BUSINESS STUDIES
Grade 11
TERM 1
Business Environments
and Business Operations
CHALLENGES IN THE
BUSINESS ENVIRONMENT
2.1 CHALLENGES FROM THE MICRO ENVIRONMENT

Difficult employees
 tend to complain a lot.
 influence new and positive employees in a
negative way.
 are usually not passionate about their jobs.
 can harm an enterprise’s image if they say
negative things about the enterprise.
2.1 CHALLENGES FROM THE MICRO ENVIRONMENT

Lack of vision and mission
 A business enterprise’s mission and vision is
supposed to direct business operations in a way
that allows the business enterprise to become a
market leader.
 A business enterprise without a mission will be
aimless and without direction.
 Managers will not be capable of providing
meaningful guidance and leadership to
employees as management will not know where
the enterprise is heading.
2.1 CHALLENGES FROM THE MICRO ENVIRONMENT

Lack of adequate managerial skills leads to
 the business enterprise not achieving its objectives.
 subordinates are not inspired by managers who lack
important managerial skills.
 managers lacking managerial skills will not be
capable of managing their departments successfully.
 employees managed by managers with inadequate
skills will be unhappy and frustrated – unhappy
employees are usually not very productive.
 unhappy employees could cause a high employee
turnover rate which reflects badly on the enterprise
and complicates the recruitment process.
2.1 CHALLENGES FROM THE MICRO ENVIRONMENT

Unions
 Aim to further the interests of employees who
belong to the union.
 Sometimes, unions make demands that are
impossible to meet.
 This creates tension between management and
employees.
2.1 CHALLENGES FROM THE MICRO ENVIRONMENT

Strikes and go-slows
 If management and employees are unable to
settle their differences, employees sometimes
resort to labour action (also known as strikes).
 A go-slow is an example of labour action.
 Employees show up at their place of work, but
work so slowly that the business cannot meet its
production targets.
 By the time management realizes what is
happening, the enterprise has lost many hours of
production.

Skills shortages among employees
 Sometimes business enterprises have difficulty
finding employees with the right combination of
skills and experience.
 Businesses are then forced to employ
candidates who are inadequately qualified.
 Employing unqualified candidates can result in:
 accidents in the workplace
 poor decision making
 overloading qualified employees

High employee turnover
 High employee turnover means employees
resign from their employers frequently and new
employees constantly have to be recruited.
 A high employee turnover rate is a strong
indication that a business enterprise is
experiencing problems.
The challenges from the micro-environment are under
the direct control of the enterprise’s management.
2.2 CHALLENGES FROM THE MARKET ENVIRONMENT

Competition
 Businesses offering the same of similar products
often pose a serious threat to one another.
 Consumers will buy from the enterprise that
offers the best value for money.
 This means that if an enterprise is unable to
match the quality and prices of its competitors, it
is in danger of losing consumers.
2.2 CHALLENGES FROM THE MARKET ENVIRONMENT

Shortages of supply
 There can be a number of reasons why
enterprises experience shortages of supply, e.g.
a fuel crisis that complicates delivery or a
supplier’s employees could go on strike.
 Nonetheless, an enterprise experiencing
shortages of supply will lose consumers as the
consumers will buy goods from other
enterprises.
2.2 CHALLENGES FROM THE MARKET ENVIRONMENT

Changes in consumer behavior
 Factors such as economic conditions or the
financial position of an enterprise’s target market
can cause changes in the target market’s tastes
and habits.
 This will cause the target market to shrink,
leaving the business with fewer people to market
its products to.
2.2 CHALLENGES FROM THE MARKET ENVIRONMENT

Demographics
 Changes in the population are one of the most
significant factors that influence business
enterprises.
 Demographic changes that are currently
occurring in South Africa include:
People tend to live longer. This leads to an increased
demand for products.
 Many people immigrate or pursue job opportunities
abroad. This not only leads to a reduced consumer
base but also to reduced availability of skilled labour.
 Many South Africans are dying because of HIV/Aids.
HIV doesn’t only influence the labour force and the
consumer force, but HIV-positive consumers have
particular product preferences.

2.2 CHALLENGES FROM THE MARKET ENVIRONMENT

Psychographics
 Psychographics is also known as lifestyle
segmentation and involves determining
consumer characteristics such as consumers’
attitudes, interests, opinions and lifestyles.
 Businesses can market their products effectively
only if they know the psychographics of their
target market.
 It is difficult to determine the psychographics of a
target market because it changes constantly.
2.2 CHALLENGES FROM THE MARKET ENVIRONMENT

Socio-cultural factors
 Include factors such as language, ethnicity,
customs, income levels and preferences
associated with particular cultures.
 Socio-cultural factors influence enterprises’
product ranges and marketing campaigns.
 Extra care must be taken buy a business
enterprise to ensure that the marketing
campaign does not offend any cultural group.
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Changes in income levels
 Factors such as unemployment, high interest rates
and high inflation rates cause fluctuation in
consumers’ income levels.
 This can leave consumers with less disposable
income.
 Reduced consumer spending results in lower profits
for enterprises.
 Consumers experiencing financial difficulties spend
their money on necessities, rather than luxuries.
 Changes in consumers’ income levels can be a
serious threat, especially for enterprises specializing
in luxury goods and services.
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Political changes
 Each government determines the objectives it
wants to achieve while it is in office.
 Governments make laws to help them achieve
these objectives.
 Businesses have to adapt to these laws.
 A change in government can result in political
instability.
 Political instability scares off potential investors
and potential tourists.
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Contemporary legislation
Failure to comply with legislation has serious
consequences, such as harsh fines or prison sentences.
 It seems obvious that business enterprises do not have
any option but to meet legal requirements, but this is not
always easy.
 For example: The Employment Equity Act suggests that
candidates who were previously disadvantaged should
receive preference when an enterprise is recruiting new
employees.
 This limits the number of candidates an enterprise can
choose from and sometimes it is difficult to find
candidates with the right combination of qualifications
and experience.

2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Labour restrictions
 Research has shown that some business
enterprises feel that South Africa’s labour market
is overly regulated.
 Restrictions that occur in the labour force that
pose potential challenges to businesses include:
 Shortage of skilled labour
 BBBEE
 Affirmative action
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

HIV / AIDS
 HIV/Aids challenges business operations in more
ways than one.
 HIV/Aids reduces the number or candidates an
enterprise can choose from and impacts
negatively on the productivity of an enterprise.
 Some enterprises contribute towards an antiretroviral fund to assist HIV-positive employees.
 This places a financial burden on enterprises.
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Micro-lending
Micro-lending is the extension of small loans (micro-loans) to
people who cannot gain access to credit granted by banks.
 There are two reasons why people make use of micro
lending:



Many people fail to meet the minimum credit requirements set by
financial institutions, such as banks.
Many people have obligations to meet, such as credit card
payments, rental expenses, or they want to buy products they
cannot afford.
The micro lending business is not regulated.
 There is therefore very little protection for people who make
use of the services of micro-lenders.
 The conditions set by micro-lenders are sometimes
unreasonable.

2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Globalisation and international challenges
 Globalisation refers to the exchange of goods,
services, capital and labour across borders.
 This means that local businesses compete with
international businesses for local consumers.
 Globalisation has made it relatively easy to
pursue career opportunities abroad, which can
result in local skills shortages.
 In some countries, labour is very cheap.
 This can make it even more difficult for local
business enterprises to be competitive in the
global market.
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Social values
 People’s values can influence their buying habits
because consumers buy products they identify
with.
 Social values that can impact on consumers’
buying habits include consumers’ attitudes
towards saving and brand loyalty.
 Business enterprises cannot control consumers’
social values.
2.3 CHALLENGES FROM THE MACRO-ENVIRONMENT

Demographics
 Some demographical challenges currently
influencing South African business enterprises
include:
 immigration
 illegal immigrants
 shrinkage of the labour force (due to crime,
disease, immigration, poverty)
 Demographical changes can result in business
enterprises having to train new employees and
selecting potential employees from a smaller
pool of candidates.