UNIT ONE
The Business Environment
The business environment consists of:
- Micro environment (internal, full control)
- Market environment (external, some control)
- Macro environment (external, no control)
Micro Environment
FULL CONTROL
The factors in the micro environment are internal factors and include:
- Business policy (VMGO)
- Business strategy
- Management and leadership
- Organisational (business) culture
- Organisational (business) structure
- Organisational (business) resources
- Business functions
Market Environment
SOME CONTROL
The factors in the market environment are external factors and include:
- Consumers (customers/clients/buyers)
- Competitors
- Suppliers / intermediaries, civil society (trade unions, NPOs, NGOs, CBOs,
strategic allies, industry regulators)
Macro Environment
NO CONTROL
The factors in the micro environment are external and include:
- Political
- Economic
- Social
- Technological
- Legal
- Environmental
- Physical
- Ethical
Tools Used To Analyse
- Micro, market and macro environment (SWOT / environmental scan)
- Market environment (PORTER’s SIX FORCES)
- Macro environment (PESTLE)
Characteristics Of Business Environment
- Multi-faceted (consists of many internal and external factors)
- Elements link and are therefore interdependent
- Uncertain
1
, - Dynamic as it changes constantly
- Changes in the external environment has an on-going effect on internal
operations.
Micro Environment
Business Policy
The business policy consists of the vision, mission, goals and objectives of the
business as well as the business strategy:
- Vision - The dream of the business ; road-map to the future.
- Mission - Describes how the business will reach its vision by outlining basic
activities and explaining the reason why the business exists.
- Goals - Long-term aims that the business puts in place ; gives direction.
- Objectives - Short-term aims. Explains how the goals will be reached.
Choice Of Strategy
- Overall strategy is defined in the business policy (VMGO)
- Changes in the business environment requires on-going complicated and
simple strategy formulation from management.
Business Structure
Organisational structure is the system businesses use to run the business
efficiently.
The structure needs to show:
- Each person's tasks
- Level of authority and responsibility
- Flow of instructions and feedback
The following managerial levels form part of the basic structure:
Top level management - long-term strategic decisions; conceptual skills.
Middle level management - Medium-term tactical decisions; interpersonal skills.
Lower level management - Short-term operational decisions; technical skills
Management runs the business by performing management tasks such as
planning, organizing, leading and control (POLC)
Leaders are not necessarily managers but they inspire, motivate and guide others
to achieve goals and objectives.
Business Culture
- The organisational culture of the business is the personality of the
business
- It includes the beliefs, morals and values upheld by the business.
Business Resources
Organisational resources are:
- Physical resources (natural resources, raw materials, equipment)
- Financial resources (own and borrowed capital)
- Human resources (management and employees)
- Intellectual resources (knowledge, skills and technical resources)
2
, Interrelatedness Of Business Functions
- The eight business functions are general management, purchasing,
production, marketing, public relations, human capital (resources),
administration and financial.
- The eight functions depend on each other and are interrelated (linked)
Business Functions
1. General Management
- Oversees the other seven functions
- Use POLC
- Sets VMGO
- Leads and motivates staff
- Consists of management at 3 levels: top, middle and lower.
2. Purchasing Function
- Buys goods and services
- Buys from best supplier
- Buys at the right price, time, quantity and quality.
- Place orders, receives, stores, sorts, distributes and controls stock.
3. Production Function
- Use production methods (mass, batch, jobbing)
- Transforms raw materials into finished products by combining raw
materials, labour and entrepreneurial skill.
- Products are standardized and checked for quality using methods of quality
control (sampling and inspection)
4. Public Relations Function
- Creates positive image
- Communicates with public
- Public includes: consumers, suppliers, government, community
- Deals with consumer complaints
5. Marketing Function
- Responsible for sale of goods and services to meet needs of consumers
- Right to product must be sold at the right place at the right time using the
best communication mix (advertising, publicity, personal selling, sales
promotion)
6. Financial Function
- Manage business funds
- Draws up budget and financial statements
- Controls spending
- Invests surplus funds
7. Human Resource Function / Human Capital Management
- Known as personnel function
3
The Business Environment
The business environment consists of:
- Micro environment (internal, full control)
- Market environment (external, some control)
- Macro environment (external, no control)
Micro Environment
FULL CONTROL
The factors in the micro environment are internal factors and include:
- Business policy (VMGO)
- Business strategy
- Management and leadership
- Organisational (business) culture
- Organisational (business) structure
- Organisational (business) resources
- Business functions
Market Environment
SOME CONTROL
The factors in the market environment are external factors and include:
- Consumers (customers/clients/buyers)
- Competitors
- Suppliers / intermediaries, civil society (trade unions, NPOs, NGOs, CBOs,
strategic allies, industry regulators)
Macro Environment
NO CONTROL
The factors in the micro environment are external and include:
- Political
- Economic
- Social
- Technological
- Legal
- Environmental
- Physical
- Ethical
Tools Used To Analyse
- Micro, market and macro environment (SWOT / environmental scan)
- Market environment (PORTER’s SIX FORCES)
- Macro environment (PESTLE)
Characteristics Of Business Environment
- Multi-faceted (consists of many internal and external factors)
- Elements link and are therefore interdependent
- Uncertain
1
, - Dynamic as it changes constantly
- Changes in the external environment has an on-going effect on internal
operations.
Micro Environment
Business Policy
The business policy consists of the vision, mission, goals and objectives of the
business as well as the business strategy:
- Vision - The dream of the business ; road-map to the future.
- Mission - Describes how the business will reach its vision by outlining basic
activities and explaining the reason why the business exists.
- Goals - Long-term aims that the business puts in place ; gives direction.
- Objectives - Short-term aims. Explains how the goals will be reached.
Choice Of Strategy
- Overall strategy is defined in the business policy (VMGO)
- Changes in the business environment requires on-going complicated and
simple strategy formulation from management.
Business Structure
Organisational structure is the system businesses use to run the business
efficiently.
The structure needs to show:
- Each person's tasks
- Level of authority and responsibility
- Flow of instructions and feedback
The following managerial levels form part of the basic structure:
Top level management - long-term strategic decisions; conceptual skills.
Middle level management - Medium-term tactical decisions; interpersonal skills.
Lower level management - Short-term operational decisions; technical skills
Management runs the business by performing management tasks such as
planning, organizing, leading and control (POLC)
Leaders are not necessarily managers but they inspire, motivate and guide others
to achieve goals and objectives.
Business Culture
- The organisational culture of the business is the personality of the
business
- It includes the beliefs, morals and values upheld by the business.
Business Resources
Organisational resources are:
- Physical resources (natural resources, raw materials, equipment)
- Financial resources (own and borrowed capital)
- Human resources (management and employees)
- Intellectual resources (knowledge, skills and technical resources)
2
, Interrelatedness Of Business Functions
- The eight business functions are general management, purchasing,
production, marketing, public relations, human capital (resources),
administration and financial.
- The eight functions depend on each other and are interrelated (linked)
Business Functions
1. General Management
- Oversees the other seven functions
- Use POLC
- Sets VMGO
- Leads and motivates staff
- Consists of management at 3 levels: top, middle and lower.
2. Purchasing Function
- Buys goods and services
- Buys from best supplier
- Buys at the right price, time, quantity and quality.
- Place orders, receives, stores, sorts, distributes and controls stock.
3. Production Function
- Use production methods (mass, batch, jobbing)
- Transforms raw materials into finished products by combining raw
materials, labour and entrepreneurial skill.
- Products are standardized and checked for quality using methods of quality
control (sampling and inspection)
4. Public Relations Function
- Creates positive image
- Communicates with public
- Public includes: consumers, suppliers, government, community
- Deals with consumer complaints
5. Marketing Function
- Responsible for sale of goods and services to meet needs of consumers
- Right to product must be sold at the right place at the right time using the
best communication mix (advertising, publicity, personal selling, sales
promotion)
6. Financial Function
- Manage business funds
- Draws up budget and financial statements
- Controls spending
- Invests surplus funds
7. Human Resource Function / Human Capital Management
- Known as personnel function
3
