Business Environments - Business Studies.
This section includes:
- Micro Environment
- Market Environment
- Macro Environment
- Environmental Scanning
- Business Functions
- Strategies as tools
- Types of business strategies
The Micro, Market and Macro
Environments
Th e e x te r n al e nvi r on m e n t (MAR KET & M AC R O p r es e n ts u n l i mi te d an d e v e r-c h an gin g
de m an ds th at ar e ou t of m an age m e n t’ s c on tr ol .
Th e i n te r n al e nv i r on m e n t (MI C RO ) is u sual l y wi thi n m an ag e m e n t’ s c on tr ol bu t p r ese n ts
i ts ow n p r ob l e m s i n th e for m of l i mi te d r es ou r ce s . M an ag e m e n t m u s t us e the i r l i mi te d
r e s ou rc e s to b ui l d on th ei r s tr e n gth s an d s tr ate gi z e ar ou n d th ei r w e ak n es s es to gai n a
c om p e ti tiv e adv an tage .
I t i s vi tal for an or g an i z ati on to i n v e s ti g ate an d an al y z e i n for m ati on fr om th e i r
e nv i r onm e nts and de ve l op s tr ate g i es to g ai n a c om p e ti tiv e adv antag e = e nvi r onm e n tal
s c an n i n g te ch n iq ue s /tool s = SW O T an al y sis , PO RTE R’ s SI X for c e s m ode l , Ex te n de d
P E STL E .
ENVIRONMENTAL SCANNING
Be ne f i t s o f e nv i r o nme nt a l s ca nni ng :
• I de n ti fi e s th r e ats b e for e th ey ar e i m m i n en t
• I de n ti fi e s p os si b l e op p or tu n i tie s an d gap s i n th e m ark e t
• K e e p s a fi n ge r on th e p ul s e of c om p e ti tor s (an al y z e )
• Al l ow s for s h or t an d l on g - te r m s tr ate gi e s to b e p l an n e d an d i m p l e m e n te d
E n vi r on m e n tal s c an n i n g i s a 3 60 -d e g r e e pr o c e s s an d i n cl u de s b oth i n te r n al an d
e x te r n al as p e c ts .
T y pe s of e nv i ro nme nt a l sc a nni ng :
• B e for e s tar ti n g a b us i n es s – Vi ab il i ty of th e p r odu c t, s tr e n gth of c om p e ti tor s ,
s i ze of m ar k e t/p os si b l e m ar k e t s h ar e , avai l ab i li ty of r e s ou rc e s (s u p p li e rs ,
fi n an c i e rs , s taff, p r e m i s es e tc .)
• C on ti n u ou s e nvi r onm e ntal s c anni ng – on goi n g an al y s i s of e ach e nv i r on m e n t b y
u si ng tool s s uc h as SW O T and/or v al u e c hai n or Re s ou rc e b as e d anal y si s
(M I C RO ), SW O T an d/or P O RTE R (M ARK E T), P 2E 2STL E (M AC RO ). Al s o, to
as s e ss th e b usi n e s s i n te r m s of Tr i p le B ottom L i n e Re p or ti n g .
HOW TO DEVELOP A MANAGEMENT STRATEGY
1 . D e fi n e th e bu si n e ss ’ vi si on , m is si on an d c or p or ate ob j e c tiv es
2. An al y s e th e di ffe r e n t e nvi r onm e nts i n de tai l
a. M i c r o E n vi r on m e n t – “ SW ” of th e SWO T an al y s is
b . M ar k e t E n vi r on m e n t – “ O T” of th e SW O T an al y s i s an d P or te r ’ s F iv e F orc e s
M ode l
c . M ac r o E n vi r on m e n t – PE STL E An al y si s
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, 3 . P os si b l e is su e s th at th e b us i n es s s h oul d con s i de r wh e n c h oosi n g a s tr ate gy :
a. Re tu r n on I n v e s tm e n t (RO I )
b . Ri s k fac tor s
c . P ote n ti al for b us i n es s gr ow th
d. Th e i m ag e th e bu si n e ss i s try i n g to c r e ate / m ai n tai n
e . Th e e ffe c t of de ci si on s on ow n e rs hi p an d c on tr ol of th e b usi n e s s
f. P ol i tic al or s oc i al i ss u es
4 . I de n ti fy th e v ar i ou s s tr ate gi c op ti on s av ai l ab l e
5 . E v al u ate an d an al y s e the vi abi li ty of e ach s tr ate gi c op ti on , p r i ori tis i n g the m i n
or de r of i m p or tan c e
6 . P l an th e i m p l e m e n tati on of th e ch os e n s trate gy
7 . I m p l e m e n t th e ch os e n s tr ate gy
8 . M on i tor an d c on tr ol th e c h os e n s tr ate gy w i th s p ec i al atte n ti on giv e n to m an agi n g
c h an ge s
MICRO (INTERNAL) ENVIRONMENT
BU S I N ES S P O L I C Y :
• V I SI O N = Th e “ dr e am ” of th e bu si n es s . Bri dg e th e g ap b e tw ee n th e p r es e n t an d the
fu tu r e
• M I SSI O N = Se ts th e b u si n e ss ap ar t fr om th e oth e r s i mi l ar bu si n e ss e s b y de sc ri bi n g
th e i r cu s tom e r s , p r odu c t/s er vi ce , di ffe re n ti ati n g q u ali ti es , 3 Ps . Th e mi ss i on i s the
s tar ti n g p oi n t of an y s tr ate gi c de ci si on .
• L O NG & SHO RT- TE RM O B J E C TI V E S = L T (RO I , k e e pi n g c os ts l ow , i n cr e as e d m ar k e t
s h ar e , i n c r e ase d i n te g r ate d r e p or ti n g , c om p e ti ti ve adv an tage ) S T (c ou p l e of m on th s
e .g . O p e n a n e w fr an c hi s e )
• B USI NE S S C UL TURE = V al u e s an d atti tu de s th at is sh ar e d wi thi n th e bu si n e ss
• RE SO URC E S = P hy si c al r es ou rc e s (As se ts , Fi n an c e s , e tc .), Hu m an r es ou r ce s
(k n ow l e dg e , p e r for m an c e m an age m e n t to de te r m i n e e ffic ie n cy )
• B USI NE S S F UNC TI O NS:
o P URC HASI N G
§ Goods b ou g h t for ow n us e e .g . F ri dg e s
§ Goods b ou g h t for r e s al e e .g . C ool dri n k s
§ Goods b ou g h t for p r oc e ss i n g e .g . Sal ad i n g r e di e n ts
§ Re s al e vs W h ol es al e
§ L ar g e s c al e pu rc h asi n g for al l fr an c h is e s
o P RO D UC TI O N
§ Au tom ati on (adv an tag e s /di s adv an tag e s )
§ Qu al i ty c on tr ol (He al th i n s p ec ti on s , e x pi ry date s )
§ Sp e e d v s F as t F ood vs Qu ali ty
o F I NANC I AL
§ F r an c h is e s tar tu p c os t e tc .
§ RO I
§ M ax i m iz e p r ofi ts (V al u e c h ai n an al ys is )
§ C r e di t v s c as h
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