Influences on Business Environments (Grade 11 NSC Matric Business Studies): Revision Notes

Business' Control Over the Micro, Market, and Macro Environments

Understanding business control levels

The success and profitability of any business depends greatly on various factors within three distinct business environments. Smart entrepreneurs understand that they can try to influence or control some of these factors to create more favourable conditions for their business operations.

However, it's important to understand that not all factors can be influenced or controlled equally. Some elements are easily managed by the business, whilst others present significant challenges. Think of it like this: a business might have complete power over setting its own prices, but it cannot control what competitors charge for similar products.

Control over the micro environment

The micro environment is the area where businesses have the most power and influence. In fact, companies can exercise full or complete control over all components within their internal operations.

How businesses control their micro environment

Businesses maintain control over their micro environment through several key strategies:

• Vision and direction setting - Companies establish and regularly update their vision statements, mission statements, goals, and objectives to align with current market trends and business needs

• Strategic management systems - Businesses implement comprehensive planning systems and make sure these plans are regularly reviewed and updated when circumstances change

• Organisational structure - Companies create policies, procedures, and management frameworks that guide the business in the right direction and support effective decision-making

• Resource management - Businesses ensure all their resources (money, equipment, people, time) are used efficiently and effectively to benefit the organisation's success

• Company culture - Businesses work to ensure all employees understand the company's culture and values, and that everyone works towards shared goals that accommodate all stakeholders (people or groups who have an interest in the company and can affect or be affected by the business)

• Leadership and direction - Management leads employees by organising and directing their activities, whilst controlling their actions to achieve the business's goals and objectives

Key insight about micro environment control

In larger organisations, the chief executive officer (CEO) works together with other senior managers to exercise control over the micro environment. Each department head takes responsibility for managing different aspects of the micro environment within their specific departments.

Influence over the market environment

Unlike the micro environment, businesses have limited control over the market environment. However, in many situations, it's still possible to influence and shape certain components within this external environment.

Influencing customers

Entrepreneurs can shape customer decisions and behaviour through well-planned marketing strategies. A marketing strategy is essentially a plan of action that outlines the business's marketing objectives and the specific methods that will be used to achieve these goals.

Businesses can influence customers through:

• Conducting market research to identify customer needs and wants, then developing products or services that meet these requirements
• Running effective marketing campaigns with promotional sales, discount prices, extended operating hours, and persuasive advertisements
• Building strong customer relationships through excellent service and communication

Working with suppliers

Entrepreneurs can also influence their suppliers' decisions and actions through various relationship-building strategies:

• Signing long-term contracts for raw materials at fixed prices, providing suppliers with guaranteed business
• Forming strategic alliances (arrangements between two companies to work together on mutually beneficial projects)
• Buying in bulk to secure discounts whilst ensuring adequate raw materials are always available

Managing competitor relationships

Although businesses have little direct influence over their competitors, they can still work strategically with them:

• Forming strategic alliances with competitors for specific projects
• Joining community business forums to share ideas and resources
• Creating consortiums with other business owners to undertake projects that benefit all members

Dealing with regulators

Individual businesses cannot directly influence regulators (people or organisations that create rules and regulations for business activities). However, when businesses work together, they can have more impact:

• Lobbying government representatives to influence legislation that affects their industry
• Working collectively to request changes to regulations that may be hindering business growth
• Participating in industry associations that represent business interests to regulatory bodies

Engaging with unions

Businesses can influence union decisions by maintaining positive relationships:

• Engaging in constructive collective bargaining sessions with trade unions
• Explaining business challenges and concerns to union leaders
• Working together to find solutions that benefit both employees and the business

Influence over the macro environment

Businesses have no direct control over the macro environment, which includes factors that affect the entire economy and society. These external factors include:

• Political factors - government policies and political stability
• Economic factors - inflation rates and fluctuations in foreign currency values
• Social factors - consumer income levels and unemployment rates
• Technological factors - changes in technology and internet infrastructure
• Legal factors - new legislation and labour laws
• Environmental factors - climate change and environmental sustainability requirements

Limited influence strategies for macro environment

Although individual businesses cannot control macro environment factors, entrepreneurs can work together to have some influence:

• Collective lobbying - Groups of businesses can use their combined influence to persuade government to change certain regulations or establish policies that help them achieve their business objectives

• Investment hedging - Businesses can protect themselves against inflation by investing surplus money in assets like gold, oil, and property, which typically provide good returns during economic uncertainty

• Information sharing - Companies can network together to share information about overcoming challenges in the technological environment, helping each other adapt to changes