Summary MNB1501 - Lesson 4 - Study Resources

Lesson 4: The Business Environment

4.1 Introduction and Aim of the Lesson
 Objective: Understand the dynamic nature of the business environment and how
it influences businesses.
 Key Points:
 The business environment is constantly changing due to factors like
technology, customer trends, regulations, and global events (e.g.,
pandemics).
 Businesses must adapt to survive in this dynamic environment.
 Examples of changes include fluctuations in exchange rates, petrol prices,
and climate conditions affecting food production.
4.2 The Business and Environmental Change
 Environmental Change:
 Defined as alterations in the status quo, impacting the business
environment.
 Rapid advancements in technology, evolving customer needs, and updated
market regulations drive change.
 Example: Transition from vinyl records to CDs, DVDs, MP3s, and now
streaming services.
 Types of Organisational Change:
1. Development Change: Improves existing processes and strategies.
2. Transitional Change: Moves from one state to another to solve problems
(e.g., mergers, acquisitions).
3. Transformational Change: Fundamentally alters culture, values, and
operations.
 Challenges:
 High failure rate for transformation efforts (>60%).
 Organizations use change management techniques to address these
challenges.
4.3 The Business Environment
 Definition:
 The sum of all variables influencing the successful existence of an
organization.
 Includes internal (employees, management) and external (customers,
regulations) factors.
 Sub-Environments:
1. Micro-Environment:
 Internal factors within the business.
 Management has significant control over this environment.
 Components: Mission, objectives, functional areas, human resources.
2. Market Environment:
 Immediate external factors directly affecting the business.
 Includes customers, suppliers, intermediaries, and competitors.
 Management has limited control compared to the micro-environment.
3. Macro-Environment:
 Broader external factors with indirect influence.
 Includes technological, economic, social, physical, institutional-
political, and international elements.
 Management has minimal control over these factors.
4.4 The Composition of the Business Environment
 4.4.1 Micro-Environment:
 Mission and Objectives:
 Mission Statement: A brief description of the organization’s purpose.

,  Examples: Tesla ("To accelerate the world’s transition to
sustainable energy"), LinkedIn ("To connect the world’s
professionals").
 Objectives: Specific goals aligned with the mission.
 Examples: Profitability, productivity, customer service, employee
retention, core values, sustainable growth.
 Organisational Functions:
 Purchasing supplies, logistics, marketing, financial expertise.
 Human Resources:
 Essential assets requiring nurturing and development.
 Challenges: Managing HIV/AIDS in the workplace through policies,
education, and support programs.
 4.4.2 Market Environment:
 Components:
1. Customers: Understanding their needs and preferences.
2. Suppliers: Providing materials, capital, and labour.
3. Intermediaries: Bridging gaps between manufacturers and consumers
(e.g., wholesalers, real estate agents).
4. Competitors: Rival businesses competing for customers.
 Porter’s Five Forces: Analysing competition and profitability in the
market environment.
 4.4.3 Macro-Environment:
 Variables:
1. Technological Environment: Innovations replacing old technologies
(e.g., telegraph → email).
2. Economic Environment: Interest rates, inflation, unemployment
affecting consumer behaviour.
3. Social Environment: Urbanization, gender roles, health issues like
HIV/AIDS.
4. Physical Environment: Scarcity of natural resources (e.g., water
shortages in South Africa).
5. Institutional/Political Environment: Government policies, labour
laws.
6. International Environment: Global events like oil price fluctuations
impacting local economies.
4.5 Environmental Scanning
 Definition:
 Process of monitoring and analysing external environmental factors to
inform strategic decisions.
 Importance:
 Provides valuable insights into strengths, weaknesses, opportunities, and
threats.
 Helps organizations stay competitive and avoid potential losses.
 Techniques:
1. Research: Identifying industry trends and threats.
2. Expert Opinion: Consulting industry experts for analysis.
3. SWOT Analysis: Evaluating internal strengths/weaknesses and external
opportunities/threats.
4. PEST Analysis: Investigating political, economic, social, and technological
factors.
5. Industry Analysis: Understanding competitors’ strategies to develop
countermeasures.
4.6 Summary
 Key takeaways:
 The business environment is dynamic and consists of micro-, market, and
macro-environments.