BUSINESS AND MANAGEMENT MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT

The External Environment  In the pursuit of achieving aims and objectives, business face challenges from both within and outside of their organization  Understanding these factors can facilitate effective decision making  …the reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself.  George Bernard Shaw

Factors of an External Environment  Those issues which either restrict or aid the performance of a business, but are beyond its control  These factors can be classified under the PEST analysis –Political –Economic –Social –Technological

Political Threats  Intervention such as taxation and interest rate policies  Government legislation define the boundaries within which a business can operate –Employment law –Consumer protection rights –Trademark legislation

Economic Threats  The state of the economy in which a business operates is determined by four key variables –Inflation –Unemployment –Economic growth –International trade (trade surplus)  Consumer and investor confidence  Actions of rival firms

Social Threats  Social, cultural and demographic change  Multiculturalism has lead to an increase in cultural exports (food, clothes, music etc)  Pressure on businesses to be environmentally friendly

Technological Threats  Efficiency of business is greatly improving (computers etc)  Efficient technological growth however can be overshadowed by the high cost of maintaining technology –Airbus A380 is a prime example of technological inefficiency

PEST or STEP  External factors can harm business (hence the name PEST)  However external factors can provide opportunities –Lower taxes or interest rates  Therefore STEP might appropriate  Variations can include PESTLE, where the L and E are Legal and Environmental  Also, STEEPLE, where the third E stands for Ethical

Mini Case Case: Rivington Foods Source: Jones, Hall, Raffo, Business Studies 3 rd Edition, Unit 5, page 40.

The SWOT ANALYSIS This involves looking at the internal strengths and weaknesses of a business and the opportunities and threats. STRENGTHS: These are things that the business and its staff do which:  They are effective at.  They are well known for.  Make money  Generate business and reputation  Lead to confidence in the market.  Cause customers to come back for repeat business.  Cause other businesses to try to learn from them.

The SWOT ANALYSIS WEAKNESSES: These are the things that the business does badly, that it is ineffective at or that it has a poor reputation for  factors that cause losses, hardships, disputes, grievances and complaints for a business. OPPORTUNITIES: These are the directions that the business could profitably take in the future because of its strengths or because of the elimination of its weaknesses. THREATS: Threats to a business arise from the activities of competitors and from failing to take opportunities or to build on successes.  complacency, a lack of rigor, and from falling profits.

STRENGTHS Current Products are market leaders in some countries in terms of sales and market share. Brand loyalty to product and to corporate identity. Effective promotion Excellent Distribution Network Constant R&D leading to new ideas. WEAKNESSES Age of life cycle of certain products. Restricted product range could cause problems if sales suddenly fall. OPPORTUNITIES Expansion into new geographical areas. Development of global brand and marketing. Possible growing demand for soft beverages. Legislation on drinks driving may encourage growth of soft drinks sale. Expansion into new markets. THREATS Growing competition from supermarket own brands. Increasing competition from competitors bringing out new products. Competition from alcoholic beverages and non-alcoholic beverages. Legislation on ingredients could force changes in production. SWOT Analysis of A Soft Drink Manufacturer

SWOT Analysis for McDonald’s Restaurant STRENGTHSWEAKNESSES OPPORTUNITIESTHREATS