CH3: Environmental Analysis Flashcards
(56 cards)
Why is environmental scanning important in business?
It helps managers detect external threats and opportunities early, so they can adjust strategies proactively and maintain competitiveness.
What are the three layers of the business environment?
Micro-environment – Internal factors like strategy, functions, and management.
Market environment – Immediate external factors such as customers, suppliers, competitors.
Macro-environment – Broad, uncontrollable external forces (e.g., economy, politics, tech).
What is the micro-environment, and how does it influence business?
It’s the internal environment, fully under management control, where decisions are made regarding strengths and weaknesses (e.g., internal processes, resource allocation).
What is the market environment, and what does it include?
It’s the layer between micro and macro, including suppliers, customers, intermediaries, competitors, and strategic partners. It acts as a buffer zone.
What defines the macro-environment?
It consists of broad, uncontrollable external factors like the economy, political conditions, and international trends, which influence strategy and risk.
How does international activity affect local businesses?
Global inflation, interest rates, exchange rates, and political developments can directly impact local costs, demand, and business viability.
What skills must managers have to operate internationally?
Cultural awareness, legal compliance, economic understanding, and adaptability to foreign business systems and management practices.
What are the four key characteristics of the business environment?
Interrelatedness – Change in one factor affects others.
Instability – Constant, unpredictable changes.
Uncertainty – Difficulty in predicting outcomes.
Complexity – Many interacting variables.
What is inflation, and what are its types?
Inflation is the ongoing increase in general price levels.
Demand-pull inflation: Demand exceeds supply.
Cost-push inflation: Rising input costs drive price increases.
How does inflation affect business decisions?
It complicates pricing, reduces purchasing power, and increases the need for tight working capital management (stock, debtors, creditors).
What is the business cycle?
A pattern of economic expansion and contraction over time. It influences consumer behavior, investment, and strategic planning.
What role does GDP play in the business cycle?
GDP is a key indicator of economic activity and helps track peaks and troughs in the cycle, guiding business strategy.
What is the impact of high interest rates on business?
Increases cost of debt.
Reduces consumer demand for financed goods.
Lowers business expansion due to expensive borrowing.
Why is unemployment a major concern for business?
It reduces consumer spending and contributes to crime and social unrest, which increases business costs and risk.
How are productivity and profitability related?
Higher productivity usually leads to greater profitability, but SA faces a gap between rising wages and stagnant productivity.
How do trade unions affect businesses in South Africa?
Strikes, violence, and wage demands disrupt operations and increase costs, making strong labor relations a priority for managers.
What is the primary driver of the technological environment?
Research and development, which leads to innovation in products, processes, and services.
How has technology changed business operations?
Through e-commerce, automated systems, labour-saving devices, and increased productivity, though sometimes at the cost of employment.
Why must businesses keep up with technological advances?
To remain competitive, meet consumer expectations, and streamline operations.
How does income distribution affect marketing strategies?
Shifts in income levels (e.g., growing Black middle class in SA) reshape market demand and influence product targeting.
What is consumerism, and how does it affect business?
Consumerism is the demand for greater corporate responsibility; businesses must protect consumers and engage with societal needs or risk public backlash.
What role does employee participation play in social responsibility?
Labour democracy promotes worker involvement in decision-making, and businesses are expected to support education, health, and well-being initiatives.
How does HIV/AIDS affect business strategy?
It impacts productivity, increases costs (healthcare, recruitment, training), and reduces the consumer base. Businesses must integrate HIV/AIDS policies into their planning.
Why is language a strategic concern in SA?
Because of its multilingual population, effective communication and marketing require language inclusivity.
