THE

BUSINESS ENVIRONMENT
Study Unit 2

LECTURE OUTLINE
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2
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INTRODUCTION
COMPONENTS OF THE BUSINESS ENVIRONMENT
INTERNAL (MICRO) BUSINESS ENVIRONMENT
EXTERNAL MARKET (TASK) ENVIRONMENT
MACRO (MEGA) BUSINESS ENVIRONMENT
BUSINESS ENVIRONMENTS OF FIRMS OPEN SYSTEMS
TYPES OF MARKETS IN THE MARKET ENVIRONMENT
ENVIRONMENTAL SCANNING
ANALYSIS OF THE BUSINESS ENVIRONMENT (SWOTs)
VARIABLES IN THE BUSINESS ENVIRONMENT
REVIEW OF THE STUDY UNIT
APPLICATION EXERCISES
2

INTRODUCTION
Business enterprises cannot function in isolation
Open systems interact with their environment
Business enterprises exist in and are surrounded by an
environment the business or organisational environment
Society and business enterprises are mutually dependent
Business enterprises satisfy societal needs
Relationship between society and business enterprises takes place
in a changing environment

COMPONENTS OF THE BUSINESS ENVIRONMENT

Different environmental variables exist internally and externally to
the business enterprise
Environmental variables have a positive or negative influence on the
enterprise
Business environment consists of two sub-environments:
Internal (micro) environment
External environment
Market environment
Macro environment
Mutual relationships exist between these environments

ENVIRONMENTAL SCANNING
Identification and forecasting phenomena in the environment
Ongoing environmental scanning is essential for strategy
formulation
Enterprises continuously engage in identifying and forecasting
opportunities and threats
Enterprises need to proactively or reactively respond to changing
conditions in the environment
Various sources of information are available to assist with scanning

ANALYSIS OF THE BUSINESS ENVIRONMENT

SWOTs analysis
Environmental conditions may be favourable or unfavourable:
Opportunity
Represents favourable (positive) conditions in
micro, market, macro environments
Advantageous to firm

ANALYSIS OF THE BUSINESS ENVIRONMENT

SWOTs
Threat
Represents unfavourable (negative) conditions in
micro, market, macro environments
Detrimental to firm