BUSINESS STUDIES Joker ENVIRONMENTAL SCANNING The importance of environmental scanning may be summarized as follows: • The environment is continually changing; therefore, purposeful monitoring is necessary to keep abreast of change. • Scanning is necessary to determine which factors and patterns in the environment pose threats to the present strategy of a business. • Scanning is also necessary to determine which factors in the environment present opportunities for a business to attain its goals and objectives more effectively. • Businesses that systematically scan the environment are more successful than those that do not. The extent of environmental scanning is determined by the following factors: • The basic relationship between a business and its environment; • The nature of the environment within which a business operate and the demands made by the environment on a business (the more unstable the environment and the more sensitive the business is to change, the more comprehensive the scanning has to be; increasing instability usually means greater risk); and • The source and extent of change (the impact of change is rarely so compartmentalized that it affects only one or two areas of an organisation; change has an interactive and dynamic effect on several aspects of a business). BUSINESS ENVIRONMENT 1. Micro Environment • The micro-environment consists of the business itself, over which management has complete control. This includes variables in this environment, such as the vision, mission and objectives of the business organisation, the various business functions and the resources and strategies of the business, which are under the direct control of management. • Knowing the organization's strengths and weaknesses puts management in a position to use available opportunities better and to identify and counter threats to the business, ensuring that it remains a stable entity. • The micro-environments of many business organisations worldwide have been subjected to changes relating to re-engineering, restructuring and the trimming of workforces. Without these major changes, businesses would no longer be able to align themselves with a changing environment 2. Market Environment The market environment is encountered immediately outside the business organisation with key variables in this environment that are as following: • Consumers or customers with a particular buying power and behavior who buys the products and services of the business; • Competitors, including new and potential competitors who want to maintain or improve their position in the marketplace; • The labour market and labour unions. Aspects such as the availability of skilled labour and the impact of strikes on business are well-known variables in South Africa and must be considered by the businesses. • Intermediaries, who compete to handle (distribute) the business’s product to get it to the consumer; and • Suppliers, who supply, or do not wish to supply, raw materials, products, services and finance to the business organisation to enable it to manufacture the products and services that the consumer requires. 3. Macro Environment The macro-environment is the sub-environment that is external to both the organisation and the market environment. Threats and opportunities may occur in the macro environment, but, as the individual business organisation has no control over the macro-environment, its influence on these threats and opportunities is insignificant. A threat can be described as an external variable in the business environment that could cause harm to the business; an opportunity is the opposite, namely a chance to generate more market share, turnover or profits for the business. COMPONENTS/ VARIABLES OF A MACRO ENVIRONMENT 1. The technological environment, which continuously brings change and innovation to the business world; 2. The economic environment, in which factors such as inflation, exchange rates, recessions and monetary and fiscal policy influence the prosperity of the business organisation; 3. The social environment, in which consumer lifestyles, habits and values (formed by culture) make certain demands on the business organisation, particularly through consumerism; 4. The physical environment, which consists of natural resources such as mineral wealth, flora and fauna, and manufactured infrastructural improvements such as electricity supply, sanitation and roads and bridges 5. The institutional-governmental environment, with the government and its political and legislative involvement as the main components. By means of legislation, for instance, governments influence business; and 6. The international environment, in which local and foreign political trends and events affect the business organisation (micro-environment) as well as the market environment. CHARECTERISTICS OF ENTREPRENEURS a) ACHIEVEMENT MOTIVATION - Entrepreneurs are described as people with a higher need to achieve than people who are not entrepreneurs. - Achievement motivation goes hand in hand with ambition and competitiveness. People with a high need to achieve are attracted to jobs that challenge their skills and their problem-solving abilities. b) LOCUS OF CONTROL - The second important characteristic is the strong internal locus of control as it indicates the need of a person to be in charge of his/her own destiny. - People with external locus of control regard luck and fortune, rather than personal ambition, ability and hard work. - People with the internal locus of control believe that they will benefit from their hard work and determination. They persuade and motivate other people and actively seek relevant information and knowledge . c) INNOVATION AND CREATIVITY - Innovation or the production of something new or original, results from the ability to see, conceive, and create new and unique products, processes or services. - Creativity can involve the adjustment or refinement of existing procedures or products and the identification of opportunities and solutions to problems. - Basically it involves new ideas. d) RISK TAKING - The successful entrepreneur correctly interprets the risk situation and then determines actions that will minimise the risk involved. - Entrepreneurs investigate the situation and calculate the probable results before they take decisions - Entrepreneurs manage the risk of their enterprises by accepting control and being involved in the basic aspects of the enterprise. - Successful entrepreneurs take calculated risks, based on information gathered and analysed. Management school of thought The quantitative school The quantitative school sees management primarily as a system of mathematical models and processes. It is largely composed of operational researchers or decision experts who believe that if management or any elements of it are at all a logical process, then this should be expressible as mathematical relations. The contribution of this school, particularly in the development of models for the running of complex processes, is important. However, this school should be regarded as an aid to management rather than as a separate school of management theory. The systems approach The systems approach to management developed in the 1950s. This approach compensated for the main limitations of the previous approaches. These limitations were, firstly, that they ignored the relationship between the organisation and its external environment, and secondly, that they focused on only one aspect of the organisation at the expense of other areas. Some managers would, for example, focus only on financial aspects and neglect the organisation’s market and customers. To overcome these shortcomings, management scholars developed systems theory, which views the organisation as a group of interrelated parts with a single purpose, where the actions of one part influence the other parts. The scientific school The contribution of the scientific school is especially associated with the work of T.W. Taylor (1856– 1915). he was an engineer at a steelworks in philadelphia and believed that a scientific approach to any task would greatly increase the productivity with which it was carried out. through the scientific application of observation, job analysis, job measurement, the redesign of jobs, and financial incentives, he and his colleagues proved that the productivity of a business could indeed be increased. The management process school The management process school, by contrast, concentrated on top management. Its method was to identify the most important functions in a business and the most important elements of management, so that universal principles of management could be developed for each function and element. The theory was that the application of universal management principles would take any business towards its goals. The human relations or behavioural school The human relations or behavioural school came into being because of the failure of the scientific and classical management process schools to make an adequate study of the human element as an important factor in the effective accomplishment of the goals and objectives of a business. Elton Mayo (1880–1949) found that increased productivity was not always attributable, as the scientific school believed, to a well-designed task and sufficiently high wages. It could also be attributed to such factors as the relationship between people in the business – between management and workers, and between workers themselves in a particular group. Basic tasks of managers Planning Planning determines the mission and goals of the business, including the ways in which the goals are to be reached in the long term, and the resources needed for this task. Organising Organising is the second step in the management process. After goals and plans have been determined, the human, financial and physical resources of the business have to be allocated by management to the relevant departments or persons, duties must be defined, and procedures fixed, to enable the business to reach its goals. Leading Leading entails directing the human resources of the business and motivating them. Leaders align the actions of subordinates with the predetermined goals and plans. Controlling Controlling means that managers should constantly establish whether the business is on a proper course towards the accomplishment of its goals. At the same time, control forces management to ensure that activities and performance conform to the plans for reaching predetermined goals. Location factors Sources of raw materials. Where, in which quantity, of which quality and at which prices can these materials be obtained? This is especially important for a company such as Eskom that needs to be near to its coal mines as a major source of raw materials. Availability of labour. Where and at which cost is the required labour available in terms of, for example, quantities, levels of training, development potential and productivity? This is important to South African automobile manufacturers, for example, which are labour intensive but require skilled workers to operate specialised assembly machines. Proximity and access to the market. This includes aspects such as the potential advantages over present competitors, the current extent and potential development of the market, the perishability of products, the needs of consumers and users regarding, for example, delivery, after-sales services and personal contact, and the possible entry of competitors into the market. Availability and cost of transport facilities. This includes aspects such as the availability of rail, air and road transport; pipeline and water transport facilities; the transport costs of raw materials in relation to finished products; and the possibility of the entrepreneur using his or her own transport (road links and limitations of private transport). The accessibility to Transnet facilities (rail haulage) could be a major factor for farmers delivering maize, for example. Availability and costs of power and water. These must satisfy the needs of the prospective business. We all understand the problems that South African businesses encounter during blackouts Characteristics of economic system Market economy • There is private ownership of factors of production • There is freedom of choice Socialism • Basic industries are owned by the state • There is freedom of choice Command economy • The state owns and control all industries and agriculture Traits of a successful entrepreneur The other traits of entrepreneurs include high levels of energy, confidence, future orientation, optimism, the desire for feedback, high tolerance for ambiguity, flexibility/adaptability, passion, commitment and determination, opportunity orientation and motivation to excel. • A sense of fairness. For dealing with vendors, customers, and employees. • Transferable values. This is closely related to the sense of fairness. I just don’t see people building businesses without believing in what they’re doing. • Willingness to work hard, shoulder to shoulder with other people. Cliche, but true: the harder I work, the luckier I get. • Knowing what they don’t know. To me that’s much more important than what you do know. • Vision for what they can build. Imagining a happy future. Dreaming.
