THE
BUSINESS ENVIRONMENT
Study Unit 2
LECTURE OUTLINE
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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
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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
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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
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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
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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
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ANALYSIS OF THE BUSINESS ENVIRONMENT
 SWOTs
• Threat
Represents unfavourable (negative) conditions in
micro, market, macro environments
Detrimental to firm
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