Business Environments- interrelationships

INTERRELATIONSHIP BETWEEN THE THREE BUSINESS ENVIRONMENTS

(Also read topic 4 from the study guide posted on the D6)

“Interrelated: they compliment or depend on each other.”

Firstly, here is a summary of the three business environments.

·         The components of each environment are interrelated

·         The three business environments are also interrelated to each other.

Each of the three environments influences one another. The micro-environment influences the market environment through its strategies. In return the micro-environment is influenced by the market environment, for example competitors cutting prices or change in consumer behaviour.

The macro environment influences the business indirectly through the market environment such as effect of tax or recession on consumer spending.

The macro environment effects the business indirectly through interest rates on loans or legislation (New Consumer Act, New Companies Act …)

The business has little to no control over the macro environment.

Direct influence of management functions on each other

Examples are:

·         If the purchasing department does not purchase the materials needed to manufacture a product or service at the best possible price, the marketing department will not be able to sell it at a good price.

·         General management is responsible for running the business. If they don't motivate employees, production and profit will suffer.

 

 

Influence of the other factors of the micro environment on each other

·         Organisational culture: How employees are treated by management and how they treat each other establishes the organisational culture of the business. A positive organisational culture will lead to a higher level of production, leading to increased profits.

·         Mission, vision and objectives: This describes what the business wants to do. If the mission, vision, goals and objectives are not clear, management will not be able to plan or organise properly. All other business functions will not know what to do.

·         Resources: Resources include human resources, equipment, capital and raw materials. A problem with any of the resources will influence the business. Increase in wages, prices of equipment and raw materials are examples of problems which the business may face.

 

Interrelatedness between components of the market environment

The various components of the market environment also influence one another directly, for example, your supplier might also supply goods to your competitor at a lower price than what they supply at to you.

·         Internal business and consumers: The behaviour of the consumer will influence the micro environment to a large extent. As the buying power of consumers decreases, the business will have to put marketing strategies in place to attract consumers.

·         Internal business and suppliers: If a supplier goes out of business it can have a serious effect on the business. It will have to find a new supplier, willing to supply at the same price. This puts strain on the purchasing department.

·         Internal business and intermediaries: If an intermediary negotiates a new market in another country it will have an impact on a few departments (purchasing, finance, marketing and administration) in the business because the production of the company will have to increase.

·         Internal business and competitors: Competitors bringing a new product onto the market can cause business sales to drop. Competitors dropping their prices because they found a cheaper supplier will hinder products from being sold.

 

 

Lesson Files
Lesson Questions

Answer the questions here on Apollo i.e. 1.1.  business environment

                                                                       1.2. Suppliers

Question 1: One word answers

Write one word or term for the following:

1.1 the internal environment of the business (2)

1.2 the social environment forms a part of this environment (2)

1.3 the personality of the organisation (2)

1.4 staff, equipment, capital and raw materials (2)

1.5 businesses selling more or less the same product (2)

1.6 businesses selling raw materials to your organisation (2)

1.7 people who purchase products from the business (2)

1.8 the environment containing cell phones, emails, MP4 players, Skype, Twitter and

Facebook (2)

1.9 a period of economic decline where income tends to fall and poverty and

unemployment increase (2)

1.10 fluctuating (changing) currencies form a part of this environment. (2)

 

Question 2: Short questions

2.1 Discuss a challenge in the business functions below and explain how the challenge

will impact on another business function: (12)

· marketing

· financial

· purchasing

2.2 Discuss how a wage increase for employees will influence the rest of the business?

(6)

2.3 Olwethu Cele started businesses that sell frames of all sizes. Explain the implication

of a supplier selling goods to a competitor at a lower price than to Olwethu's

business. (4)

2.4 Explain how a business can influence its consumers. (3)

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