Environments

Micro environment
The micro environment is the business itself. It has full control of its variables

The various components of the micro environment

Vision
 Refers to a statement that explains what a business aims to achieve
 Sits out where the business needs to go to be successful

Mission statement
 A statement that explains the reason for the business existence
 Explains what the business does to achieve its goals

Goals
 Can be defined as long term objectives of what the business wants to achieve
 Goals give the business a sense of direction

Objectives
 Short term tasks / steps for the business to reach their goals
 Contains a deadline for achievement

Organisational Culture
 Refers to the personality of the business.
 It influences people’s actions and attitude.

Organisational resources
 Refer to the things/ assets that a business uses to make goods and services
 Human resources [people]
 Physical resources [paper, stationary]
 Financial resources
 Technological resources

Explain the differences between leadership and management

Management Leadership
Task orientated People orientated

Uses instructional approach Uses motivational approach

Guides human behaviour Influences human behaviour

The purpose of the organisational structure

 The organisational structure is also known as an organogram
 An organogram shows the hierarchical structure of the business

Business functions

Administration function
It is responsible for collecting, processing and storing all the data and information
required by the business. The administration function must be up to date with the
latest information technology

General management function

Coordinates the other business functions to achieve the goals and objectives of the
business. The general management function plans, organise, leads and controls
resources in the business.

Financial function
The financial function is responsible for determining other financial needs of
the business. It ensures that the businesses funds are used efficiently. It
manages all the funds and financial assets of the business.

Human resource function

The human resources function is responsible for attracting new employees into the
business. It also must manage all the people in the business by providing education
and training for their employees.

Marketing function
The marketing function undertakes market research to determine the real needs of
the target market. It is also responsible for the advertising/ promotion of goods and
services to customers.

Purchasing function
The purchasing function is responsible for buying all the resources that the business
needs in order to produce its goods and services.

Production function.
The production function is responsible for changing/ processing raw materials into
finished or semi-finished products. It ensures that the business creates quality
products to meet the demands of the target market.

Public relations function.

The public relations function is responsible for creating a good public image for the
business. It ensures that there is proper communication between the business and
all its stakeholders.
 The concept of quality
 It refers to the ability of a product or service to successfully satisfy the expectations
of a customer.
 The quality of a product or service is measured by criteria such as durability,
appearance, performance, reliability and after sales services.
 The quality of a service lies in its efficiency to provide the desired outcome and will
affect whether the consumer will continue to support the business.

Quality control Quality assurance

Process of inspections are carried out on Quality assurance is a process of checks at the
the final product to ensure that it meets start, during and at the end of the production
the required standards process to ensure that the required standards
have been met
It verifies the quality of the output and Quality assurance is the quality process and
includes setting targets, measuring tries to prevent mistakes by aiming to get the
performance and taking corrective product right the first time
measures

The importance of quality for businesses

 The quality enables businesses to have a good reputation and promotes brand
awareness.
 The consumers associate the image of the business with the quality of the product.
 The business gains goodwill and support from the community.

Quality indicators of the following business functions:

 Human resource
 Administration
 Financial
 General management

Human resources:
 The HR department ensures low staff turnover
 The HR department complies with all the applicable labour laws
 The HR department has a fair selection process in place

Administration function
 The administration department ensures reliable and fast data capturing and
processing
 The administration department safely stores all documentation neatly and orderly
 The administration departments apply reliable and up to date information to
management on time, which enables fast decision-making

Financial function
  The finance department in choice is up to date and accurate financial records, which
ensures the correct tax payments
 The finance department prepares realistic budgets and has a strict budget control
system in place
 The finance department ensures a secure financial control system is in place to
prevent fraud

General management function

 Management ensures ongoing strategic planning and implementation and control of
other plans
 Management ensures that each employee has the necessary resources to do his job
efficiently
 Management complies and effectively communicates the mission statement, vision
and values to employees and other stakeholders

The correlation between management and the success of the business

 Management plays an important role in making the correct decisions and motivating
employees to be productive
 Poor management can result in ineffective employees and loss of productivity
 Businesses require ongoing decision-making and problem solving

The market environment

The market environment refers to the immediate external components that directly
affect the ability of the business to operate. It has limited control over its variables

Components of the market environment

 Consumers/ customers
 Suppliers
 Competitors
 Civil society

1. Consumers/ customers/ market/ clients

 They are individuals or other businesses that purchase products and
services from a business
 Consumers are the final users of the product/ service
 The market is than you and old customers who have money to buy
goods/ services
 If customers are not happy with the products or services of a
business, they will turn to a competitor

2. Suppliers
  Suppliers or individuals or other businesses that provide/ supply
businesses with the inputs or resources they need in order to produce/
manufacture their product or services
 Businesses need to ensure that they identify reliable suppliers in the
market
 If suppliers fail to provide businesses with quality resources/ inputs
or if the suppliers don’t deliver these resources/ inputs on time or
at the right prices, then the businesses will not be able to meet their
goals/ objectives

3. Intermediaries
 Intermediaries bridge the gap between producers and consumers
 Some intermediaries assist the businesses with packaging and
advertising of their products and services
 Intermediaries include wholesalers, retailers, agents, brokers,
transportation services, etc

4. Competitors
 Competitors refer to businesses/ organisations that provide or sell more or
less the same goods/ services
 Businesses will be forced to offer quality products or services at the
lowest possible prices or else they will lose their customers to their
competitors
 The following Porter’s five forces influence competition:
 Power of consumers
 Threats of substitute products/services
 Competitive rivalry
 New entrants to the market

Why competition poses a challenge to businesses

 Competition as one of the components of the market environment poses
a challenge to businesses because it is not within the control of the
business
 Consumers will buy from the business where they get the most value for
money and they could choose the competitor
 Businesses could find it hard to differentiate itself from its competitors to
gain a competitive advantage

Community based organisations

 They are established to assist the community with job creation, social
economic development, and becoming self-sufficient
 They are local organisations that operate in the community to provide
social services with aim of social upliftment
 Non-governmental organisations
 Non-governmental organisations are non-profit organisations that
operate separately from the government
 They are established to fulfil important needs in the community by
addressing some social economic issues

Regulators
 Regulators or government bodies that make rules and regulations to
control the activities of businesses
 These rules and regulations are put in place to ensure that businesses
do not exploit their customers or employees

Unions
 Unions are established bodies that protect the interests of workers
 They have the right to call for industrial actions such as strikes or go
slows if their demands are not met by organisations or the
government

Strategic allies
 Strategic allies or businesses that combine their resources to
undertake a project that will benefit all of them
 They may share their expertise and information to benefit all their
members

Macro environment
The macro environment forms part of the external environment, and the
business has no control or influence over the macro environment

Components of the macro environment

 Physical environment
 Economic environment
 Cultural environment
 Social environment
 Demographic environment
 Technological environment
 Legal environment
 Political environment
 International/ global environment
 Institutional environment

PESTLE environment stands for the following:

 Political environment
 Economic environment
 Social environment
 Technological environment
 Legal environment
  Environmental

Political environment
 The political environment represents the government and its
institutions, and the public and private stakeholders that influence
businesses
 The political environment refers to the actions taken by the
government that affixed daily business activities

Economic environment
 The economic environment refers to all the external economic
factors that influence buying habits of consumers and businesses
 It, therefore, affects the performance of businesses who

Social environment
 Social aspects include changes in cultural and demographics
 The cultural environment affecting businesses includes religion,
customs, and traditions that influence actions and decisions

Technological environment
 It refers to external factors in technology that impact business
operations
 Changes in technology affect how businesses are made

Legal environment
 The legal environment refers to the laws passed by the government,
which affect businesses
 No legal elements refer to rules that businesses must adhere to, and
all other legal aspects businesses should consider
 Contemporary socioeconomic issues

Meaning of socio-economic issues

 They are aspects that have a negative effect on the individual, communities and
business.
 These are societal and economic factors in the macro environment.

Why socio-economic issues pose a challenge to businesses

 Businesses may not be well supported by customers because of their limited
disposable income.
 Absenteeism of employees affected by HIV/AIDS will result in a decrease in
productivity of the business
 Counterfeiting, bootlegging and crime may lead to a loss of profit for businesses

Inequality
 Some people have more money than others and can therefore access education,
basic healthcare and social services
 Inequality contributes to poverty in the country

Poverty
 Poverty is defined as the lack of resources to meet basic human needs
 This leads to poverty in families and societies
 If people have low levels of education and have limited skills, then they only qualify
for low level jobs

The impact of inequality and poverty on businesses

 Limited customer spending means that businesses record lower sales figures
 Businesses may not grow because of reduced sales figures
 Businesses are pressurised by the media attention to poverty into investing in poor
communities

Meaning of inclusivity
 It means that everyone should have access to equal opportunities irrespective of
their race, gender, sexual orientation, disabilities, religion and education
 It aims to address discrimination of persons based on gender and disability
Purpose of inclusivity in the workplace
 The goal of inclusivity is to ensure that the business implements fair labour practices
 It seeks to redress the inequalities of the past
 Ensures that the workforce is representative of the demographics of the country

Meaning of unemployment and unproductive labour forces

Unemployment refers to an economic situation, in which economically active people are willing and
able to work but are unable to find unemployment

The impact of unemployment and unproductive labour forces on businesses

 Unemployment often leads to other socio-economic issues such as crime and
poverty
 An increase in unemployment rate will affect sales and profitability of the business

The negative impact of HIV/AIDS on businesses

 Reduced productivity of affected employees
 Increased employee absenteeism because of medical appointments for
doctor or clinic visits
 Trained and experienced employees often die due to complications
caused by HIV before they can grow old

Types of gambling
1. Pyramid schemes
2. Illegal gambling
3. Money laundering

Pyramid schemes
 Pyramid schemes refer to businesses that may potentially yield high revenues for
people who invest their money in them
 Individuals invest more and more money, but often only the individuals at the top of
the pyramid receive large sums of money

Illegal gambling
 Illegal gambling is when unlicensed businesses offer gambling to the public
  Illegal gambling activities can also take place in poor communities such as when
people place with die (dices) on street corner for money, or when individuals
frequent unlicensed casinos.

Money laundering
 Money laundering is the process by which unlawful profits from crimes are invested
in invalid businesses to cover up their wrongdoing
 The source of money is camouflaged and made to seem as if it was lawfully gained

Impact of gambling on businesses

 Employees will gamble themselves into financial difficulties may be absent from
work regularly
 The consequences of regular gambling may disrupt the work setting due to staff
absenteeism and potentially unproductive employees

Socio-economic issue Meaning Impact on businesses

Counterfeiting The process of fraudulently Due to the circulation of
manufacturing, altering, or counterfeited products a
distributing a product that is decline in sales may be
of lesser value than the experienced by businesses
original product.
Legal costs will increase
businesses expenses if illegal
action is taken against those
involved in illegal activities.
Bootlegging Bootlegging refers to Businesses will be affected
unlawfully manufacturing negatively due to the loss of
fake goods for sale. sales.

The business will sell fewer

authentic products, which
will lead to lower profits for
the business.
Strikes A strike occurs when Strikes will result in
employees refuse to work, production losses and
usually due to petition a reduction in sales. Business
specific issue. may be forced to close in
A strike is usually the result operation of a strike.
of a dispute, such as
employee grievances or the Businesses may incur
 fear of being retrenched in damages to their premises
the workplace. due to protest or protest
actions.
Political disturbance Political disturbance occurs Businesses may not be able
when groups of people to operate at full capacity
voice their objection to due to high numbers of
show their disapproval of absent staff.
the handling of different
situations in the country. Employees may not be able
to travel to work due to
protest action and this may
result in lower productivity in
the business.

Violence Violence may be defined as Violence has a negative

an extreme physical force effect on the workforce as it
exercised over someone to impact on the safety and
cause severe injury and security of the workers in
grievous bodily harm or the workplace.
damage to property.
The trauma that workers
experience could result in a
lack of productivity of the
employee.
Crime Crime is any prohibited Staff productivity is reduced
activity that is punishable by at work.
law. Crime refers to the loss
of goods due to theft, Employees may require
corruption, abuse, counselling after the
hijackings and burglaries. occurrence of an incident
resulting in higher costs for
the business.

Business Sectors
Key concepts

Primary sector Deals with the extraction of raw materials and natural resources.
Secondary sector Involves the process of transforming raw materials into finished or
unfinished products.
Tertiary sector Refers to industries that offer services to other businesses and
consumers.
Formal sector Businesses in the formal sector are registered businesses who pay
taxes to the government.
Informal sector Refer to businesses that are not registered and do not pay tax on the
profits of the business.
Private sector Consists of businesses owned, managed and controlled by
individuals and organisations seeking to generate profit.
Public sector Is the part of the economy where goods and services are provided
by the government or local authorities carrying out the task
instead.
Registered business In South Africa, businesses must register with the South Africa
Revenue Service (SARS) for purposes of tax.

Meaning of the primary, secondary and tertiary sectors

1.1.1 The Primary sector

 The primary sector provides raw materials to businesses in the other sectors.

1.1.2 The secondary sector

 This business sector is involved in transforming raw materials into semi-
finished or final goods, usually by means of factories.
 This sector is also referred to as the manufacturing sector.

1.1.3 The tertiary sector

 This sector is involved in wholesaling and retailing of semi-final or final goods.
 This sector renders different types of services in the economy.
1.2 Examples of each sector

1.2.1 The primary sector

 Fish, diamonds, coal, livestock, fruit.
 Mining, fishing, farming, agriculture.

1.2.2 The secondary sector

  Manufacturing, construction, food processing.

1.2.3 The tertiary sector

 Retailing, wholesaling, banking, insurance.

The relationship between these sectors

 The sectors work together to create an economic chain of production.
 The primary sector also depends on the secondary sector for manufactured goods
such as machinery and equipment.
 The primary sector and secondary sector also depends on the tertiary sector to
provide services such as insurance and transport.

The meaning of the formal and informal sectors

Formal sector Informal sector

Businesses in the formal sector are Businesses in the informal sector are not
registered and pay taxes. registered with CIPC and do not pay tax on
profits to SARS.
These businesses are required to register The informal sector refers to those workers
with the Companies and Intellectual who are self-employed.
Property Commission (CIPC).

The importance of the formal and informal sector

The importance of the formal sector

 Business activities are included in the GDP figures of the country.
 Companies pay taxes on their profits.
 People who are employed at companies pay personal income tax.

The importance of the informal sector

 Encourages entrepreneurship and self-employment.
 Provides employment opportunities for communities and contributes to property
alleviation.
 It is easy to enter this sector and serves the needs of individuals.

The difference between the formal and informal sector

 Formal sector Informal sector
Businesses in the formal sector are Businesses in the informal sector are not
registered with CIPC. registered with the CIPC.
Businesses pay tax to SARS on turnover and Businesses do not pay tax on the profits of
profit made. the business.
Formal sector activities are monitored by These businesses are not monitored by the
the government. government.

The meaning of the public and private sector

Public sector
 The public sector comprises of various business enterprises owned and managed by
the government.
 It is composed of all levels of government and government-controlled enterprises.

Private sector
 The private sector consists of business activity that is owned, financed and run by
private individuals.
 Businesses in the private sector are privately owned by sole traders.

The importance of the public and private sector

The public sector

 It provides public goods and services such as water and electricity to meet the needs
of its people.
 It improves the general standard of living of all its citizens.
 It ensures equal distribution of wealth.

The private sector

 Differs a large variety of goods and services to meet the demands of consumers.
 Gives back by uplifting the community with Corporate Social Responsibility (CSR)
programs.
 Provides job opportunities for people who have different skills in all sector
 Provides employment and contributes to tax revenues.
The difference between the public and private sectors

Public sector Private sector

It is the part of the economy where goods These businesses are privately owned and
and services of public interest are provided provide goods and services with the aim of
by the government. making a profit.
These companies should ensure the equal They provide opportunities for other
distribution of wealth among the rich and businesses to create wealth for growth.
poor.
They provide public goods and services They offer a large variety of goods and
such as water and electricity to meet the services with the aim of making a profit.
needs of its people.