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Business environment summary
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TOPIC 1: INFLUENCES OF BUSINESS ENVIRONMENTSTERM DEFINITION
All the internal and external factors that affect the functioning
Business Environments
of a business, e.g. micro, market and macro environments.
This environment is the business itself, it consists of all the
Micro Environment
elements inside the business.
Market Environment This environment exists immediately outside the business.
This environment exists outside the micro and the market
Macro Environment
environments.
The amount of influence that a business has on the business
Extent of Control
environments.
An acronym used for the elements to identify challenges
PESTLE Analysis posed by the Macro environment: Political, Economic, Social,
Technological, Legal, Environmental.
Independently Working free from outside control or influence on their own.
Fluctuations in foreign Changes in the value of international money. Dollars/
currency Euro/Yen/ Pound
Profit margins The amount of profit made by the business such as 25%
Commercial transactions conducted electronically on the
e-commerce
Internet.
Taking a lot of or too much time.
Time- consuming
"an extremely time-consuming process"
Accessible market Market that is easy to reach. Makes buying and selling easy.
Outline components of the micro-environment (Recap)
• Business mission and objectives
• Management structure
• Organisational resources
• Organisational culture
Outline components of the market environment (Recap)
• Customers
• Suppliers
• Competitors
• Regulators
• Strategic allies
• Unions
2
,Outline components of the macro environment (Recap)
• Political
• Economic
• Social
• Technological
• Legal
• Environment
Description of the term ‘CONTROL’
The power to influence or direct the behaviour of other organisations and institutions
Explain the reasons why businesses have MORE CONTROL over the MICRO environment
• All six components of the micro environments can be controlled by the
management of the business.
• A business decides on the culture and goals by compiling a vision, mission statement,
goals and objectives.
• Resources are organised by employing and managing staff.
Explain the reasons why businesses have LESS CONTROL over the MARKET environment
• All components of the market environment work independently of the business.
Explain the reasons why businesses have NO CONTROL over MACRO environment
• This environment operates outside of the influence of the business.
• Management of a business has absolutely no control over the components of the
macro environment.
Discuss/Explain/Describe how businesses can control the business environments.
• Business has full control over the micro environment.
• Management of the business therefore has no direct control over any of the
components in the market environment but may influence the components.
• Management of a business has absolutely no control over the components of the
macro environment.
Discuss/Explain the benefits/advantages of businesses that are involved in the MACRO
environment.
• It helps the management to have a complete understanding of the external or
bigger environment.
• It helps identify opportunities and threats that would affect the business.
3
, Recommend/Suggest ways in which businesses can be involved in the macro
environment (PESTLE ANALYSIS)
Describe/Discuss/Explain the challenges of the MACRO environment.
MACRO INVOLVEMENT OF THE
CHALLENGE
ENVIRONMENT BUSINESS
POLITICAL • Business need to work within all • Some government policies may
the laws & regulations set up by affect businesses.
Government. • Consumer rights organisations
• Regulation of industries control may prevent businesses from
trade with other countries & selling products if they do not
protect local industries, customers meet certain requirements.
and employees. • Trade agreements may prevent
• If a business is fully aware of all businesses from importing some
the regulations, it can ensure that medicine/products.
it sets up appropriate trading
channels.
ECONOMIC • This environment is subject to • Inflation/Interest rates may
constant change. negatively impact on business.
• Exchange rates changes • Loans may be expensive due to
constantly during the course of a high interest rates.
day. • Fluctuations in foreign currency
• Business can take advantage of may restrict import.
changes in exchange rates, •
seasonal price changes, and
government tax concessions if
they have the requisite
information.
SOCIAL • These environments can offer • Customers may not be able to
(cultural and useful information to the business afford products due to low
demographic) • Business must ensure that they income levels.
have all the information they can • Businesses may not be conversant
find about the people they are with the local language of their
dealing with. customers.
• Information will allow the business
to:
- project an image appropriate to
the target
- market;
- compete effectively, because it
understands the competition;
- attract investors effectively and
- negotiate successfully with
suppliers.
4
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