BUSINESS STUDIES
BUSINESS ENVIRONMENTS
MACRO ENVIRONMENT
external environment.
The business has no control over these so it is required to design strategies to adapt to the
always changing external environments.
❖ External environment:
➢ places ever-changing, unlimited demands on business
➢ out of management’s control
➢ business must capitalise on opportunities & eliminate threats to gain a competitive
advantage
❖ Competitive advantage: how the business has an edge in the market or over competitors
(local or international).
➢ Enables the business to exploit this advantage & sell more, to attract more
customers/reduce expenses, thus generating more profit.
❖ Internal environment: usually within management’s control
➢ problem = limited resources which management must use to build on strengths &
protect weaknesses.
❖ Different techniques and tools can be used to gather & analyse information relating to
internal & external environments.
❖ Critical to investigate all variables to understand which factors can/cannot be controlled
❖ Techniques that can be used include:
➢ Resource based view: micro environment
➢ Value chain analysis: micro environment - a technique specifically used to
analyse the cost of components of a product with the ultimate aim of reducing
those costs.
➢ SWOT analysis: micro, market and macro environments
➢ Porter’s five forces model: market
➢ PESTLE: macro environments
➢ Balanced scorecard: micro environment
1
,ENVIRONMENTAL SCANNING
❖ Important to know what is happening around you as a business owner - need to scan
each environment.
➢ (Is there a political crisis? Are there new competitors?)
❖ Need to use all sources of information, media, internet, network of contacts.
➢ Some businesses do a physical scan of the environments
❖ To do a comprehensive scan: look at each element of the environment.
➢ SWOT analysis, Porter’s Five Forces Model could be used to pre-empt problems
that may arise/to see new opportunities.
SWOT ANALYSIS
looks at both the internal and external elements of a business.
Macro Environment = O & T (Look at each element and decide if they pose an opportunity or
threat)
By constant scanning businesses are able to look at events in the external environment and
develop strategies on how to deal with these events.
❖ Events in the Macro Environment occur either as:
❖ Trends:
➢ Predictable changes
➢ Business can plan to some extent
➢ Impact and rate of change difficult to predict
■ (technological change, labour developments, economic trends)
❖ Crisis:
➢ Unexpected and unplanned
➢ Unstable situation for economy and business
■ (war, natural disasters, labour strikes, outbreak of diseases)
2
, EVENTS IN THE BUSINESS ENVIRONMENTS
Can be a trend or crisis
TRENDS IN THE BUSINESS
❖ Important to do environmental scanning when developing strategies to cope with
changing trends in the external environment.
❖ Environmental scanning anticipates what is happening in the industry that may affect your
business and plan ahead.
❖ Watch competitors:
➢ the way they respond to the environment may give them the competitive
edge/may be an indication of what not to do
❖ Similar industries may give you clues:
➢ Looking to developed nations and learning from their experiences
mistakes/working together
➢ could save both time and money.
❖ Seasonal or occasional trends:
➢ occasions to learn & devise better strategies for when a similar situation occurs
again.
CRISIS IN THE BUSINESS ENVIRONMENT
❖ Part of every business life cycle - always unforeseen circumstances when working in a
complex/unpredictable environment.
❖ The managerial team needs to have contingency plans
❖ two possible strategies:
➢ Risk Management Assessment Strategy
➢ Decision Tree Strategy
RISK MANAGEMENT ASSESSMENT STRATEGY
❖ Working through the process of identifying possible risks and pre-deciding ‘what would
happen if’.
❖ Used to assess potential physical/health risks & put contingency plans in place.
➢ OHS Act requires employers to take precautions/make provisions for all possible
risks.
3
BUSINESS ENVIRONMENTS
MACRO ENVIRONMENT
external environment.
The business has no control over these so it is required to design strategies to adapt to the
always changing external environments.
❖ External environment:
➢ places ever-changing, unlimited demands on business
➢ out of management’s control
➢ business must capitalise on opportunities & eliminate threats to gain a competitive
advantage
❖ Competitive advantage: how the business has an edge in the market or over competitors
(local or international).
➢ Enables the business to exploit this advantage & sell more, to attract more
customers/reduce expenses, thus generating more profit.
❖ Internal environment: usually within management’s control
➢ problem = limited resources which management must use to build on strengths &
protect weaknesses.
❖ Different techniques and tools can be used to gather & analyse information relating to
internal & external environments.
❖ Critical to investigate all variables to understand which factors can/cannot be controlled
❖ Techniques that can be used include:
➢ Resource based view: micro environment
➢ Value chain analysis: micro environment - a technique specifically used to
analyse the cost of components of a product with the ultimate aim of reducing
those costs.
➢ SWOT analysis: micro, market and macro environments
➢ Porter’s five forces model: market
➢ PESTLE: macro environments
➢ Balanced scorecard: micro environment
1
,ENVIRONMENTAL SCANNING
❖ Important to know what is happening around you as a business owner - need to scan
each environment.
➢ (Is there a political crisis? Are there new competitors?)
❖ Need to use all sources of information, media, internet, network of contacts.
➢ Some businesses do a physical scan of the environments
❖ To do a comprehensive scan: look at each element of the environment.
➢ SWOT analysis, Porter’s Five Forces Model could be used to pre-empt problems
that may arise/to see new opportunities.
SWOT ANALYSIS
looks at both the internal and external elements of a business.
Macro Environment = O & T (Look at each element and decide if they pose an opportunity or
threat)
By constant scanning businesses are able to look at events in the external environment and
develop strategies on how to deal with these events.
❖ Events in the Macro Environment occur either as:
❖ Trends:
➢ Predictable changes
➢ Business can plan to some extent
➢ Impact and rate of change difficult to predict
■ (technological change, labour developments, economic trends)
❖ Crisis:
➢ Unexpected and unplanned
➢ Unstable situation for economy and business
■ (war, natural disasters, labour strikes, outbreak of diseases)
2
, EVENTS IN THE BUSINESS ENVIRONMENTS
Can be a trend or crisis
TRENDS IN THE BUSINESS
❖ Important to do environmental scanning when developing strategies to cope with
changing trends in the external environment.
❖ Environmental scanning anticipates what is happening in the industry that may affect your
business and plan ahead.
❖ Watch competitors:
➢ the way they respond to the environment may give them the competitive
edge/may be an indication of what not to do
❖ Similar industries may give you clues:
➢ Looking to developed nations and learning from their experiences
mistakes/working together
➢ could save both time and money.
❖ Seasonal or occasional trends:
➢ occasions to learn & devise better strategies for when a similar situation occurs
again.
CRISIS IN THE BUSINESS ENVIRONMENT
❖ Part of every business life cycle - always unforeseen circumstances when working in a
complex/unpredictable environment.
❖ The managerial team needs to have contingency plans
❖ two possible strategies:
➢ Risk Management Assessment Strategy
➢ Decision Tree Strategy
RISK MANAGEMENT ASSESSMENT STRATEGY
❖ Working through the process of identifying possible risks and pre-deciding ‘what would
happen if’.
❖ Used to assess potential physical/health risks & put contingency plans in place.
➢ OHS Act requires employers to take precautions/make provisions for all possible
risks.
3
