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Presentation on theme: "Chapter 3: UNDERSTANDING THE BUSINESS ENVIRONMENT"— Presentation transcript:

Components of Business Environment Macro Environment Influence Micro Environment Influence Internal Environment of the Organization Types of Business and Supporting Industries Identifying Business Opportunities Evaluating Business Opportunities

2 Components of Business Environment
Environmental scanning can lead to an idea that can be converted into a business opportunity. Two approaches in scanning the environment: a. macro perspectives b. micro perspective.

3 Components of Business Environment
Example: the agricultural sector Agricultural Sector Forestry Fishing Plantation Poultry Veneer plywood Logging Furniture Sawn timber Fishing equipment Deep-sea fishing Fishing processing Wholesales/distribution Clearing plantation Planting Processing Wholesales/supplies Poultry farming Processing Wholesales/supplies

4 Components of Business Environment
Macro perspective; agricultural sector offer business opportunities in forestry, fishing, plantation and poultry industries. Micro perspective; each industry offer specific business opportunities. Eg. Poultry?

5 Macro Environment Influence
Factors in macro environment a. socio-cultural b. political and legislation c. economy d. technology

6 Macro Environment Influence
Socio-cultural factors. Demographic and cultural trends. - demographics: ethnic group, age, gender, geographic location, distribution of income. - social trends: lifestyle, tastes and preferences. Political and legislation. Policy, legislation & regulations. - trade barriers, political risks, trade agreement, taxation, government spending.

7 Macro Environment Influence
Economy. Current state of the economy, labour market, interest rates, currency value/foreign exchange rate, overeseas opportunities, etc. Technology. Technology changes takes 2 forms; pure invention or process invention. pure invention: semiconductors. process invention: small changes in design, product formulation, manufacturing, materials and distribution.

8 Micro Environment Influence
Factors in micro environment a. Consumers b. Competitors c. Suppliers d. Financial institutions e. Government agencies f. Non-government organizations

9 Micro Environment Influence
Consumers. Main target group. Maybe individuals, or groups of people, or industrial buyers (dealers, agents, wholesalers, retailers. Competitors. Businesses that fulfill the same customer needs or have the potential to serve those customers. Can be identified through customers’ input or business directories.

10 Micro Environment Influence
c. Suppliers. Influence the price and quality of products supplied. d. Financial institutions. Provide loans. Influence loan amount, duration and interest/dividend rates e. Government agencies. Provide various incentives, training, other types of support. d. Non-government organizations. Chambers of commerce, consumer groups, religious groups, environmental groups.

11 Internal Environment of the Organization
Resources. Skills, ideas, knowledge and experiences, financial, human resources, technology, reputation (image). Structure. Structure and strategy must fit. Culture. Inculcate positive corporate culture. How?

12 Types of Business and Supporting Industries
The output of an industry may require input from other industries. This form industrial linkages among industries from the same sector or other sectors. Forward linkage Car distribution Service workshop Supplier of spare parts Car rental service Taxi company Backward linkage Component industry Transportation Tyre industry Cleaning service Supplier of equipment & office supplies National Car Project

13 Identifying Business Opportunities
Four major steps in identifying, evaluating and selecting a business opportunity. 1. Identifying the needs and wants of customers 2. Scanning the environment and evaluating of self and the community. 3. Screening of business opportunities. 4. Selecting a business opportunity and preparing a business plan.

14 Evaluating Business Opportunities
Experience Knowledge and skill Financial situation Interest Networking Values/Norms of the community

15 Evaluating Business Opportunities
Experience. Many entrepreneurs involved in businesses that are suited to their own experience. Knowledge and skill. To establish whether that someone really knows what to do. Financial situation. Financially able. Access to sources of fund. Financially viable.

16 Evaluating Business Opportunities
Interest. Interest give more confidence and a sense of responsibility. Networking. Establish network to expedite business processes. Values/Norms of the community. Business opportunities must be coordinated with the values or norms of the community.

17 Screening Business Opportunities
Legality. Monopolistic power and level of competition. Capital requirements. Risks.

18 Screening Business Opportunities
Legality. Ensure business opportunity is legal. Monopolistic power and level of competition. Business opportunity is not monopolized. Rank the level of competition. Capital requirements. Business opportunity chosen must be appropriate for the financial resources available in order to avoid financial problems in the future. Risks. Evaluate risks. Level of risk depends on three factors; difficulty or ease to enter a business, size of capital and profit margin.

19 Changing Environmental Trend
Economic trends Teenagers with more cash and disposal income Resulting new business, product and service opportunities Designer cloths, compact discs, DVD players, games and consoles, handheld computers.

20 Changing Environmental Trend
Resulting new business, product and service opportunities Social trends Increased interest in fitness Fitness centers, in-house exercise equipment, weight-loss centers, health food stores.

21 Changing Environmental Trend
Resulting new business, product and service opportunities Technological trends Advances in biotechnology Biotech related pharmaceutical products, food products, veterinary products, information services.

22 Changing Environmental Trend
Resulting new business, product and service opportunities Political and Regulatory trends Increased EPA and OSHA standards Consulting companies, software to monitor compliance, products to help ensure compliance.



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