and can easily fail
...

•
•
•
•

The management of a business has a major impact on the
success of the business
...

Ineffective management can affect the productivity and
profitability of a business
...


Industrial Analysis Tool for the MARKET ENVIRONMENT:
SWOT ANALYS
STRENGTHS
•
•
•
•
•
•

What advantages does your organisation have and what
do you do better than anyone else?
What unique or lowest-cost resources can you draw upon
that others can't?
Do you have skilled employees and a strong customer
base?
Do you provide high quality product?
Do you have sufficient resources?
What is your core competency?

WEAKNESSES

•
•

High cost infrastructure
High employee turnover
Weak brand portfolio
High debts level
What are people in your market likely to see as
weaknesses?
What factors cause loss of sales
Are your competitors doing any better than you?

•
•
•
•
•
•
•
•

Corporate tax may increase
Rising pay levels
...

Increasing fuel price
...

Stricter laws regulating environment pollution
Currency fluctuations
...

New technology that will enhance quality services and
products
Changing customer habits
...

Government’s incentives for ‘specific industry
Growing number of people buying on line (electronic
marketing)
What good opportunities can you spot?

THREATS

7

Name the challenges of the MARKET environment
...

Challenges in the MARKET environment
1
...

• This is especially true if there are too many competitors in a
limited market
...


Shortage of supply

• Shortage of goods or raw materials necessary for production
can destroy the business
...


4
...


Unions

•

Dealing with trade unions is a challenge for business
...


very tense
...


Demographics and
psychographics

• Business must know the demographics of the market in
which they operate
...

• Psychographics refers to the study of attitude, tastes and
desires of the market
...


6
...

• Business must understand the socio-cultural influences at
play in the target market
...

•
Put emphasis on setting the business apart from its competitors
...
This is more of a research study done by businesses
...


Power of SUPPLIERS
• The smaller the number of suppliers, the more powerful they may be as the
choice of suppliers may be limited
...


2
...

• If a business is dealing with a few powerful buyers, they are often able to dictate
their terms to the business
...


Power of COMPETITORS/COMPETITIVE RIVALRY
• Competitive rivalry refers to the number of competitors and their ability to
influence / control the market
...


4
...

• Unique products will not be threatened by substitute products
...


Threat/Barriers of NEW ENTRANTS to the market
• New competitors can quickly/easily enter the market, if it takes little time/ money
to enter the market
...

• If the barriers to enter the market are low, then it is easy for new businesses to
enter the market/industry
...

•
Political changes
•
Economic factors
•
Socio-economic issues
•
Technological factors
•
Legal factors
•
Environmental (Globalisation / International challenge)
Explain / Discuss how contemporary legislation affects (impacts) business operations
1
...

ADVANTAGES

•

•
•
•

2
...

May gain consumer loyalty, if they
comply with CPA
...

Prevents larger businesses from
undermining smaller ones
...

ADVANTAGES

•
•
•

•

Businesses have to replace/repair faulty
items/refund money if the fault occurs
within six months after purchase
...

Confidential business information may
become available to competitors
...

Prevents unfair discrimination in the
workplace as it promotes equal
opportunities for all employees
...


DISADVANTAGES
•

•
•

Productivity may decrease if
employees are allowed to participate
in the activities of trade unions during
work time
...

Reduced global competitiveness due
to lower productivity
...


COMPENSATION FOR OCCUPATIONAL INJURIES & DISEASES ACT (COIDA)
PURPOSE: Provides a comprehensive protection to employees who injured in the
course of performing their duties
...


Promotes safety in the workplace
...

Supply administrative
guidelines/mechanisms for dealing
with/processing claims
...


DISADVANTAGES
•
•

•

BASIC CONDITIONS OF EMPLOYMENT ACT (BCEA)
PURPOSE: Provides clear terms and conditions of employment for employers and
employees
...


DISADVANTAGES

Creates a framework of acceptable
•
employment practices e
...
, work hours,
leave, etc
...

Encourages consultation between
employers and employees
...

Work hours are specified so that the
employer cannot exploit employees
...

Businesses may regard employment
contracts negative and may not
implement it, which result in
noncompliance/penalties
...

This may result in reduced productivity

THE SKILLS DEVELOPMENT ACT (SDA)
PURPOSE: Develops skills of people in South Africa in order to improve productivity
...

Procedures required by this Act may be
costly as paperwork places an extra
administrative burden on businesses
...


Increases the number of skilled
employees in areas where these skills
are scarce
...

Increases global competitiveness
Increases investment in education and
training in the labour market
...


DISADVANTAGES
•
•
•

Increases cost as the process requires a
large amount of paper work
...

Skills programmes may not always
address training needs of employees

11

6
...

ADVANTAGES

•
•

•

•
•

7
...

Ensures the implementation of
affirmative action measures to redress
the imbalances in employment
...

Encourages consultation between
employer and employees
...


DISADVANTAGES
•

•
•

BROAD BASED BLACK ECONOMIC EMPOWERMENT (BBBEE)
PURPOSE: Enable wealth to be spread more broadly across all population groups
...


Encourages businesses to address the
demands for redress/equity directly
...

A good BEE rating improves the image
of the business
...

Processes may lead to
corruption/nepotism if not monitored
properly
...


NATIONAL CREDIT ACT (NCA)
PURPOSE: Promotes the social and financial interest of consumers
...

Expensive to train/employ someone
who knows little about the Act
...


The whole credit process is transparent
e
...
both businesses and customers
know their responsibilities
...

Increases cash sales as credit can only
be granted to qualifying customers
...

Leads to loss of sales as many
consumers may no longer qualify to
buy on credit
...


12

Industrial Analysis Tool for the MACRO ENVIRONMENT:
NOTE: You need to NAME the PESTLE factor, IDENTIFY challenges of each factor and
RECOMMEND WAYS businesses can deal with the identified challenges as explained in the
table below:
FACTOR

CHALLENGE

RECOMMENDATIONS

POLITICAL

i
...
Consumer rights organisations
may prevent businesses from
selling products if they do not
meet certain requirements
...
Trade agreements may
prevent businesses from
importing some
medicine/products
...
Inflation/Interest rates may
negatively impact on
business
...
Loans may be expensive due
to high interest rates
...
Fluctuations in foreign
currency may restrict import
...
Research recent government
policies
ii
...

iii
...


ECONOMIC

i
...

ii
...

iii
...
Customers may not be able to i
...

income levels
...
Learn local languages/Hire
ii
...

language
...
May not keep up with/be
i
...

technology/equipment in the
ii
...

to operate/maintain new
ii
...

employees to maintain/use
iii
...

afford new technology
...
Compare prices/Select
iv
...

prices
...
Businesses must be geared for
online trading/e-commerce
13

FACTOR
LEGAL

i
...


iii
...

ENVIRONMENTAL

i
...


iii
...
Comply with all relevant
may have a direct impact on
legislation that may impact on
a business, e
...
the
businesses
...

ii
...
g
...

mark registration/patents
...
Budget for high legal
obtaining a licence/trade
establishment costs
...
Businesses must know the
some establishments
...

Chemicals/Ingredients in
i
...

labels/packaging to inform
Measures to dispose of
customers about possible side
business waste may be
effects/correct use of
expensive
...

Packaging of some products
ii
...

recyclable
...
Implement recycling measures
to prevent pollution of the
environment/Use packaging
that is re-usable/recyclable
...

Businesses takes control of other businesses selling / providing
the same products/services (competitor)
...
g
...

A business combines/takeover/merge with their supplier to
reduce dependency
...
g
...

A business combines/takeover/merge with the seller/retailer/
distributor of their products
...
g
...

To be willing to make chances when the business faces
problems/ challenges
To do the right thing: avoid activities that do harm to people
or the environment
Any person with a concern in the business
A true leader takes responsibility for their team
...

Employees must show responsibility and do what is required by
their job
A different view or outlook on the same thing

Explain/Discuss/Recommend ways in which businesses can adapt to challenges of the
MICRO ENVIRONMENT
...

Problems in the micro environment must be analysed, solutions identified and
implemented
...
Information
management

•
•
•

B
...
Mergers,
takeovers,
acquisitions
and alliances

•
•

Information is an essential management tool to deal with the
challenges
...

Management must implement an effective information system,
which is accessible and useful to all staff
...

This is done by analysing all the information, identifying all the
stakeholders involved and getting a clear picture of each
stakeholder’s viewpoints and requirements
...

Methods of increasing market share:
- merger with another similar organization;
- the acquisition of an existing business by the shares
buy out until your business has a controlling stake;
- acquire another business;
- forming an alliance with another organization
...


Types of business strategies
1
...
1
...
2
...

Involves expansion of business activities to gain control over the direct distribution of
the products
...

Backward integration
The business combines business with or take over its suppliers
...

EXAMPLE: Jonny’s Pizza Hut buys Doug’s Dough (Pty) Ltd - a small business that supplies
dough for the pizza bases
...
3
...

•
The aim is to reduce the threat of competition /substitute products/services
...

16

2
...
1
...

•
It is a growth strategy where businesses focus on selling existing products to existing
markets
...


2
...
Market Development
•
It is a growth strategy where businesses aim to sell its existing products in new markets
...


2
...
Product Development
•
It is a growth strategy where businesses aim to introduce new products into existing
markets/modifies an existing product
...

DIVERSIFICATION STRATEGIES
3
...
Concentric diversification
•
The business adds a new product or service that is related to existing products and
which will appeal to new customers
...

•
EXAMPLE: Jonny’s Pizza Hut introduces a new product called Pizza Balls, with the
ingredients traditionally on top of the pizza, inside the dough
...
2
...

•
Occurs when a business acquires or merges with a business that is at the same
production stage, but it may offer a different product
...

3
...
Conglomerate diversification
•
The business adds new products or services that are unrelated to existing products
which may appeal to new groups of customers
...

•
Occurs when a business wants to increase its product range and markets
...


17

4
...
1
...

•
Businesses may sell off divisions/product lines with slow growth potential
...

•
Unproductive assets are sold to pay off debts
...


4
...
Retrenchment
•
Terminating the employment contracts of employees for operational reasons
...

4
...

•
•
•
•

Liquidation
All assets are sold to pay creditors due to a lack of capital/cash flow
...

Companies in financial difficulty may apply for business rescue to avoid liquidation
...


D
...
Direct influence
of the
environment

•
•
•
•

To adapt to changes, business need to be flexible in their
organisational design and strategies
...

Systems must then be developed to meet the needs and goals
as effectively as possible
Businesses are directly and indirectly influenced by the
changing environment
...

They must also know the risks and opportunities that these
changes hold
...


18

F
...

Many are actively taking part in projects that uplift the local
communities
...

The project serves as a marketing tool for the business, as
people are impressed when business makes a positive
contribution
...


Define the term ‘LOBBYING’
•

Lobbying means persuading individuals or groups with decision-making power to
support a position you believe is right
...


•

Lobbying can be used to influence anyone with power, For example: Trying to
influence decisions made by officials in the government or members of regulatory
agencies
...


•

Example: The taxi industry successfully lobbied government against being charged toll
fees on certain roads in Gauteng
...

•

Inflation is an economic reality and businesses cannot do very much to stop it
...


•

Hedging is where a business tries to invest its money in such a way that its value grows
at a faster rate than inflation
...


•

This can be done by buying shares, property or precious metals like gold and platinum
...


•

This requires excellent negotiating skills on the part of businesses
...


•

Essential for the business to be fair, transparent, establish trust and good
communication with the union representatives
...


•

Rules state which conditions must be met by a company to produce valid results or
goods of a guaranteed level of quality

•

This involves imposing requirements, conditions or restrictions, setting the standard for
activities, and enforcing in these areas or obtaining compliance
...


•

Networking allows management to build new business relationship and to generate
new business opportunities
...


•

Get fresh ideas
...


•

Get access to job opportunities
...


•

Get career advice and support
...


•

Gain a different perspective
...


Discuss / Explain / Describe WAYS BUSINESSES CAN FORM POWER RELATIONSHIPS
•

These are agreements between two or more firms to engage
in an activity on a shared basis
...


•

Also built on the way in which they complement each other
...


•

If a business has large and powerful investors, it can benefit
from the relationship by gaining credit more easily and get

Persuasion of large
investors

better deals from suppliers
...


•

Association with such people has a positive influence on the
reputation and image of the business
...


Company
representative’s
influence

•

He or she represents the company’s belief, policies, products
and services
...


•

The representative should therefore be selected very
carefully
...
g
...

Acting in ways consistent with what society and individuals
think are good values
...

This Act was introduced to promote simple procedures for the
resolution of labour disputes in the workplace
...

To use things from the business for yourself and not for the
business
The removing of someone from employment/discharge must
be done according to the law
A disagree between management and employer
A real cause for complaint like unfair treatment

Overview of important socio-economic issues
•
•
•

Business must come up with possible solutions and strategies to deal with the issues
...

It is in the interest of the business to try to lessen the impact by understanding each of
the issues and the challenges they create
...

• There are huge inequalities in the income levels of people in
South Africa
...

• As the value of money is reduced due to inflation, consumer’s
buying power decreases and sales of the businesses decreases
...

• Staff retrenchment is often the result, leading to higher
unemployment figures and further reduction in the buying
power of the consumers
...

demographic
• Business must use diversity as an asset in making the business
issues
work because different people all provide different perspectives
customers will have in the real world
...

• Examples: Identity theft, credit card fraud and money
Economic crime
laundering
...

• Refers to dishonest activities in which a person entrusted with
Ethical
authority in a business, acts contrary to the interest of the
misconduct
business
...

Corruption and
• Undermines business and negatively influences investment
...


23

Population growth

•
•
•
•

Illiteracy

•
•
•
•

Lack of skills

•
•

•
•
Unavailability of
natural resources

Inefficiency in the
use of resources
Dumping

•

•
•

•
Exhaustion of
natural resources

•

•
Strikes

•

Population in South Africa continues to grow
...

Also puts a huge strain on the economy of the country
Illiteracy makes it impossible for people to fully participate in the
economic life of a country
...

Strong link between unemployment and illiteracy
...

Unskilled employees could spend considerable time seeking
help to perform their jobs or they could perform tasks to their
understanding, to the detriment of the work process
...

When more experienced employees spend time monitoring
unskilled workers, it detracts from their work and affects their
production as well
...

Nature: Certain of the earth's resources, such as oil and coal,
are non-renewable and sooner or later will be completely
exhausted
...

Producing less than the maximum possible output of goods and
services, from its resources
It's when a country or company exports a product at a price
that is lower in the foreign importing market than the price in the
exporter's domestic market
...

Over time, the depletion of these resources will lead to an
energy crisis, plus the chemicals emitted by many natural
resources are strong contributors to climate change
...

Businesses suffer production and financial losses and consumer
confidence is adversely affected
...

The attention causes discomfort, is humiliating and interferes
with the job
...

Giving or obtaining advantage through means which are
illegitimate, immoral, and/or inconsistent with one's duty or the
rights of others
...

Most mismanagement lawsuits involve some form of negligence
or neglect on the account of the liable party
...

Big losses of income to the business
Illegal copying and streaming of movies and television shows also leads to substantial
losses

Suggest ways that businesses can deal with piracy
Copyright

Patent

DEFINITION
This a law that gives the owner
of a work (for example, a book,
movie, picture, song or website)
the right to say how other
people can use it
...


•

•

•

•

DEALING WITH PIRACY
Copyright laws make it
easier for authors to make
money by selling their works
...

A patent gives an inventor
the right to stop other
people making or using their
invention
...


•

DEALING WITH PIRACY
The overall purpose of
trademark law is to prevent
unfair competition by
protecting the use of a
symbol, word, logo, slogan,
design, domain name, etc
...


Define / Explain the meaning of INDUSTRIAL RELATIONS
•
•
•

Industrial relations refer to the relations between management and workers in industry
...

Major losses of revenue to the industry

Discuss the CAUSE of strikes and the EFFECT it has on businesses & the society
•
•
•
•
•
•
•
•
•

Strikes occur when a group of employees withhold their labour in the production
process
...

When negotiations between management and representatives of trade unions break
down, trade unions usually call on their members to go on strike
...

Employees may not be dismissed or retrenched during a protected strike
...

Strikes have a negative effect on the economy
...

Businesses recover increases paid to striking workers by including the cost of the
increases in the price of the goods and services, thus leading to higher inflation
...

The goal is to reduce business productivity or efficiency
...


26

Define the term “LOCKOUTS”
Lockouts refer to the right of employers to prevent striking employees from entering
the business premises
...

The employer must give the employees at least 48 hours written notice if it intends
locking the employees out
...


•
•
•
•

Differentiate between STRIKES and GO-SLOWS
•

•

•

STRIKES
Strikes occur when a group of
employees withhold their labour in the
production process
...

Strikes will lead to loss in production
time, and employees have less
disposable income
...

The goal is to reduce business
productivity or efficiency
...


Discuss / Explain / Describe the purpose of the Labour Relations Act
•

NATURE

•

PURPOSE

•
•
•
•
•
•
•

Sets out the rules and regulations employers, employees and for labour unions
and the settling of disputes
...
hiring and firing procedures;
2
...
rights and responsibilities of trade unions;
4
...
strikes; and
6
...

Provides a framework/structure for labour relations between employers and
employees
...

Promotes workplace forums to accommodate employees in decision making
...

Promotes fair labour practice between the employers and employees
...

Clarifies the transfer of employment contracts between the existing and new
employers
...


Outline / Discuss / Explain the ROLE OF TRADE UNIONS
•
•
•
•
•
•

Addressing poverty reduction
Job creation challenges
The role of trade unions in South Africa was shaped by the political struggle of the
apartheid years
...

Trade unions support the notion that the economy should favour the working class and
the poor
...


Outline / Discuss / Explain the FUNCTIONS OF TRADE UNIONS
•
•
•
•
•
•

Negotiate with employers for decent working conditions, remuneration and benefits
for employees in order to improve their standard of living
...

Protect employees from discrimination and abuse
...

Educate employees about their rights and how to enforce these rights
...


28

TOPIC 5: BUSINESS SECTORS
Term

Description

Examples of industries

All the internal and
• Primary
external factors that affect • Secondary
the functioning of a
• Tertiary
...
g
...

• A business sector is a sub
division/subset of the
economic activities
...

•

•
PRIMARY
SECTOR
•

•
SECONDARY
SECTOR

•

•

TERTIARY
SECTOR

•
•

This sector deals with extraction
of raw materials and natural
resources
...

This sector processes raw
materials into finished goods
...

This sector renders services to
the public and
businesses/provides auxiliary
services
...


•
•
•
•
•

Mining
Fishing
Agriculture
Forestry
Farming

•
•
•
•

Manufacturing
Building & construction
Clothing
Food processing

•
•
•
•
•
•
•

Distribution
Transportation
Banking
Insurance
Retail
Entertainment
Tourism

29

Discuss / Explain / Describe the link/relationship between the primary, secondary and
tertiary sector
•
•
•
•
•
•
•
•
•
•
•

Primary, secondary and tertiary sectors are interrelated and cannot function without
each other
...

The linen or clothing is manufactured because there are retailers in the tertiary sector
who are prepared to sell the products to the consumers
...

Other enterprises may skip some aspects of a specific sector
...

Many businesses are interdependent and rely on other businesses to perform some of
their functions for them
...

EXAMPLE: A fisheries may outsource the management information system of the
business to another organisation that may specialise in this area
...

EXAMPLE: A shop in the tertiary sector relies on another tertiary sector service for the
communication infrastructure of the business
...


SECONDARY

Olive oil is extracted from the olives
...


PRIMARY

Coffee beans are grown and picked
...


TERTIARY

Coffee powder is sold in shops and
supermarkets

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