ENVIRONMENTS AND
SECTORS OF THE ECONOMY
BUSINESS
ENVIRONMENTS
MICRO ENVIRNONMENT
MARKET ENVIRONMENT
MACRO ENVIRONMENT
MICRO ENVIRONMENT
THE MICRO
ENVIRONMENT
CONSISTS OF:
1. THE BUSINESS FUNCTIONS
2. RESOURCES AVAILABLE TO
THE BUSINESS
THE BUSINESS
FUNCTIONS
1. PURCHASING
2. PRODUCTION
3. HUMAN RESOURCES
4. ADMINISTRATION
5. MARKETING
6. PUBLIC RELATIONS
7. FINANCIAL
8. GENERAL MANAGEMENT
PURCHASING
BUYING GOODS AND
SERVICES NEEDED BY
OTHER DEPARTMENTS IN
THE BUSINESS
PRODUCTION
FOR PRODUCTION TO
TAKE PLACE YOU
NEED:
CAPITAL
NATURAL RESOURCES
LABOUR
ENTREPRENEURIA
L SKILLS
PRODUCTION DIAGRAM
HUMAN
RESOURCES(HR)
1. THIS IS THE RECRUITING OF
WORKERS
2. THEY PRODUCE THE GOODS
THAT ARE NEEDED TO SELL
ADMINISTRATION
THIS IS WHEN DATA IS COLLECTED FROM
SOURCES FOR EXAMPLE BOOKS, ORAL SOURCES
ETC.
THIS DATA IS THEN PROCESSED INTO
INFORMATION FOR EXAMPLE THE INFORMATION
IS PUT INTO A GRAPH
MARKETING
THIS IS WHEN THE PRODUCT IS ADVERTISED
IT CAN BE ADVERTISED BY USING
1. BILLBOARDS
2. TV
3. RADIOS
4. NEWSPAPERS
5. ETC.
WAYS OF MARKETING
BILLBOARDS
TV
RADIOS
NEWSPAPERS
PUBLIC RELATIONS
(PR)
THIS IS WHEN THE BUSINESS
BUILDS A RELATIONSHIP WITH
THE:
• CUSTOMERS
• STAKEHOLDERS
FINANCIAL
THIS ENSURES THAT THERE
IS ENOUGH CAPITAL IN THE
BUSINESS
GENERAL MANAGEMENT
THEY CO-ORDINATE AND OVERSEE
OTHER FUNCTIONS THROUGH:
PLANNING
ORGANISING
LEADING
CONTROLLING
RESOURCES AVAILABLE
RESOURCES ARE AVAILABLE FOR THE BUSINESS
TO USE TO PRODUCE GOODS OR SERVICES
RESOURCES MAY INCLUDE:
CAPITAL
LABOUR
PHYSICAL RESOURCES (EQUIPMENT)
BUSINESS POLICY
THIS IS THE FRAMEWORK
CREATED BY THE BUSINESS
THEY ARE :
VISION
MISSION
GOALS
ORGANISATIONAL CULTURE
VISION
THIS IS THE “ROAD MAP” TO THE FUTURE OF THE
BUSINESS
IT IS DRAWN UP BY:
LOOKING AT BUSINESS HISTORY
CURRENT SITUATION OF THE BUSINESS
THE FUTURE OF THE BUSINESS
MISSION
REFRESHMENT OF VISION
IMPROVEMENT OF VISION
ELABORATES ON THE FUNCTION OF
THE BUSINESS AND ITS EXISTENCE
GOALS
YOU GET:
GOALS
OBJECTIVES
GOALS
GOALS ARE LONG
TERM
THEY ARE FUTURISTIC
ACHIEVEMENTS
OBJECTIVES
THEY ARE SHORT TERM
THEY ARE CURRENT
ACHIEVEMENTS
ORGANISATIONAL
CULTURE DIAGRAM
ORGANISATIONAL CULTURE
VALUES AND BELIEFS SHARED IN THE BUSINESS
WHEN CULTURE IS POSITIVE THERE WILL BE CO–OPERATION
AND ACHIEVEMENT
PEOPLE HAVE TO RESPECT EACH OTHERS BELIEFS IN A BUSINESS
MARKET ENVIRONMENT
THE MARKET ENVIRONMENT
CONSISTS OF:
PORTERS SIX FORCES
BUYERS
SUPPLIERS
COMPETITORS
INTERMEDIARIES
STRATEGIC ALLIANCE
MICHAEL PORTER
MICHAEL PORTER CREATED IT
HE DID IT TO ANALYSE THE INDUSTRY WITHIN WHICH A
BUSINESS OPERATES
IT IS USED IN THE COMPETITIVE MARKET TODAY
PORTER’ S SIX FORCES
MODEL
THE LEVEL OF RIVALRY IN THE MARKET
THE AVAILABILITY OF SUBSTITUTE PRODUCTS
THE THREAT OF NEW ENTRANTS
THE POWER OF SUPPLIERS
THE POWER OF BUYERS
COMPLEMENTORY PRODUCTS
LEVEL OF RIVALRY IN THE
MARKET
THE BUSINESS SHOULD FIND
OUT ALL ABOUT ITS
COMPETITORS
AVAILABILITY OF SUBSTITUTE
PRODUCTS
COMPETITORS WILL SELL THE SAME/similar
PRODUCTS that satisfies the same need/want.
FOR EXAMPLE:
WIMPY
STEERS
MCDONALDS
THE THREAT OF NEW
ENTRANTS TO THE MARKET
THE BUSINESS SHOULD TAKE NOTE OF OTHER
COMPETITORS
SMALLER COMPETITORS COULD BECOME A LARGER
THREAT IN THE FUTURE SO BARRIERS SHOULD BE
CREATERED
THE POWER OF SUPPLIERS
THEREHAS TO BE A GOOD
RELATIONSHIP BETWEEN THE
BUSINESS AND THE SUPPLIER
A STRONG
RELATIONSHIP WILL HAVE
MUTUAL BENEFITS
THE POWER OF BUYERS
(INCLUDING INTERMEDIARIES)
THE BUYER MAY BE MORE THAN THE FINAL
CONSUMER OF THE GOODS OR SERVICES
THE BUSINESS WILL SUPPLY THE GOODS TO THE
INTERMEDIARIES IN THE DISTRIBUTION CHANNEL
EXAMPLE:
AGENTS
WHOLESALERS
RETAILERS
COMPLIMENTORY PRODUCTS
Itrefers to any other product or service
that adds value to the original product,
for e.g. a complimentary product for a
burger is tomato sauce.
DISTRIBUTION CHANNEL
INTERMEDIARIE
STHEY ACT AS THE GO-
BETWEEN THE
PRODUCER AND THE
CONSUMER
STRATEGIC
ALLIANCE
THIS IS WHEN 2 OR MORE
BUSINESSES COME TOGETHER
THEY DO THIS TOEXPAND
THEIR TARGET MARKET
MACRO ENVIRONMENT
THIS IS EXTERNAL AND IT
HAS NO CONTROL
THE MACRO ENVIRONMENT
CONSISTS OF:
PESTLE
THE DIFFERENT SECTORS
PESTLE
P-POLITICAL
E-ECONOMIC
S-SOCIAL
T-TECHNOLOGICAL
L-LEGISLATION
E-ENVIRONMENTAL
PESTLE ANALYSIS
POLITICAL
This can include government
policy, political stability or instability, corruption,
foreign trade policy, tax policy, labour law,
environmental law and trade restrictions.
ECONOMIC
These issues include: assessing
potential changes to
an economy's inflation rate, taxes,
interest rates and exchange rates.
SOCIAL
Include age distribution, population growth rate,
employment levels, income statistics, education and career
trends, and religious beliefs, as well as cultural
and social conventions.
THE BUSINESS MUST PARTICIPATE IN CSR (CORPORATE
SOCIAL RESPONSIBLITY) TO SHOW PEOPLE THAT THE
BUSINESS WILL HELP AND CARES
TECHNOLOGICAL
TECHNOLOGY IS CONSTANTLY
CHANGING
MANY BUSINESSES CAN’T KEEP UP
WITH THIS CHANGE
General examples of Technological Factors affecting
business include:
The existence of 3D technology.
Computer calculation speed/power.
The ability of computers to create truly 'random' numbers.
Engine efficiency.
Internet connectivity.
Wireless charging.
Automation.
Security in cryptography.
THE EVOLUTION OF COMPUTERS
LEGISLATION
THE BUSINESS MUST FOLLOW
THE LAWS OF THE COUNTRY
THE BUSINESS MUST NOT DEAL
IN ANY ILLEGAL WORK
These are external factors which focus on the influence
that the law may have on business operation and
customer behavior.
The important distinction between legal factors and political
factors is that the latter is concerned with government
intervention in society and the economy to create growth,
while the former is concerned with government intervention
in society and the economy to maintain fairness and
wellbeing. Some examples of legal factors that you might
come across in a PESTLE analysis are as follows:
Consumer law
The legality of doing XYZ
Fraud law
Import/Export law
ENVIRONMENTAL
Weather, climate, environmental offsets and
climate change which may especially affect
industries such as tourism, farming, agriculture
and insurance.
SECTORS
YOU GET:
PUBLIC SECTORS
PRIVATE SECTORS
FORMAL SECTORS
INFORMAL SECTORS
PUBLIC SECTOR
Public sectors include public goods and
governmental services such as the military, law
enforcement, infrastructure (public roads, bridges,
tunnels, water supply, sewers, electrical grids,
telecommunications,
etc.), public transit, public education, along with
health care and those working for the government
itself
PRIVATE SECTOR
The private sector is the part
of the economy that is run by
individuals
and companies for profit and
is not state controlled.
PRIVATE COMPANY
PRIVATECOMPANIES ARE
OWNED BY ONE OR MANY
ENTREPRENEURS
THE SHARES ARE NOT FOR
SALE
SECTORS OF
INDUSTRY
YOU GET THE:
PRIMARY SECTOR
SECONDARY SECTOR
TERTIARY SECTOR
GRAPH SHOWING THE
SECTORS OF INDUSTRY
PRIMARY SECTOR
THIS IS THE EXTRACTION OF RAW
MATERIALS
PRIMARY ACTIVITYS INCLUDE:
MINING
FORESTRY
AGRICULTURE
ANIMAL HUSBANDRY
FISHING
EXAMPLE OF PRIMARY
SECTOR
WHEAT IS EXTRACTED IN FIELDS
WORKERS DO THIS IN THE AGRICULTURAL
ACTIVITY
SECONDARY SECTOR
THIS
IS WHEN THE RAW MATERIALS
ARE TRANSPORTED TO FACTORIES
HERE AT THE
FACTORIES THE RAW
MATERIALS ARE PROCESSED INTO:
FINISHED GOODS
SEMI-FINISHED GOODS
EXAMPLE OF SECONDARY
SECTOR
THE WHEAT IS THEN TRANSPORTED TO
ALBANY BREAD FACTORY
HERE AT THE
FACTORY THE WHEAT IS
THEN PROCESSED INTO BREAD
TERTIARY SECTOR
THIS
IS WHEN THE END PRODUCT IS
TRANSPORTED TO RETAILERS
GOODS ANDSERVICES ARE THEN SOLD TO
THE CONSUMERS
TERTIARY SECTOR
YOU GET 2 TYPES OF SERVICES:
PERSONAL SERVICES (individuals)
COMMERCIAL SERVICES (businesses)
PERSONAL SERVICES
THESE ARESERVICES DONE
FOR INDIVIDUALS
EXAMPLE:
HAIRDRESSING
EDUCATION
COMMERCIAL SERVICES
THESESERVICES ARE DONE
FOR BUSINESSES
EXAMPLE
TRANSPORTATION
STORAGE
EXAMPLE OF TERTIARY
SECTOR
THE
BREAD IS THEN TRANSPORTED
FROM ALBANY TO RETAILERS
EXAMPLE OF RETAILERS:
PICK ‘N PAY
SPAR
WOOLWORTHS
AUXILLIARY SERVICES
THESESERVICES FALL
BETWEEN THE DIFFERENT
SECTORS
EXAMPLE - TRANSPORT
