1.Business environment
1.1.Key concepts
Business environment, micro-environment, market environment, environmental change,
macro-environment, composition of the business, environmental scanning, environmental
SWOT analysis
1.2.The organisation & environmental
change
LO1: Explain the meaning of environmental change.
• Change refers to any alteration in the status quo
• Environmental variables
o Technological innovations
o Economic fluctuations
o New laws
o Social factors
1.3.Composition of business environment
LO2: Explain the nature and composition of the business environment.
Business environment
• Sum of all variables which may influence the successful existence of the organisation
• System approach to management: organisation is integral part of its environment and
should adopt to it
• Characteristics
o Interrelatedness of the environmental factors/variables
o Increasing instability & change
o Environmental uncertainty – depends on amount of relevant information
available
o Complexity of environment – result of number of external variables
LO3: Discuss each of the components of the environmental model.
Micro-environment
• Business itself – workers, managers & functional areas
• Management has almost complete control
o Vision, mission, objectives, business functions and resources
o E.g. pricing & recruitment decisions
• Analysis allows management to identify strengths, weaknesses to utilise opportunities
and counter threats
• Will influence market environment through strategy employed
, Market environment (aka Task environment)
• Immediate external sub-environment that has direct influence on the business
• Management can exert some control – influence variables through strategy applied
• Key variables:
o Consumers, competitors, suppliers & distributors/intermediaries
• Give rise to opportunities & threats
Macro-environment
• Greater external environment that influence business
• Management has least control
• Variables
o Technological environment
o Economic environment (e.g. inflation, exchange rates, interest & fiscal
policy)
o Social environment (e.g. consumer life style, habits, values & culture)
o Physical environment (Natural resources incl. minerals and manufactured
improvements e.g. roads)
o Institutional environment (government and its political & legislative
involvement)
o International environment (local & foreign political trends)
LO4: Explain how each of the environmental variables can impact on an industry or an
individual business.
LO5: Describe some ways in which management should respond to the influences of the
environment.
1.4.Micro-environment
Components
• Vision, mission and objectives of the business
o Vision – What does organisation want to become?
o Mission – What is the business?
o Enduring statement of purpose that distinguishes one business
from other similar firms
o Foundation for development of long-term objectives
o Objectives – e.g. market share, profitability, worker empowerment
• Organisational functions (management)
o Purchasing, logistics, marketing, financial etc.
• Resources
o Include human resources (salaries, recruitment policies & staff retention)
o Tangible resources
o Production facilities, raw materials, financial resources,
property, computers and other machinery/equipment.
o Intangible resources
o Brand names, patents, trademarks, reputation, technical
knowledge, organisational morale & accumulated experience
o Organisational capabilities
o Ability to combine resources, people and processes in a
particular way
o Fight against HIV – Why?
o Not only macro-environment (social) concern – internal policies
o Better opportunities for growth in the market
1.1.Key concepts
Business environment, micro-environment, market environment, environmental change,
macro-environment, composition of the business, environmental scanning, environmental
SWOT analysis
1.2.The organisation & environmental
change
LO1: Explain the meaning of environmental change.
• Change refers to any alteration in the status quo
• Environmental variables
o Technological innovations
o Economic fluctuations
o New laws
o Social factors
1.3.Composition of business environment
LO2: Explain the nature and composition of the business environment.
Business environment
• Sum of all variables which may influence the successful existence of the organisation
• System approach to management: organisation is integral part of its environment and
should adopt to it
• Characteristics
o Interrelatedness of the environmental factors/variables
o Increasing instability & change
o Environmental uncertainty – depends on amount of relevant information
available
o Complexity of environment – result of number of external variables
LO3: Discuss each of the components of the environmental model.
Micro-environment
• Business itself – workers, managers & functional areas
• Management has almost complete control
o Vision, mission, objectives, business functions and resources
o E.g. pricing & recruitment decisions
• Analysis allows management to identify strengths, weaknesses to utilise opportunities
and counter threats
• Will influence market environment through strategy employed
, Market environment (aka Task environment)
• Immediate external sub-environment that has direct influence on the business
• Management can exert some control – influence variables through strategy applied
• Key variables:
o Consumers, competitors, suppliers & distributors/intermediaries
• Give rise to opportunities & threats
Macro-environment
• Greater external environment that influence business
• Management has least control
• Variables
o Technological environment
o Economic environment (e.g. inflation, exchange rates, interest & fiscal
policy)
o Social environment (e.g. consumer life style, habits, values & culture)
o Physical environment (Natural resources incl. minerals and manufactured
improvements e.g. roads)
o Institutional environment (government and its political & legislative
involvement)
o International environment (local & foreign political trends)
LO4: Explain how each of the environmental variables can impact on an industry or an
individual business.
LO5: Describe some ways in which management should respond to the influences of the
environment.
1.4.Micro-environment
Components
• Vision, mission and objectives of the business
o Vision – What does organisation want to become?
o Mission – What is the business?
o Enduring statement of purpose that distinguishes one business
from other similar firms
o Foundation for development of long-term objectives
o Objectives – e.g. market share, profitability, worker empowerment
• Organisational functions (management)
o Purchasing, logistics, marketing, financial etc.
• Resources
o Include human resources (salaries, recruitment policies & staff retention)
o Tangible resources
o Production facilities, raw materials, financial resources,
property, computers and other machinery/equipment.
o Intangible resources
o Brand names, patents, trademarks, reputation, technical
knowledge, organisational morale & accumulated experience
o Organisational capabilities
o Ability to combine resources, people and processes in a
particular way
o Fight against HIV – Why?
o Not only macro-environment (social) concern – internal policies
o Better opportunities for growth in the market
