Chapter 1: Business Environments
Environmental Scanning
Definition: Process of obtaining information about possible current and future events that
may have an impact on the performance of the business.
The purpose of Environmental scanning
Identifying challenges/opportunities for the business in a constantly changing
environment that the business operates in.
® Crisis- quick and unexpected change
® Trend- change that occurs over a period of time
Management must develop flexible strategies that will assist the business to respond
quickly to crisis and opportunities.
Continuous environmental scanning
1. Review the vision/mission
2. Formulate a strategy
3. Implement a strategy
4. Evaluation and control
Conducting environmental scanning
External environment Macro environment Use PESTLE elements to
identify O and T
Market environment Use Porters’ model to
identify O and T
Internal environment Micro environment Look at S and W
SWOT analysis
Strength Weakness
Opportunities Threats
Strengths and weaknesses are internal factors that the business has control over and
should be used to create value in the business
Opportunities and threats are external factors
® Opportunities- add value to the business
® Threats-destroy the value of the business
, Strengths
Add value and give the business a competitive advantage. The business must develop
strategies using its strengths to overcome weaknesses and threats and take advantage of
opportunities.
Strengths (8)
• Competitive price • Business culture
• Location • Good marketing and a strong brand
• Patents (know-how) • Access to financing and other resources
• Skilled workforce • Operational efficiency
Competitive pricing
The business sells products/services at a better price than competitors, differentiating
itself within the market. Consumers that are price conscious prefer more reasonably
prices products providing the business with a good-selling position
Location
How easily accessible to the target market.
- Perishable goods; establish close to the source of the raw material
- Non-perishable goods; establish close to the target market
-
Factors when considering location (7)
• Type of business • Future developments
• A complementary business in close • Trading hours
proximity • Surround businesses that may be a
• Easy access direct competitor
• Security
Patents
Patent is registered by the business to give it legal exclusivity to produce a product.
Advantage because it limits potential competitors from entering the same market.
Product differentiation creates a competitive advantage for the business
Skilled workforce
Employees know how to perform their jobs resulting in less wastage and improved
productivity.
Business culture
Way things are done in the business
Good marketing and a strong brand
Positive association that people have with that brand which can lead to higher sales.
Environmental Scanning
Definition: Process of obtaining information about possible current and future events that
may have an impact on the performance of the business.
The purpose of Environmental scanning
Identifying challenges/opportunities for the business in a constantly changing
environment that the business operates in.
® Crisis- quick and unexpected change
® Trend- change that occurs over a period of time
Management must develop flexible strategies that will assist the business to respond
quickly to crisis and opportunities.
Continuous environmental scanning
1. Review the vision/mission
2. Formulate a strategy
3. Implement a strategy
4. Evaluation and control
Conducting environmental scanning
External environment Macro environment Use PESTLE elements to
identify O and T
Market environment Use Porters’ model to
identify O and T
Internal environment Micro environment Look at S and W
SWOT analysis
Strength Weakness
Opportunities Threats
Strengths and weaknesses are internal factors that the business has control over and
should be used to create value in the business
Opportunities and threats are external factors
® Opportunities- add value to the business
® Threats-destroy the value of the business
, Strengths
Add value and give the business a competitive advantage. The business must develop
strategies using its strengths to overcome weaknesses and threats and take advantage of
opportunities.
Strengths (8)
• Competitive price • Business culture
• Location • Good marketing and a strong brand
• Patents (know-how) • Access to financing and other resources
• Skilled workforce • Operational efficiency
Competitive pricing
The business sells products/services at a better price than competitors, differentiating
itself within the market. Consumers that are price conscious prefer more reasonably
prices products providing the business with a good-selling position
Location
How easily accessible to the target market.
- Perishable goods; establish close to the source of the raw material
- Non-perishable goods; establish close to the target market
-
Factors when considering location (7)
• Type of business • Future developments
• A complementary business in close • Trading hours
proximity • Surround businesses that may be a
• Easy access direct competitor
• Security
Patents
Patent is registered by the business to give it legal exclusivity to produce a product.
Advantage because it limits potential competitors from entering the same market.
Product differentiation creates a competitive advantage for the business
Skilled workforce
Employees know how to perform their jobs resulting in less wastage and improved
productivity.
Business culture
Way things are done in the business
Good marketing and a strong brand
Positive association that people have with that brand which can lead to higher sales.
