BUSINESS STUDIES

GRADE 10

MACRO ENVIRONMENT
Introduction
● The macro environment is the environment directly outside the market
environment. It is made up of many components outside the business, over
which the business has no control.
● These components often present the business with challenges, because they
are always changing and developing.

Physical/natural environment
● The physical environment means the things that we can sense with our five
senses; that we can touch or feel, see, hear, smell and taste. So the physical
environment of a business includes natural elements and also human-made
structures (sometimes called the built environment); for example:
○ the landscape, site and the buildings from which the business
operates
○ local climate and weather conditions such as very dry or very wet
conditions, hot and cold, wind, and so on
○ availability, cost and sustainability of resources such as water and
electricity
○ availability and accessibility of infrastructure such as road, rail and air
transport, ports, storage and telecommunication
○ environmental factors such as any pollution of air, land, water or
noise pollution; costs of preventing pollution through recycling and
waste control. Businesses that cause pollution can get heavy fines.
● Certain natural disasters such as earthquakes and volcanic eruptions cannot
be prevented. All that people can do is to try to escape in time.
● However, the damage from most natural disasters can be limited or even
prevented by careful advance planning, prevention measures and common
sense.
● For example, keep firebreaks clear and do not light fires on windy days; do
not build within river flood plains or close to active volcanoes; use only steel-
reinforced building materials and approved designs in areas where
earthquakes are known to be a risk.

Economic environment
● The economic environment of business includes all the business and
government enterprises and organisations involved in the economy.
● The economic environment depends on the economic system of the
country. In South Africa our economic system is based mostly on free market
principles.
● The economic environment of business depends on the following factors.
Balance of payments of the country
● If a country imports more in monetary value than it exports, it results
in a negative balance of payments.
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 ● A negative balance of payments will make the rand weaker against
other currencies. This, in turn, makes imported goods more expensive
in South Africa.
● If, on the other hand, South Africa exports a higher rand value of
goods and services than it imports, we have a positive balance of
payments.
● This will make the rand stronger against other currencies, which
makes imported goods cheaper to buy. However, because a stronger
rand makes South African goods and services more expensive for
people to buy in other currencies, a strong rand makes it harder for
South African businesses to sell their exported products to buyers in
other countries
● Economies of countries move through four stages of the business
cycle:
o Stage 1: Expansion
o Stage 2: Peak
o Stage 3: Recovery
o Stage 4: Recession
Income distribution
● The income distribution between rich, middle-class and poor people
in a country has an impact on business because it affects the size of
the market for different types of goods and services and the buying
power of consumers.
● If many people are poor and only a few are very rich, the country will
have only. a small market for luxury goods and most people will
barely be able to afford basics.
● In some countries, citizens are either extremely wealthy or extremely
poor, with few people qualifying as middle-class.
● In such countries there is only a small market for the wide range of
more general consumer goods and services which are usually sold to
middle class households.
2.2.1. Redistribution of income:
● Transfer payments or the redistribution of income via social grants
(such as old-age pension, disability grants and child support grants),
enables individuals in the lower income brackets to buy products and
services they otherwise would not be able to afford.
● The market for such items therefore grows and the businesses which
supply them will do better.
2.2.2. Unemployment:
● Higher unemployment leads to fewer products and services
● In return potential workers are not earning income.
● This leads to a smaller market to sell products and services.

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2.2.3. HIV/Aids:
● Many economically active people are infected with HIV/Aids.
● Skilled people become ill.
● Illness causes absenteeism from work and therefore lower
productivity.
● Aids lead to death of skilled people.
● Others need to be trained for their positions which lead to higher
training costs.
● The productivity of the country as a whole suffers.
2.2.4. Other economic factors
● Inflation
● Tax

Social, cultural and demographic environment

● The social and cultural aspects of the macro-environment cover the
customs, religion, languages, lifestyles and values of the society in which a
business operates. While these may restrict businesses in certain ways at
times, they may also open up business opportunities. For example, a
butchery in a neighborhood where there are many devout Muslim or Jewish
people cannot sell pork products or it will get no customers. However, in the
same neighborhood there will be a market for goods such as halaal
products, headscarves, or items particular to the Jewish faith and culture.
● The demographics of a society determine which types of businesses will do
well and what the businesses should offer. Demographics refers to
population characteristics such as the numbers in various age groups;
gender balance (percentage of men/boys compared to women/girls;
education levels; skills and racial groups in the society. For example, a
community with many young children can support more shops which sell
toys or children’s clothes. It also needs more schools. You would also expect
to find more nursery schools and day-care centers where there are many
young children.

Technological environment
● Technology refers to all the ways in which people use tools or machines of
any kind to make work or other activities easier, quicker or more effective.
● Businesses use technology in production processes (for example, robots in
factories), to market products and services (for example, television and radio
advertising), and to manage finances and perform administrative and
managerial functions (think of banking and all the uses of computers in
offices).
Technology changes business
● As technology changes, it affects all aspects of businesses: not many
hand tools are used to make furniture or for large-scale agriculture

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 these days; computers have replaced manual and electric typewriters;
fresh produce can be sent by air to sell in faraway countries the next
day; stock control and ordering can take place automatically as
quantities and details of sold goods are recorded on computerized
shop tills, and so on.
Online shopping
● The demand for a business’ goods or services may change when
technology changes the lifestyles and buying patterns of
consumers.
● Online shopping via the internet has dramatically expanded the
potential customer base of certain businesses and also created new
opportunities to do business via the internet.
● At the same time, the availability of online shopping has decreased
demand for some products from conventional street stores and
service businesses.
New materials
● Technological progress often produces new materials to replace
harmful products from the market.
● For example, new insulation materials have replaced asbestos
(which gave off dangerous fibres that caused lung disease), and the
development of biological insect control measures has helped to
reduce the use of hazardous chemicals such as DDT that end up in
the food chain and can lead to animals and birds dying.
Bar codes
● Electronic point of sale (EPOS) data capturing in retail outlets
supplies information which marketing can use. The laser checkout
reads a bar code on the product and people responsible for
ordering stock for the business then analyse sales and re-order
stock as needed. At the same time, customers get a printed slip
giving details of what they bought on which date and how much
they paid.
● This meant that manufacturers of most consumer goods,
particularly groceries, had to add bar codes on their products.
● Changes in the technological environment affect the kinds of
products and services that businesses produce, the ways in which
they design, manufacture, and market them and manage stock
control.
Robotics technology
● Factory robotics technology has changed the production processes
in many factories.
● The use of automated equipment (also called ‘robots’) has led to less
employment opportunities for some categories of jobs (for example,

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 in vehicle assembly plants and manufacturing production lines), but
in many cases robots have replaced people in jobs that were
dangerous or repetitive.
● Also, the higher levels of technology and increased production and
efficiency often create new opportunities for more skilled workers.
Computer technology in the office
● Today people use personal computers in most offices. This means
that jobs such as typists do not exist anymore, but other jobs filled
the gap: we now have data capturers who ‘capture’ data of various
sorts (figures, letters, reports, books, advertisements, photographs
and other graphics) into a computer.
● Many people, who in past times employed secretaries to record their
ideas, now do their work themselves on computers, and thus record
it directly in an electronic format that can be manipulated and
emailed to communicate it to others.
● Accountants, designers, photographers, musicians, engineers and
writers can all develop and record their ideas on computers. Entire
educational courses are now run using computers to communicate
between lecturers or teachers and students.
● Postal services, faxes (facsimiles), messengers and couriers have all in
various degrees been replaced by emailing documents. So has the
need for people to sit in boardrooms or fly across the globe and meet
face to face for meetings – by using videocams and computers,
people hold ‘meetings’ without moving from their offices or homes.
● However, all these computers, together with the programmes used
to run them, need the support of various types of technicians to keep
them running smoothly.

Political environment
● A good relationship between a stable government and business creates a
positive political environment.
● An unstable government and poor relationship between the government
and the business creates a negative political environment.
● Some political decisions that influence businesses are:
○ How the government levies tax
○ How the government spends tax
○ Interest rates and inflation
● Other political factors are strike action, legal and illegal immigration, civil
revolution and terrorism.
● The political party in power can influence legal, economic and social
developments.

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Legal environment
● Laws are rules passed by parliament to control the behavior of a country’s
citizens
● Legislation is enforced to exercise control. This is done through the legal
system and courts.
● South African courts are divided into three categories which includes
Superior Courts, Magistrates' Courts and Special Courts.
● The legal system through the courts, has jurisdiction to oversee
employment, tax, trademark rights, patent rights, intellectual property
rights, sale of goods between sellers and buyer, property rights and
ownership rights and consumerism
● Some important Acts (rules) that are passed by parliament to control
behavior and to protect citizens in the country are:
● OHSA (1993): Occupational Health and Safety Act lays down rules for
safety in the business, especially for factories and helps to reduce the
risk of hazards and poor health.
● BCEA (1997): Basic Conditions of Employment Act stipulates aspects
such as working hours, leave and minimum wages.
● Companies Act (2008): Different forms of ownership and their
requirements are specified
● Consumer Protection Act (2008): The rights of consumers are made
clear.
● EEA (1998): Employment Equity Act sets standards for equal
treatment regarding race, culture, gender, language, people with
disabilities.
● SDA (1998): Skills development Act requires equal opportunities for
further training in the workplace.
● LRA (1995): Labour Relations Act sets a framework for negotiation
between the employer (boss) and the employee (worker).

International environment
● International events can have an impact on the economy, for example:
○ Political unrest in Zimbabwe leads to illegal immigrants moving to
South Africa, pushing up local unemployment.
○ Events that take place outside the borders of South Africa can impact
local businesses i.e. Earthquakes elsewhere, such as in Japan, cause a
shortage or imported goods.
○ Policies control South African imports and exports.
○ A fluctuating demand for export commodities, such as gold,
diamonds, platinum, other minerals, machinery and equipment.
○ Fluctuating prices of import commodities such as machinery and
equipment, chemicals, petroleum, scientific instruments and food
from mainly Germany, China, USA, Saudi Arabia, Japan and the UK.

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Institutional environment
● This environment refers to the official and non-official procedures to do
business and the institutions involved in this procedure.
● Starting a company (company formation procedure):
○ Reserving a name and registration of a company with the Registrar
of Companies.
○ Registering with SARS for income tax, VAT (value added tax) and
PAYE (pay as you earn tax for employees).
○ Registering with the Department of Labor for UIF (unemployment
insurance fund) and workman's compensation fund.
● Examples of non-official procedures:
○ getting to know customs and traditions of people in the area of trade
○ belonging to a chamber of commerce.