1. The Business Environment and Business Economics

2. The Business Environment
What is business economics?
decision making in business
external influences on the firm
the business environment
internal decisions of the firm
the external effects of business decision making
What do business economists do?
description
analysis
recommendations

3. The Business Environment
Political / legal factors
Economic factors
the microeconomic environment
the macroeconomic environment
Social / cultural factors
Technological factors
PEST analysis
relationship between the four sets of factors
importance of the economic factors

4. The Structure of Industry
Importance of industrial structure to the performance of firms
Classifying production
primary production
secondary production
tertiary production
Shares in GDP and employment of the three sectors
trends over time
current position

5. Output of industrial sectors (as % of GDP)
Primary
2.8%
Secondary
42.3%
54.9%
Tertiary
1974

6. Output of industrial sectors (as % of GDP)
Primary
Primary
5.8%
2.8%
Secondary
Secondary
23.3%
42.3%
54.9%
70.9%
Tertiary
Tertiary
1974
2002

7. Employment by industrial sector (% of total employees)
Primary
Secondary
3.4%
41.9%
54.7%
Tertiary
1974

8. Employment by industrial sector (% of total employees)
Primary
Primary
Secondary
1.8%
3.4%
Secondary
18.4%
41.9%
54.7%
79.8%
Tertiary
Tertiary
1974
2002

9. The Structure of Industry
Classifying firms into industries
nature of an industry
industrial sectors
why classify firms into industrial sectors?
helps in analysing trends
identifying specific needs
helps to understand relationships between firms
Standard industrial classification
nature of the system of classification
sections, subsections
divisions, groups and classes

10. Standard industrial classification: 1992

11. The Structure of Industry
Changes in the structure of UK economy
expanding and contracting sections
by output
by employment

12. GDP by industry (1980 = 100)
GDP by industry (1980 = 100) C
A/B

13. GDP by industry (1980 = 100)
GDP by industry (1980 = 100) C D
A/B

14. GDP by industry (1980 = 100) E
GDP by industry (1980 = 100) C D
A/B

15. GDP by industry (1980 = 100) E
GDP by industry (1980 = 100) F C D
A/B

16. GDP by industry (1980 = 100) GDP by industry (1980 = 100) I G/H J-Q EF C D
A/B

17. Employment by industry (1980 = 100)
A/B C

18. Employment by industry (1980 = 100)
A/B D C

19. Employment by industry (1980 = 100)
A/B D E C

20. Employment by industry (1980 = 100)F
A/B D E C

21. Employment by industry (1980 = 100)
J-Q
G/H I
Employment by industry (1980 = 100) F
A/B D E C

22. The Structure of Industry
Changes in the structure of UK economy
expanding and contracting sections
by output
by employment
Analysing industrial structure

23. The Structure of Industry
Changes in the structure of UK economy
expanding and contracting sections
by output
by employment
Analysing industrial structure
changes in industrial concentration

24. The Structure of Industry
Changes in the structure of UK economy
expanding and contracting sections
by output
by employment
Analysing industrial structure
changes in industrial concentration
the distribution of SMEs in the economy

25. Number of businesses, employment and turnover by industrial sector (2001)

26. The Determinants of Business Performance
Structure  conduct  performance
relationship between business structure and business conduct (behaviour)
competitive markets and competitive behaviour
limited competition and collusion
relationship between business conduct and business performance
different indicators for measuring performance
profitability, market share, growth, etc.

27. The Determinants of Business Performance
Internal aims and organisation
profit maximisation as the prime goal
other goals
distinction between owners and managers
importance of managers’ own objectives
“satisficing”

28. The Determinants of Business Performance
Other factors affecting performance
internal structure
information
competence of management
quality of the workforce
systems
information systems
motivation
technical systems
distribution systems
financial systems