Challenges of the business environment We’ve learnt about factors + business = environment. The term ‘Business Environment’ can be further explained as including everything that affects the growth, survival and establishment of a business (positively or negatively), which eventually influences the objectives of the business. An organisation operates in a Micro (internal), Market, and Macro Environment. Challenges in the Micro Environment: We know that management controls the Micro Environment, however, problems can still arise within this environment. List five challenges that the Micro Environment can face: _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Highlight reasons why trade unions can be a problem for a business: _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Challenges in the Market Environment: As business cannot control the market environment, this could create difficulties for a business. Some obstructions include: competition, shortages of supply, changes in consumer behaviour, demographics and psychographics, socio-cultural factors. Explain how each one would be a challenge to the market environment. Challenges in the Macro Environment: This environment cannot be controlled by a business at all. Some challenges are changes in income levels, political changes, contemporary legal legislation, labour restrictions, microlending, globalisation/ international challenges, social values and demographics, and socioeconomic issues. How could political changes affect business? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ List two social-economic issues that may affect the running of a business and explain: _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Grade 11 Explain why microlending is an advantage: ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ ______________________________________________________________________________________ Adapting to challenges of the business environments The success of a business is influenced by all three business environments (Micro, Market and Macro). Therefore, in order for a business to be successful, it needs to constantly adapt to challenges that arise in the business environment. How can business adapt to challenges? Information management – data and information of a business. Strategic responses – moving to a new market; expanding market share via merger, takeover, acquisition and alliance. Organisation design and flexibility – restructure of the business to align with the overall strategy of the business. It must be flexible to adapt to changing business. Direct influence on the environment – introduction of new products or services, opening new branches, advertising, negotiations with suppliers and trade unions. Social responsibility – upliftment programmes; environmental programmes; education etc. Lobbying – to give business an advantage. Hedging against inflation – reducing risk when uncertain about price fluctuations. Bargaining sessions between management and unions – to agree to wage increases, prevent losses during strikes, maintain relations. Networking – to establish new customers; new ideas and information; wider market; build business relationships. Power Relationships – relationships with other businesses to share resources; expand market share; develop effectiveness. Grade 11.