THE BUSINESS ENVIRONMENT

Study Unit 2

LECTURE OUTLINE
1 2 3 4 5 6 7 8 9 10 11 12 INTRODUCTION COMPONENTS OF THE BUSINESS ENVIRONMENT INTERNAL (MICRO) BUSINESS ENVIRONMENT EXTERNAL MARKET (TASK) ENVIRONMENT MACRO (MEGA) BUSINESS ENVIRONMENT BUSINESS ENVIRONMENTS OF FIRMS OPEN SYSTEMS TYPES OF MARKETS IN THE MARKET ENVIRONMENT ENVIRONMENTAL SCANNING ANALYSIS OF THE BUSINESS ENVIRONMENT (SWOTs) VARIABLES IN THE BUSINESS ENVIRONMENT REVIEW OF THE STUDY UNIT APPLICATION EXERCISES
2

INTRODUCTION
Business enterprises cannot function in isolation Open systems interact with their environment Business enterprises exist in and are surrounded by an environment the business or organisational environment Society and business enterprises are mutually dependent Business enterprises satisfy societal needs Relationship between society and business enterprises takes place in a changing environment

COMPONENTS OF THE BUSINESS ENVIRONMENT

Different environmental variables exist internally and externally to the business enterprise Environmental variables have a positive or negative influence on the enterprise Business environment consists of two sub-environments: Internal (micro) environment External environment Market environment Macro environment Mutual relationships exist between these environments

ENVIRONMENTAL SCANNING
Identification and forecasting phenomena in the environment Ongoing environmental scanning is essential for strategy formulation Enterprises continuously engage in identifying and forecasting opportunities and threats Enterprises need to proactively or reactively respond to changing conditions in the environment Various sources of information are available to assist with scanning

ANALYSIS OF THE BUSINESS ENVIRONMENT

SWOTs analysis Environmental conditions may be favourable or unfavourable: Opportunity

Represents favourable (positive) conditions in micro, market, macro environments Advantageous to firm

ANALYSIS OF THE BUSINESS ENVIRONMENT

SWOTs
Threat
Represents unfavourable (negative) conditions in micro, market, macro environments Detrimental to firm