TOPIC 2 - THE CHALLENGES OF THE BUISNESS ENVIRONMENTS

Question 1

Explain the challenges of the micro environment.

Answer 1

1. Difficult employees - Difficult employees are those who do not support the vision and goals of the business – their actions may lead to conflict in the workplace, which could then break down the team spirit.
2. Lack of vision and mission - It may lead to conflict and negatively affect productivity.
3. Lack of adequate management skills - Managers who do not have the necessary management skills will not be able to lead, direct and control personnel and resources in the business.
4. Unions - Sometimes unions make demands that are impossible for businesses to meet, and this creates tension between management and employees.
5. Strikes and go-slows - Strikes and go-slows are examples of industrial actions that may be organised by a trade union and have a negative impact on business operations.
6. Shortage of skills among employees - If employees are not well trained, their performance will not meet the required standards set by the business.

Question 2

Discuss the challenges of the market environment.

Answer 2

1. Competition - If a business cannot match the quality of the goods or services of its competitors, it may lose its customers.
2. Shortage of suppliers - Every business needs raw materials to produce its goods or services.
3. Changes in consumer behaviour - Economic conditions or fashions can cause changes in consumer taste and preferences, this could lead to fewer sales.
4. Demographics - When lots of people emigrate, it could lead to a decrease in the number of consumers and skilled labour.
5. Psychographics - Businesses must be aware of their customers’ lifestyles and behaviour.
6. Socio-cultural factors - It affects the product line and the marketing campaign of a business.

Question 3

Recommend ways in which businesses can overcome competition in the market environment.

Answer 3

1. Businesses must ensure that they produce unique goods or
   services for the target market.
2. Businesses need to provide more personalised services by being responsive to their customer’s needs/wants.
3. Goods/services must be priced lower than competitor’s goods/services in
   the market.

Question 4

Outline the challenges of the macro environment.

Answer 4

1. Changes in income levels - Unemployment, high interest rates, high inflation rates, or an increase in taxes, leave consumers with less money to spend on goods and services.
2. Political changes - A change in government can result in political instability – which can scare away possible investors and tourists, and in turn threaten the survival of a business.
3. Contemporary legal legislation - Businesses that fail to obey
   these laws could be fined or the
   owners could be sent to prison.
4. Labour restrictions - These laws create a legal framework that protects employees from being exploited by their employers and also restricts the practices of employers.
5. Micro-lending - They normally charge higher interest rates, and their repayment period is shorter than those of the commercial banks.
6. Globalisation - Refers to the exchange of products, services, capital, and labour across
   national borders, that is, businesses are competing with international businesses for local customers.
7. Social values and demographics - It influences consumers’ buying habits because consumers buy products they
   identify with. Changes in the characteristics of demographics of the population affect the products/services that businesses need to produce.
8. Socio-economic issues - Socio-economic issues like crime, poverty, HIV/AIDS, and corruption influence business operations in different ways.

Question 5

Gives examples of contemporary legislation that may affect business operations.

Answer 5

1. The Labour Relations Act (LRA).
2. The Basic Conditions of Employment Act (BCEA).
3. The Compensation for Occupational Injuries and Diseases Act (COIDA).
4. The Skills Development Act (SDA).
5. Consumer Protection Act (CPA).
6. National Credit Act (NCA).
7. Employment Equity Act (EEA).
8. Broad Based Black Economic Empowerment (BBBEE).