BMNG – Business LU 4
LU 4 – The Business Environment
4.1 Introduction
Society depends on business organisations for most products and services it needs, including employment
opportunities that businesses create.
Business organisations and society (environment that the business functions in) are mutually dependent.
- This relationship become complex when certain variables in the environment bring about constant
change that impacts the business organisation in diff ways.
The previous years of instability and the new era of rapid change and uncertainty have increased
the need in organisations to try and deal with the impact of environmental change. The result of
this is a greater awareness of environmental influences on management decisions and then
developed an approach to investigate and monitor change in the environment.
4.2 The Business And Environmental Change
The rate of change has a greater effect on the business than the direction of change (even though it could have
been occurring for a number of years).
The 3 sub-environments of the business environment.
Environmental variables increasingly affect the environment which
business organisations operate and make decisions regarding
investments and strategies very demanding.
Environmental variables that are constantly changing the
environment in which business organisations operate include:
- technological innovations
- economic fluctuations – change in interest rate /
exchange rate
- legislation
- Market
social factors – increased urbanisation, Environment
changing social values
- Monetary and fiscal policy
- Changing consumer needs
- Trade unions
Businesses constantly need to change to align themselves with the realities of the changing external
environment, if they do not adapt to the changes, they would not be fit to compete in the new global economy.
The interaction between the environment and a business organisation = ongoing process = results in a new
environment with new threats and opportunities.
Management should align its organisation with the environment in which it operates in such a way that it can
identify, in advance, the opportunities and threats that environmental change brings.
4.3 The composition of the business environment
Effective management of the business organisation requires management to take careful note of environmental
changes in order to develop new business strategies.
The business environment is therefore defined as all the factors/variables, both inside and outside
the business organisation that may influence the continued and successful existence of the
business organisation.
1
, BMNG – Business LU 4
4.3.1The 3 sub-environments
This figure shows the interaction between a business
organisation and its environment.
THE MICRO-ENVIRONMENT
- Business Itself
- Management
- Vision
- Mission
- Objectives
- Business Functions 1 - Business
- Resources Environmental
- Strategies of the business Model
Analysis of the micro-environment allows managers to determine the capabilities, strengths, and
weaknesses of the organisation so they can use opportunities better to identify and counteract the threats
to the business.
THE MARKET ENVIRONMENT
Encountered immediately outside the business organisation.
The key variables/ variables that give rise to potential opportunities and threats:
- Consumers
- Competitors
- Labour market and labour union
- Intermediaries
- Suppliers
Management finds its most important tasks in the market environment ∴the market environment is also called
the task environment.
Management has no control over the components of the market environment, although management may
influence the relevant variables through its strategy.
Both the market environment and the micro-environment are effected by developments in the micro-
environment.
THE MACRO-ENVIRONMENT
=is external to both the organisation and the market environment.
Business org has no control over the macro-environment and its influence on threats and opportunities is
insignificant.
The macro-environment consists of the distinct components or variables:
- The technological environment
- The economic environment
- The social environment
- The physical environment
- The institutional environment
- The international environment
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LU 4 – The Business Environment
4.1 Introduction
Society depends on business organisations for most products and services it needs, including employment
opportunities that businesses create.
Business organisations and society (environment that the business functions in) are mutually dependent.
- This relationship become complex when certain variables in the environment bring about constant
change that impacts the business organisation in diff ways.
The previous years of instability and the new era of rapid change and uncertainty have increased
the need in organisations to try and deal with the impact of environmental change. The result of
this is a greater awareness of environmental influences on management decisions and then
developed an approach to investigate and monitor change in the environment.
4.2 The Business And Environmental Change
The rate of change has a greater effect on the business than the direction of change (even though it could have
been occurring for a number of years).
The 3 sub-environments of the business environment.
Environmental variables increasingly affect the environment which
business organisations operate and make decisions regarding
investments and strategies very demanding.
Environmental variables that are constantly changing the
environment in which business organisations operate include:
- technological innovations
- economic fluctuations – change in interest rate /
exchange rate
- legislation
- Market
social factors – increased urbanisation, Environment
changing social values
- Monetary and fiscal policy
- Changing consumer needs
- Trade unions
Businesses constantly need to change to align themselves with the realities of the changing external
environment, if they do not adapt to the changes, they would not be fit to compete in the new global economy.
The interaction between the environment and a business organisation = ongoing process = results in a new
environment with new threats and opportunities.
Management should align its organisation with the environment in which it operates in such a way that it can
identify, in advance, the opportunities and threats that environmental change brings.
4.3 The composition of the business environment
Effective management of the business organisation requires management to take careful note of environmental
changes in order to develop new business strategies.
The business environment is therefore defined as all the factors/variables, both inside and outside
the business organisation that may influence the continued and successful existence of the
business organisation.
1
, BMNG – Business LU 4
4.3.1The 3 sub-environments
This figure shows the interaction between a business
organisation and its environment.
THE MICRO-ENVIRONMENT
- Business Itself
- Management
- Vision
- Mission
- Objectives
- Business Functions 1 - Business
- Resources Environmental
- Strategies of the business Model
Analysis of the micro-environment allows managers to determine the capabilities, strengths, and
weaknesses of the organisation so they can use opportunities better to identify and counteract the threats
to the business.
THE MARKET ENVIRONMENT
Encountered immediately outside the business organisation.
The key variables/ variables that give rise to potential opportunities and threats:
- Consumers
- Competitors
- Labour market and labour union
- Intermediaries
- Suppliers
Management finds its most important tasks in the market environment ∴the market environment is also called
the task environment.
Management has no control over the components of the market environment, although management may
influence the relevant variables through its strategy.
Both the market environment and the micro-environment are effected by developments in the micro-
environment.
THE MACRO-ENVIRONMENT
=is external to both the organisation and the market environment.
Business org has no control over the macro-environment and its influence on threats and opportunities is
insignificant.
The macro-environment consists of the distinct components or variables:
- The technological environment
- The economic environment
- The social environment
- The physical environment
- The institutional environment
- The international environment
2
