Describe the business environment in the city or country that you live in.

You should
explain whether the business environment encourages or inhibits business activity.
Justify your view with the use of examples. In addition, you should examine four
different industries and describe the type of market structure that exists in each of these
industries. You should explain whether there is much or little competition and why?
Based on your answers above, discuss the effects that the above business environment
has on consumers and society in general.

INTRODUCTION

A company's operating status is influenced by a combination of internal and external factors.

Clients and suppliers; competition and owners; technological advancements; laws and
government actions; and market, social, and economic trends are all part of the business
environment. Business environment has two major types which include internal and external
business environment. Internal business environment incorporates supplier of inputs,
customers, marketing intermediaries, competition, the general public etc. The external
environment includes economic, social and cultural, political and legal, technological,
demographic and natural environment etc. The business environment has an impact on the
overall performance of an organization, amount of competition, price of goods and services,
profits and losses and economic growth as a whole (Korcsmáros, & Šimova, (2018).

MACRO-BUSINESS ENVIRONMENT FACTORS

Economic environment in Zimbabwe

Zimbabwe's gross domestic product (GDP) was expected to fall by 8% for the second year in
a row in 2020, as COVID-19 halts economic recovery (Mashapure, Hamunakwadi,
Chavunduka, & Chikazhe, 2021). Manufacturing, non-mineral exports, hospitality, trade,
vehicle imports, and transportation all suffered as a result of the operating restrictions.
Manufacturing and service firm sales in July 2020 were around half of what they were in July
2019. After mobility limitations were eased, supply-side shocks subsided, but domestic
demand remained weak in the face of triple-digit inflation, significant unemployment, and
income losses. Import demand increased as a result of several years of drought, which needed
additional maize and electricity imports, as well as new needs for lab equipment and medical
supplies as a result of the epidemic. Due to significant remittance inflows and a trade surplus,
the current account was in surplus.
To keep price volatility in check, fiscal and monetary policy responses to the pandemic have
been constrained (Gohori, & van der Merwe, 2021). Consumer prices were extremely
unpredictable during this time, and the general public's purchasing appetite declined,
particularly for consumable products, resulting in a drop in retail income for the retail
industry. Despite wage pressures and the necessity for more spending to respond to the
pandemic and the growing number of poor, fiscal policy remained tight. In 2020, the fiscal
balance shifted to a minor deficit of 1.3 percent of GDP. The Reserve Bank of Zimbabwe
implemented the reserve money targeting framework, floated the currency rate, and launched
a foreign auction in June 2020. These actions served to stabilize the parallel market exchange
rate and lower the parallel market premium, albeit the parallel market premium remained
distortive. As a result, from an all-time high of 838 percent in July 2020, inflation fell to 322
percent in February 2021.

The presence of the COVID-19 restrictions disadvantaged companies which dwell on imports
such as Toyota Zimbabwe (Nyanga, & Zirima, 2020). Toyota Zimbabwe imports cars for
resale from South Africa and other international markets such as Japan. Zimbabwe’s retail
sector was seriously hampered post to COVID-19 restrictions and this reduced competition in
the retail sector since the supply of final products such was cars was reduced.

For the past decade, Zimbabwe's manufacturing industry has decreased in tandem with the
country's economic activity, owing to a variety of causes, including a hyperinflationary
climate that peaked at 231 million percent in 2008. (CZI Survey, 2009). A lack of working
capital support, a shrinking domestic market, high utility tariffs, higher than regional tax
structures, high wages, credit and liquidity crunch, and a variety of supply-side bottlenecks,
including fuel, electric power, imported inputs, and skills, characterized the business
environment during this time. As a result of a likely shift in spending habits in favour of
cheaper imported goods, demand for local products has also decreased.

Legal environment

The Zimbabwean government raised the intermediated financial transactions tax from USD

0.05 to USD 0.02 per dollar traded (Tarupiwa, 2020). The impact of the new financial
transaction tax on consumption is examined in a Grant Thornton article (that is, demand and
supply). The tax affects all parties in the supply chain, which means that each supplier must
pay the tax on every electronic money transfer he or she makes. The tax raises the costs of
suppliers, and suppliers along the supply chain will wish to offset the higher manufacturing
and administrative costs by passing the tax on to ultimate customers in order to keep their
profits. The cumulative effect of all of these incremental increases along the supply chain is
an exponential increase in total costs. The percentage increase in tax rate on the final
consumer would be 32 700 percent, as shown in the table below (based on $500 worth of
items).

According to Simatele (2021), the implementation of the 2% tax on intermediated financial

transactions had the effect of reversing all of the government's efforts to promote a paperless
economy and financial inclusion, since traders are striving to avoid paying the 2% tax by
being paid in cash. As most taxpayers want to avoid paying taxes, they are turning to the
informal sector and interact in cash. Most traders and businesses are keeping their hard-
earned money in cash and utilize it to buy raw materials and commodities than deposit it in a
bank, where they would be taxed every time, they make a transaction or payment.

The intermediate money transfer tax is discouraging the general public to put money in the
bank and to utilise other mobile money transfer mechanism such as Ecocash (Simatele &
Mbedzi, 2021). This initiative is a disadvantage to the banking sector for example, Standard
Chartered Bank because the more people are repellent to the banking services such as making
deposits, the more the banks lose profits. The intermediate money transfer tax makes the
banking sector adopt new survival strategies to allow people to retain lost customers. These
strategies include an increase in the offering of banking products such as loans to retain lost
customers thus encouraging the general public to use banks and the banking sector is
becoming competitive.

Political environment

The economy of Zimbabwe has become a topic of national debate. The economic crisis is
rooted in an insecure political environment that stretches from former President Robert
Mugabe's tyrannical rule to the new political administration, where comparisons to the
previous administration in terms of change have failed to persuade not only the international
community, but also local investors (Matingwina, 2019). High currency exchange rates,
consumers stockpiling, and business viability have all contributed to a lack of confidence in
the market. Political variables are government rules that have a good or negative impact on
business operations, and on the negative side, they can add a risk element that causes the
business to lose money. Zimbabwe's chances of achieving a genuine economic turnaround are
dependent on the country's ability to resolve its current political issues.
Because to Zimbabwe's political instability, the business environment has become less
hospitable, resulting in a shortage of foreign direct investment (Chigumira, 2018). Despite the
fact that the new political administration has taken its “Zimbabwe is open for business”
charm offensive to the international community, the country's political instability, as
evidenced by disputed election results, protests, and security agents' crackdown on civilians,
has proven to be a major impediment to the country's prospects as a desirable investment
destination. Governments wield enormous power over businesses, and there is often little that
businesses can do about it. Zimbabwe has been accused of becoming a "command economy,"
with the government's hand obvious in practically every area of the economy, including the
most recent metropolitan mass transportation system.

President Emmerson Mnangagwa's government, which took office in November 2017 after
previous President Robert Mugabe resigned, is still dealing with political difficulties and
social turmoil. Thousands flocked to the streets in protest on August 1 after the government
postponed the publication of official presidential election results held on July 30, 2018
(Shonhe, 2018). Six people were killed when the army used live bullets to disperse the
demonstration. A seventh person died as a result of injuries sustained during the
demonstration. Increasing public revelations of high-level corruption, such as the high-profile
scandals surrounding Zimbabwe's COVID-19 response and the energy sector, have stoked
public outrage, and the government has responded with increasingly vitriolic rhetoric, arrests,
denial of bail, and harassment directed at members of the opposition political party,
journalists reporting on corruption, and other critics. The level of political uncertainty has
remained high.

Street protests which happened in 2018 led to property destruction, theft of retail traders’
stock leading to loss of revenue and economic loss at large. In addition to economic losses
which were incurred by the Zimbabwean nation and the loss of lives of street protesters
caused socio-economic problems whereby family members of the deceased suffered
emotional loss.

Natural environment

Heavy winds and continuous rain are typical characteristics of cyclones. These are to blame
for the bodily harm they cause when they pass through. The storm destroyed power lines,
buildings, roads, communication lines, water and sanitation systems, especially in
Chimanimani and Chipinge. Boulders rolled down slopes, and structures were inundated in
water or carried away, according to reports. In a few of hours, all business-related activities
were ceased. In every context, well-built infrastructure is a critical enabler for business
activity, and many sections in Chimanimani have been left desolate.

The impacted areas are located in the Eastern Highlands, a popular tourist destination in the
country. Many people's lives are dependent on tourism-related businesses and activities.
Unfortunately, as of now, accommodation facilities, road networks, and other infrastructure
have been damaged, not to mention the numerous individuals who have died, been hurt, or
been displaced. Aside from all of these sad events, returning to routine will take some time.
Even in locations where the infrastructure is fully intact, there may be a drop in visitor
arrivals as a result of the cyclone's unfavourable image. There are still reports that the worst
may not yet be over. As a result, it's regrettable to note that tourism, which is a major source
of revenue in the afflicted areas, has suffered a setback.

It alluded to the destruction of infrastructure, which is critical to businesses earlier. Prior

cyclone surveys have showed that merchants are frequently the hardest damaged locally or
regionally. It is estimated that it will take at least 5 years for affected merchants to regain
their footing. There was no doubt a large number of small to medium enterprises (SMEs),
mostly informal, in the impacted areas. It's distressing to watch these businesses' efforts
swept away in the flash of an eye, especially since they normally operate with constrained
capital flows. We must also remember those who were fortunate enough to have their
company locations unaffected. They are currently unable to operate due to the current
scenario, which has pushed them to do so for several days. All of this corresponds to revenue
losses as well as losses in food-related industries owing to deterioration or spoilage.

The impacted areas are also known to be densely populated by farmers — the majority of the
affected areas are rural. The majority of the people who live in these areas rely on agriculture
for their livelihood. Farming operations such as coffee, tea, dairy, and others, which provide
employment, income, and subsistence, have been severely impacted. This could have
ramifications for the entire country, as some of the agricultural produce is normally for
national consumption. Again, losses have been suffered as a result of animal deaths, crop
degradation, population displacement, and infrastructure destruction.

The cyclone forced the closure of Mozambique's port. Several stories surfaced claiming that
truck drivers were directed by their supervisors to park their trucks for days. This means that
a large amount of inbound cargo destined for certain local firms (or vice versa) could be
stranded for days. Most local firms must have suffered significant losses as a result of this.
Even informal cross-border traders were affected since they were unable to cross the border.
With all of this in mind, it goes without saying that many people have suffered financial
losses.

Technological environment

Several studies have emphasized the importance of technology and innovation, which has
garnered widespread attention at both the national and global levels. The United Nations
Economic and Social Council on Science, Technology, and Innovation, for example, has
emphasized the importance of science, technology, and innovation as critical tools for
achieving millennium development goals through the application of new and existing
scientific and technological knowledge, as well as related institutional changes (United
Nations Economic and Social Council, undated).

At the local level, the Government of Zimbabwe has prioritized science, technology, and
innovation as key drivers of competitive and vibrant industrial growth through the
development of new and competitive processes and products, as outlined in the Industrial
Development Policy, the Science, Technology, and Innovation Policy, and the Zimbabwe
Nanotechnology Statement (Chanza, Mugano & Bandauko, 2014).

Global technological progress is causing industry and commerce systems to evolve towards
more complex operations. Competition today comes from all over the world, and it is based
on an inexplicable cornucopia of new technology, greater talents, and sophisticated supply-
chain and distribution strategies, according to Lall (1994). Producers must benchmark and
adopt newer technologies and management methods that are at or near ‘best practice' in order
to thrive. Technology is causing industrial enterprises to become less vertically integrated and
more specialized. The scenario necessitates a concentrated effort on policy shifts and
paradigm shifts to help countries transition from a low-growth and technology path to a
higher-growth and technological path.

Social environment

Zimbabwe's socioeconomic and humanitarian situation has deteriorated dramatically in the

recent decade, from 2000 to 2010. Food production and security have been harmed by
shortages of basic food items and erratic rainfall patterns over the years. The economy's
recession was accompanied by an ineffective health-care delivery system, water shortages,
and inadequate sanitation, resulting in Zimbabwe's worst cholera outbreak in many years.
These difficulties were exacerbated by the terrible effects of the HIV and AIDS pandemic on
Zimbabwe's effective population.

Unemployment is at an all-time high, with almost 90% of the population unemployed. Many
people lost their employment as a result of the economic downturn, and they joined the skills
migration to the Diasporas. As a result, income disparities have worsened, and the Gini
Coefficient is now estimated to be 0.57. (World Bank, 1998). Over 62 percent of
consumption is accounted for by the top 20% of the population, while just 4% is accounted
for by the bottom 20%. Zimbabwe has a population of about 13 million people and the
highest literacy rate in Africa at 92 percent.

MICRO-BUSINESS ENVIRONMENT FACTORS

Competition

Globalisation and market liberalisation have become realities in Zimbabwe, and they present
opportunities as well as risks to the industrial industry. In a worldwide economic
environment, Zimbabwean businesses are facing rising competition and are failing to
compete on both the export and import fronts. “There are tremendous pressures on firms to
increase their operational efficiency for enhanced competitiveness and overall business
performance (Damiyano, Muchabaiwa, Mushanyuri & Chikomba, 2012). Competition from
foreign products, new product introduction by competitors, rapid technological developments
and shorter product life cycles, unanticipated customer shifts, and advances in manufacturing
and information technology are all examples of such pressures.

According to Damiyano et al. (2012), in the new economic environment, the firm must
produce a dependable product or service on schedule and ensure that consumer expectations
are met. To meet these obstacles and take advantage of the opportunities that come with
globalisation, Zimbabwean manufacturing enterprises must improve their operational
efficiency and management practices to become internationally competitive. Furthermore, it
is critical that Zimbabwe's domestic policies establish an environment that allows local
enterprises to grow and improve their manufacturing superiority in order to compete on a
global scale.

Zimbabwe's economy is at its crossroads, where it may now recover from a decade of
contraction and reclaim its former regional competitiveness. In the new economic context of
a more liberal international and domestic environment, the competitiveness of the local
manufacturing sector will be vital to its long-term success and growth. A globally
competitive Zimbabwean manufacturing sector will produce and contribute more to the
development of a more sustainable and stable economy, which will attract both foreign and
domestic investment.
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