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AN IEB STUDENTS DREAM GUIDE TO BUSINESS STUDIES, current affairs and brilliant essay examples suitable from grade 10-grade 12
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Business notes:CHAPTER 1
, CHAPTER 1: BUSINESS ENVIRONMENTS
INTRODUCTION
External environment = unlimited and ever-changing demands that are out
of management’s and the organisation’s control.
The business needs to consider these events and must design strategies
(plans of action) to adapt to situations in the external environment.
Internal environment = within management’s control but presents its own
problems in the form of limited resources.
Management must use limited resources to build on Competitive advantage:
strengths and to protect weaknesses to = keep or increase This describes how the
competitive advantage. business has the edge in the
market or over competitors
It is also important to keep in mind that the events occurring (local/ international). If the
within the business may in turn impact on events in the business has a competitive
macro environment advantage, it enables the
business to exploit this
1. In the event of a strike, a business/ group of businesses advantage to sell more, to
(industry) may have an effect on the economy. attract more customers or to
reduce expenses, thus
2. A business employing or retrenching workers generating more profit.
contributes to the employment/ unemployment rate of the country.
3. The way the business operates may directly influence the physical
environment in which it operates, etc.
Different techniques or tools can be used to gather and analyse info relating
to the internal and external environments and to understand which factors can
be controlled and which cannot.
Some of the techniques/tools available can be used either (micro) or (market &
macro) while others can be used in all three.
o Micro: SWOT
o Market: SWOT or Porter’s Six Forces
, o Macro: SWOT or PESTLE
1 THE MACRO ENVIRONMENT
Various tools may be used to analyse events in macro environment in order to:
eliminate any threats
capitalise on opportunities
Some of the tools that may be used to analyse the macro environment include:
A. environmental scan
B. SWOT-analysis
C. PESTLE // P2ESTLE2
1.1 ENVIRONMETAL SCAN
Environmental scan used to assess the micro, market and macro environment.
Entrepreneurs must constantly be in touch with the world around them.
An environmental scan = will identify factors that may impact on the business so
that existing plans can be adjusted or new plans could be developed to deal
with these factors.
Benefits of an environmental scan:
Identifies threats before they happen
Identifies possible opportunities and gaps in the market
Keeps a finger on the pulse of the competitors
Allows an entrepreneur to create both short-term and long-term strategies
in order to protect their business.
Environmental scanning is a 360˚ process and includes both internal and
external aspects.
There are two types of environmental scanning:
Before starting the business Continuous environmental scanning
Before putting time, effort, money and other Environmental analysis is done on an ongoing basis
resources into a new venture, it is important through analysing each of the environments using
to skim over the market environment and various tools.
get more information on aspects such as:
Viability of the product or service If done in enough detail, the Social, Environmental
Strength of competitors
Size of the potential market to absorb a new and Economic effect (People, Planet, Profit) of the
player in the industry business can be identified and the factors behind
Stability of your resources: Suppliers, financiers,
this can be analysed in order to adjust the planning of
staff, fellow investors, premises…
the business, including but not limited to TBL.
, The environment scanning process in the macro environment:
1. Business will scan the macro environments to identify issues which need to be
addressed.
2. Although a SWOT analysis may be used to evaluate factors in both the external
and internal environments, in the macro environment, only OPPORTUNITIES
and THREATS are considered.
3. PESTLE is a useful tool to identify specific opportunities and threats in the
macro environment.
1.2 A SWOT- ANALYSIS (Only 0 and T)
The 0 and T refer to issues in the macro + market environments.
A PESTLE- ANALYSIS:
Political factors
Important terminology:
This factor is important in relation to: The Constitution forms the
local political situation of the country basis of all other laws in the
Political situation of other countries country and both private
world politics in general citizens and businesses have
Political factors and LEGAL factors are closely related to abide by this law. Some of
Because the political party running the country, will make the laws that the basic issues covered by
determine what is acceptable and what is not allowed, for example: the Constitution include:
1. Broad Based Black Economic Empowerment (BBBEE) to redress inequalities of the past and other national
employment laws
2. International trade regulations and restrictions
3. Monopolies and mergers’ rules
,4. Consumer protection
5. Public administration
Political refers to attitudes and approaches whereas Legal factors are those which have
become law and regulations. Legal needs to be complied with whereas Political may
represent influences, restrictions or opportunities, but they are not mandatory.
When looking at political factors that may impact on the business, the following aspects
should be considered:
The likelihood of Government interference in the economic functioning of the country (and
therefore, the running of businesses), as with a free market vs. socialism vs. communism
The degree of political stability in the country and its impact on business confidence
Political ties with other countries as this may, for instance, influence trade agreements
Degree of media freedom / freedom of speech which may be used to criticise the political
parties in the country when government officials make themselves guilty of corruption
The attitude of different political parties in the country where business is conducted is
important.
The local banking and mining sectors, for example, may want to take note of a political party
such as the Economic Freedom Front (EFF) that is in favour of nationalising banks and mines.
Good to consider the points of view of opposing political parties as this may (or may not) shape
the future political orientation of the country.
The process followed when Government tenders are allocated (if the business is interested in
tendering for Government contracts)
Economic factors
Economic factors that may affect the business:
Economic growth and development rates in the country, i.e. the improvement (or deterioration)
of the standard of living of the people of the country
Inflation rates: Inflation is the continuous and significant increase in the general price level of
goods and services. The higher the inflation rate, the lower the purchasing power of the
monetary unit will be.
Interest rates: the rate at which people or businesses borrow money from the bank or the
percentage return on investment when saving money in the bank. High interest rates make it
difficult for businesses to borrow money to expand.
Exchange rates, i.e. strength of local currency vs. currencies of other countries.
Fuel price is linked to exchange rates, importing price of fuel, government taxes and levies
(National Budget: Fuel levies increase by 29c a litre for petrol and 30c a litre for diesel). Fuel price
is adjusted every 1st Wednesday of every month. Price of petrol is regulated by the
, government while the price of diesel is regulated by the gas company, e.g. BP, Total, Engen, etc.
Franchisees at the forecourts have no control over the price of petrol and diesel.
High unemployment rates mean people do not have money and as a result, businesses suffer
lower profits.
Taxes such as income tax, VAT, import duties, sin tax (including sugar tax), etc.
Ethical factors
Ethics refers to the principles and values that will determine = if decisions and actions are
acceptable.
Ethics - (provides a guideline for the business to evaluate how to act in the "right" way when
faced with a moral dilemma or difficult situation.)
Elements that the business has to consider when looking at Ethics include:
o What is the difference between ethical and legal? Something may be legal, but not ethical
in a particular legal situation in terms of a country's trade regulations.
o Fair Trade refers to respect and transparency in business dealings, acknowledging that one
party will not attempt to exploit the other.
o Corporate Social Responsibility: It is the responsibility towards the shareholders to make a
profit vs. the responsibility towards giving back to the community (refer to Chapter 6).
o An employee's privacy regarding the use of the internet vs. the rights of the business to
expect responsible behaviour from employees. Employers must be able to access
computers to ensure employees are not contravening the company's regulations.
o Challenges for Service stations/convenience stores: negligence major issue, including
shrinkage (between 0,5 and 4%), cashier fraud. CCTV’s installed.
Social factors
Social factors refer to = impact that social trends have on the economy and the role players in
the economy, such as businesses and consumers' behaviour and their lifestyles.
Research shows that majority of South African are influenced by convenience of location,
speed of service, high-quality fresh produce and product availability.
The business has to adapt to changes in social trends. Eg. think about the impact that social
media has on the world around you and how businesses have to adapt their marketing and sales tactics to
utilise opportunities related to the use of mobile devices.
The average age of the population, the life expectancy and people becoming more
, health conscious
No. single parents providing for a family
HIV / Aids infection and diseases such as TB and malaria
Levels of literacy / education
Unemployment rates
safety and crime
pollution and recycling
Distribution of wealth / poverty
Changing role of women in society
Technological factors
Technology = the equipment the business uses to buy, advertise or sell the products or services.
Consider how the following factors impact on the business:
o Rapid development of issues surrounding social media.
o Automation of different processes, requiring less use of lower-skilled and cheaper manual
labour. E.g. petrol station, move towards all activities done on a tablet.
o Advances in online money transfers e.g. internet banking, electronic fund transfers, apps
such as Zapper etc. (Also consider legislation e.g. Protection of Personal Information Bill)
o Online shopping
o Quicker sales transactions through EPOSSE (Electronic Point of Sales Scanning Equipment
as opposed to manual pricing) at pay points
o Product innovation through Research and Development (R & D)
Legal environment
The legal environment refers to all laws that impact on the business.
This may include:
Labour legislation such as the Labour Relations Act, minimum wage rates set annually, the
Basic Conditions of Employment Act, Broad Based Black Economic Empowerment, skills
development and the Occupational Health and Safety Act (Hazardous section important for
Petrol stations; lots of health and safety violations.)
Legislation introduced to protect the consumer and consider the CPA and the Credit Act.
Scrutinize information displayed on labels designed to inform and protect consumers.
Laws that protect the environment against exploitation and pollution
Criminal justice that protects the business against piracy and rip-offs
Laws relating to paying tax, registering the business, health and safety and specifications for
dealing with food (to name but a few)
Physical environment and other Environmental factors
Environmental factors are NB if one thinks of the growing awareness to protect the
environment and to prevent negative consequences such as global warming and changes in
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