BUSINESS ENVIRONMENTS
1. The Macro Environment
1.1 An Environmental Scan
In a environmental scan:
• The business identifies key issues.
• A SWOT analysis focuses only on Opportunities (O) and Threats (T).
• PE2STLE helps pinpoint specific opportunities and threats.
1.2 A SWOT-analysis (Only O and T)
Opportunities and threats in the macro environment include issues like:
• A deteriorating exchange rate, which can threaten profitability if raw materials are imported.
1.3 A PE2STLE analysis
1.3.1 Political Factors
The political situation of the country the business operates in and the political situation of other countries.
Important Terminology: The Constitution
The Constitution forms the basis of all other laws in the country and both private citizens and businesses have
to abide by this law.
Some of the basic issues covered by the Constitution include:
• The Bill of Rights (basic human rights) • Provincial governance
• Public administration • Local governance (municipalities)
Political factors be considered include:
• Government interference in the economic functioning of the country.
• The degree of political stability in the country.
• Political ties with other countries. This influences trade agreements
• Degree of media freedom/freedom of speech which can be used to criticise corrupt political parties.
1.3.2 Economic Factors
Economic factors include:
• Economic growth and development rates - The improvement/deterioration of the standard of living
of the people of the country
• Inflation rates – Affects the purchasing power of money.
• Interest rates - High interest rates make it difficult for businesses to borrow money to expand.
• Exchange rates - The strength of the local currency vs. the currencies of other countries
• High unemployment rates – Reduces consumer spending.
• Taxes such as income tax, VAT, import duties, etc.
, 1.3.3 Ethical Factors
Refers to the principles/values that will determine if decisions and actions are acceptable. Ethics provide a
guideline for the business to evaluate how to act in the "right" way when faced with a difficult situation.
Elements to consider when looking at Ethics include:
• Fair Trade - Respect and transparency in business dealings.
• Corporate Social Responsibility - The responsibility towards the shareholders to balance profit and
give back to the community.
• Employee's privacy - Balancing internet privacy with responsible behaviour and regulation
compliance.
1.3.4 Social/Socio-Economic Factors
Refers to the impact that social trends have on the market. The business must adapt to these trends
• The average age of the population, the life expectancy and people becoming more health conscious.
• The number of single parents providing for a family (Family status)
• HIV / Aids infection and diseases such as TB and malaria (Illness)
• Levels of literacy/education
• Unemployment rates
• Personal safety and crime (Security)
• Awareness of the issue of pollution and recycling (also refer to Environmental factors)
• Distribution of wealth/ poverty (Status)
• The changing role of women in society in certain cultures.
1.3.5 Technological Factors
Refers to the equipment the business uses to buy (or make), advertise, or sell the products or services.
Factors that impact on the business:
• The rapid development of issues surrounding social media
• Automation of different processes, requiring less use of lower-skilled and cheaper manual labour
• Advances in online money transfers (internet banking, electronic fund transfers)
• Online shopping
• Quicker sales transactions through EPOSSE (Electronic Point of Sales Scanning Equipment as opposed
to manual pricing) at pay points.
• Product innovation through Research and Development (R & D).
1.3.6 Legal Environment
Key laws impacting businesses include:
• Labour legislation (Labour Relations Act, Basic Conditions of Employment Act, etc.).
• Consumer protection laws (Consumer Protection Act, Credit Act).
• Environmental protection laws.
• Criminal laws against piracy and fraud.
• Laws on taxes, business registration, health, safety, and food handling.
1.3.7 Physical environment and other Environmental factors
Environmental factors focus on growing awareness to protect the environment, including:
• Shift towards eco-friendly products.
• Emphasis on recycling and hybrid cars.
• Higher taxes on air travel.
• Efforts to reduce carbon footprints.
1. The Macro Environment
1.1 An Environmental Scan
In a environmental scan:
• The business identifies key issues.
• A SWOT analysis focuses only on Opportunities (O) and Threats (T).
• PE2STLE helps pinpoint specific opportunities and threats.
1.2 A SWOT-analysis (Only O and T)
Opportunities and threats in the macro environment include issues like:
• A deteriorating exchange rate, which can threaten profitability if raw materials are imported.
1.3 A PE2STLE analysis
1.3.1 Political Factors
The political situation of the country the business operates in and the political situation of other countries.
Important Terminology: The Constitution
The Constitution forms the basis of all other laws in the country and both private citizens and businesses have
to abide by this law.
Some of the basic issues covered by the Constitution include:
• The Bill of Rights (basic human rights) • Provincial governance
• Public administration • Local governance (municipalities)
Political factors be considered include:
• Government interference in the economic functioning of the country.
• The degree of political stability in the country.
• Political ties with other countries. This influences trade agreements
• Degree of media freedom/freedom of speech which can be used to criticise corrupt political parties.
1.3.2 Economic Factors
Economic factors include:
• Economic growth and development rates - The improvement/deterioration of the standard of living
of the people of the country
• Inflation rates – Affects the purchasing power of money.
• Interest rates - High interest rates make it difficult for businesses to borrow money to expand.
• Exchange rates - The strength of the local currency vs. the currencies of other countries
• High unemployment rates – Reduces consumer spending.
• Taxes such as income tax, VAT, import duties, etc.
, 1.3.3 Ethical Factors
Refers to the principles/values that will determine if decisions and actions are acceptable. Ethics provide a
guideline for the business to evaluate how to act in the "right" way when faced with a difficult situation.
Elements to consider when looking at Ethics include:
• Fair Trade - Respect and transparency in business dealings.
• Corporate Social Responsibility - The responsibility towards the shareholders to balance profit and
give back to the community.
• Employee's privacy - Balancing internet privacy with responsible behaviour and regulation
compliance.
1.3.4 Social/Socio-Economic Factors
Refers to the impact that social trends have on the market. The business must adapt to these trends
• The average age of the population, the life expectancy and people becoming more health conscious.
• The number of single parents providing for a family (Family status)
• HIV / Aids infection and diseases such as TB and malaria (Illness)
• Levels of literacy/education
• Unemployment rates
• Personal safety and crime (Security)
• Awareness of the issue of pollution and recycling (also refer to Environmental factors)
• Distribution of wealth/ poverty (Status)
• The changing role of women in society in certain cultures.
1.3.5 Technological Factors
Refers to the equipment the business uses to buy (or make), advertise, or sell the products or services.
Factors that impact on the business:
• The rapid development of issues surrounding social media
• Automation of different processes, requiring less use of lower-skilled and cheaper manual labour
• Advances in online money transfers (internet banking, electronic fund transfers)
• Online shopping
• Quicker sales transactions through EPOSSE (Electronic Point of Sales Scanning Equipment as opposed
to manual pricing) at pay points.
• Product innovation through Research and Development (R & D).
1.3.6 Legal Environment
Key laws impacting businesses include:
• Labour legislation (Labour Relations Act, Basic Conditions of Employment Act, etc.).
• Consumer protection laws (Consumer Protection Act, Credit Act).
• Environmental protection laws.
• Criminal laws against piracy and fraud.
• Laws on taxes, business registration, health, safety, and food handling.
1.3.7 Physical environment and other Environmental factors
Environmental factors focus on growing awareness to protect the environment, including:
• Shift towards eco-friendly products.
• Emphasis on recycling and hybrid cars.
• Higher taxes on air travel.
• Efforts to reduce carbon footprints.
