Presentation on theme: "Chapter 3: UNDERSTANDING THE BUSINESS ENVIRONMENT"— Presentation transcript:
1 Chapter 3: UNDERSTANDING THE BUSINESS ENVIRONMENT Components of Business EnvironmentMacro Environment InfluenceMicro Environment InfluenceInternal Environment of the OrganizationTypes of Business and Supporting IndustriesIdentifying Business OpportunitiesEvaluating 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 perspectivesb. micro perspective.
3 Components of Business Environment Example: the agricultural sectorAgricultural SectorForestryFishingPlantationPoultryVeneer plywoodLoggingFurnitureSawn timberFishing equipmentDeep-sea fishingFishing processingWholesales/distributionClearing plantationPlantingProcessingWholesales/suppliesPoultry farmingProcessingWholesales/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 environmenta. socio-culturalb. political and legislationc. economyd. 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 environmenta. Consumersb. Competitorsc. Suppliersd. Financial institutionse. Government agenciesf. 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 ratese. 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 linkageCar distributionService workshopSupplier of spare partsCar rental serviceTaxi companyBackward linkageComponent industryTransportationTyre industryCleaning serviceSupplier of equipment& office suppliesNational CarProject
13 Identifying Business Opportunities Four major steps in identifying, evaluating and selecting a business opportunity.1. Identifying the needs and wants of customers2. 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 ExperienceKnowledge and skillFinancial situationInterestNetworkingValues/Norms of the community
15 Evaluating Business Opportunities Experience. Many entrepreneurs involved in businessesthat 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 trendsTeenagers with more cashand disposal incomeResulting new business, product andservice opportunitiesDesigner cloths, compact discs, DVD players, games and consoles, handheld computers.
21 Changing Environmental Trend Resulting new business, product andservice opportunitiesTechnological trendsAdvances in biotechnologyBiotech related pharmaceuticalproducts, food products, veterinaryproducts, information services.
22 Changing Environmental Trend Resulting new business, product andservice opportunitiesPolitical and Regulatory trendsIncreased EPA and OSHA standardsConsulting companies, software to monitor compliance, products to help ensure compliance.