1
,Chapter 1 – business environments
Tools used to analyse the macro environment
1. Environmental scan
2. SWOT analysis
3. PESTLE
Environmental scan
- Identify factors that may impact on the business
- Adjust existing plans or develop new plans to deal with these factors or events
- Can be used in macro and market environment
- Scan and identify issues
- Macro = opportunities and threats are considered
PE2STLE
- Political
- Economical
- Ethical
- Social
- Technological
- Legal
- Environmental
POLITICAL
- Make the laws of what is acceptable and what not
- Local political situation of the country
- World politics
- Government corruption
ECONOMIC
- Economic growth and development – more money in the country
- Inflation rates – general increase in prices over a time period. Usually a year
- Interest rates – decrease loan, increase investments
- Exchange rates – when your supplier is in a different country and the ran
decrease the price of goods/services will have to increase
- High unemployment rates – less money = less profit / advantage – wide
variety of staff to choose from
2
, - Taxes, income tax, VAT – people have less money therefore prices have to
decrease to make a profit
ETHICAL
The principles and or values that will determine if the decisions and actions are
acceptable. A guideline to evaluate how to act in the right way
- Fair trade
- CSR
- Privacy
SOCIAL (SOCIO-ECONOMIC)
Impact that social trends have on the role players in the economy
- Life expectancy
- Levels of literacy – people can’t read = manipulation
- HIV/AIDS – less productivity
- Unemployment – can pick employees
- Average population
- Crime and safety- disadvantage – nobody will come to the store / advantage –
if competitors are in a high crime area as customers will come to your store
- Poverty – disadvantage – no money to buy products which increase crime
rates in areas/ advantage skills development
TECHNOLOGICAL
- Automation
- Online shopping
LEGAL
Refers to all laws that impact the business
- Laws and acts
- Criminal justice
- Tax laws
- New legislation
3
, PHYSICAL
Growing awareness to protect the environment and to prevent negative
consequences such as global warming
- Change in weather patterns
- Environmental issues
- Recycling – grow brand image which increases customers
- Sustainable – CSR and different initiatives
Market Environment
- Place where good and services are bought and sold
Porters 6 force model
- Michal Porter
1. Level of rivalry
- Current competitors have a strong customer base
- Sell products at a lower price to attract customers, increase quality in
order to compete
Examples
- Market share
- Brand loyalty
- Price
- Trading hours
- Location
Strategies
- Customer loyalty programs to make the business more attractive than
competitors
- Reduces price of certain items to make business more attractive
2. Threat of new competitor/entrant
Barriers to enter the market
- Patents protect products
- Monopoly – one person controlling the entire environment
- Tax on imported goods
Offer a variety of products, sell them at a cheaper amount and a better quality.
New ideas also become a threat as it become a competitive advantage
4
,Chapter 1 – business environments
Tools used to analyse the macro environment
1. Environmental scan
2. SWOT analysis
3. PESTLE
Environmental scan
- Identify factors that may impact on the business
- Adjust existing plans or develop new plans to deal with these factors or events
- Can be used in macro and market environment
- Scan and identify issues
- Macro = opportunities and threats are considered
PE2STLE
- Political
- Economical
- Ethical
- Social
- Technological
- Legal
- Environmental
POLITICAL
- Make the laws of what is acceptable and what not
- Local political situation of the country
- World politics
- Government corruption
ECONOMIC
- Economic growth and development – more money in the country
- Inflation rates – general increase in prices over a time period. Usually a year
- Interest rates – decrease loan, increase investments
- Exchange rates – when your supplier is in a different country and the ran
decrease the price of goods/services will have to increase
- High unemployment rates – less money = less profit / advantage – wide
variety of staff to choose from
2
, - Taxes, income tax, VAT – people have less money therefore prices have to
decrease to make a profit
ETHICAL
The principles and or values that will determine if the decisions and actions are
acceptable. A guideline to evaluate how to act in the right way
- Fair trade
- CSR
- Privacy
SOCIAL (SOCIO-ECONOMIC)
Impact that social trends have on the role players in the economy
- Life expectancy
- Levels of literacy – people can’t read = manipulation
- HIV/AIDS – less productivity
- Unemployment – can pick employees
- Average population
- Crime and safety- disadvantage – nobody will come to the store / advantage –
if competitors are in a high crime area as customers will come to your store
- Poverty – disadvantage – no money to buy products which increase crime
rates in areas/ advantage skills development
TECHNOLOGICAL
- Automation
- Online shopping
LEGAL
Refers to all laws that impact the business
- Laws and acts
- Criminal justice
- Tax laws
- New legislation
3
, PHYSICAL
Growing awareness to protect the environment and to prevent negative
consequences such as global warming
- Change in weather patterns
- Environmental issues
- Recycling – grow brand image which increases customers
- Sustainable – CSR and different initiatives
Market Environment
- Place where good and services are bought and sold
Porters 6 force model
- Michal Porter
1. Level of rivalry
- Current competitors have a strong customer base
- Sell products at a lower price to attract customers, increase quality in
order to compete
Examples
- Market share
- Brand loyalty
- Price
- Trading hours
- Location
Strategies
- Customer loyalty programs to make the business more attractive than
competitors
- Reduces price of certain items to make business more attractive
2. Threat of new competitor/entrant
Barriers to enter the market
- Patents protect products
- Monopoly – one person controlling the entire environment
- Tax on imported goods
Offer a variety of products, sell them at a cheaper amount and a better quality.
New ideas also become a threat as it become a competitive advantage
4
