Business Environments Chapter 1

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Macro Environment
· Environmental Scan

identify factors that may impact on business

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then adjust existing plans or develop new plans to deal with these factors/events
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· SWOT Analysis

identify opportunities and threats and how it helps / can be resolved.

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·PESTLE Analysis

-Political political situation of country (and others), world politics, political stability, gov. corruption, refugees

-Economic Economy growth/development, inflation rates, interest rates, exchange rates, high unemployment rates, taxes (tax, vat, import duties, etc.)
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-Social Life expectancy, levels of literacy, diseases/viruses (HIV), unemployment, average population, crime and safety, poverty.
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-Technological Automation, technology changes, online shopping, research and development, Self checkout machines.
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-Legal Laws and acts, criminal justice, tax laws, new legislation.
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-Environment Environmental issues, recycling, sustainable.

-Ethical Fair trade, privacy, CSR.

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Market environment

• Environmental scan

• SWOT analysis

• Porters 6 forces

Level of rivalry (current competitors)

· Threat of new entrants

Availability of substitute products

Power of supplier
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Power of buyer
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Power of complimentary products.

Micro environment

8 business functions

-Purchasing function- buys goods/services needed by all departments

(Goods for own use/resale/processing)

-Production function- transforms raw materials into products to satisfy needs

(Continuous product design to satisfy, keep cost low.)

Automation

Advantages- productivity increased Disadvantages- expensive setup

- no human error -could cause laborer unrest
-cheaper in long run -regular maintanance/repairs

Quality control

Advantages- expected quality Disadvantages- decreases productivity

-customer loyalty -increases workload
-good brand image

-Financial function- business needs capital to start business (own or borrowed)

-Financial statements: Statement of financial position

Statement of comprehensive income
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Maximize profits, increase profitability,

ensure liquidity, remain solvent.

-Selling on credit

Increased turnover (more goods sold) Delay payment from debtors

Customers continue to buy on credit Risk of bad debt (customer may not pay)
Credit stimulates economy Administrative expenses
Interest recieved Increased employee workload

-Human capital function- employees trained with correct skills

-(labor relations act, stills development act, basic conditions of employment act, broad-based black economic employment act.)

-Risks:

-lack of specific skills -changes in labor legislation requirements

-poorly motivated workforce -unrealistic demands from trade unions leading to strikes
-conflict in workplace

-Marketing function

Marketing mix (4P's)

Product policy Price policy Place (distribution) Promotion policy

Advertising Sales promotion Personal sales Publicity

Marketing communication mix (4P's)

-Public relations function- create and maintain favorable image of business with relevant interest groups and stakeholders.

-Administrative function- responsible for collecting all data in business and business environment.
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data then processed into info

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info stored and made available to management as/when needed

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admin handles all the ‘paperwork’ and record keeping in business to comply with legislation
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Investments Chapter 8

An asset or item that is purchased with the hope that it will generate income or appreciate in the future.

Risk:

The higher the risk, the higher the return if the investment succeeds. If it fails, it could lead to a huge loss.

I
Diversification is putting you eggs (investments) into different baskets.

Return on investment(ROI):

An indicator of what the investor will receive over and above the original investment.

Timelines (period of investment):

The longer the period of investment, the greater the risks are that the investor can afford to date.

Investment options:

Equities/shares

Risk: ROI: Time:

moderate to high risk increase in share price long-term

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blue-chip shares will decrease risk (established business) dividends receive dividends (long term)
political instability
strength of Rand

Debentures (bond)

Give company money (debt for them) and they promise to pay you back over a period of time (with interest).

Risk: ROI: Time:

often sold at a fixed interest rate companies have to pay interest may be used as long-term
higher risk than bank investment but lower than shares no capital growth financial instrument
unsecured higher interest rate
interest is taxable

Retirement annuities / pension funds

Risk: ROI: Time:

how and where administrator has invested 1. Determined by fund manager depending on number of years you can
manage risk of individuals 2. No definite guarantees contribute will directly affect the value you
can't maintain their standard of living 3. Funds make predictions receive
4. Administration and management fees

Reasons why people may not be financially secure at retirement:

-wait too long to invest

-live longer
-higher medical costs
-provision for other benefits lost
Endowments

Form of life insurance

I
Risk: ROI: Time:

investor gets to choose risk depends on risk profile chosen 5-10 years

:
contribution waiver: if investor is unable to work due to management and administration fees
illness or disability, insurer will pay monthly
contributions on behalf of insured

Offshore investment

Reasons: Time:

diversification limitation on amount of money that can be

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changes in exchange rate taken out of the country every year

opportunities in other countries short/long-term investments
emigrating

Unit trust

Risk: ROI: Time:

option available to choose from includes high risk good unit trusts will outperform medium to long-term investments
equity fund to a stable fund. Where risks are reduced inflation over medium term 3-5 years
by diversifying investments. rate of return depends on risk option
chosen

Collectibles

Risk: ROI: Time:

requires a high level of knowledge and expertise value increases over time growth over long term, profit over short period
damage to a collectible decreases the value. no monthly income of time if you were able to buy the collectible at
a low price

Notice deposits

Fixed deposits Money market accounts (32 day call)

Risk: Risk:

money invested in bank generally has a low risk low risk

ROI: ROI:

longer the time invested and higher the amount will lower interest rates than other long investments

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determine interest rate (notice account)
doesn’t beat inflation
Time:

Time: short-term investment opened

from a month to a year
1-10 years or longer
Fixed property

Risk: ROI: Time:

location rental income best results over long-term

- state of the economy increase in property over time
capital gains tax (taxed on profit)
Insurance Chapter 9

Short-term Assurance
INsurance is IN case something happens
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Long-term
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As-sure as we are human beings, we will retire and one day die

General concepts regarding insurance:

Non-insurable risks: Average clause- when the asset isn't insured for the correct values (under-insured > pay Requirements of a valid insurance contract:
less than you should) > absolute good faith- insured disclose all
-War
Proximate clause- company makes sure loss was due to the cause that was insured and relevant info that affects risk
-bad debt
not a secondary event. > insurable interest- if proven they’ll sustain
-obsolete inventory
Excess- stipulates the percentage/amount that the insured must pay financial loss
-technology changes
Subrogation- the insured person can claim from the insurance for an accident and not > contractual capacity- of legal age/ sound
-outdated inventory
from the guilty party, this right belongs to the insurance company. mind
-illegal act
Cession- (cede the policy / transfer a policy)
-climate change

Types of insurance

Compulsory insurance:

Unemployment insurance fund (UIF)

Gives short-term relief to workers when they've unemployed / unable to work (maternity/ill)
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Covid> it paid workers their salaries when businesses did not receive income
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Contributions: both employee and employer > 1% of gross salary is deducted from employees salary and same amount is contributed by the employer

- Sealing amount > R14 872

The following people are exempted:

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Following rules applied regarding claims:

-work less than 24 hours a month -claim the max period, employees should have contributed to UIF for at
-employees who earn commission least 4 years
-employees of the national/provincial government -any UIF benefit owed to a person who dies will be paid to dependents

Compensation for Occupational Injuries and Diseases Act (COIDA)

If worker becomes injured, ill or disabled due to work, it is possible for defendants to claim.
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Every employer registers with COIDA fund and an annual amount is paid according to the employees income and risk of the job.
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Employee will inform employer once the accident has occurred and then the employer has 7 days to inform compensation commissioner
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injured or hurt employee will receive financial assistance for medical expenses there are many safety requirements that employers need to put in place
better medical cave for employees will probably mean they will return to work according to laws and this is added admin and an additional expense.
earlier than usual

Road Accident Fund (RAF)

individual, not their car

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compulsory insurance that covers all road users in South Africa

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· assists people who were injured in a motorcar accident and will pay for rehabilitation as well as medical claims
contributions to the fund are included in price of fuel
Non-compulsory insurance

Fire insurance: General business insurance/commercial insurance:

>machines/stock/buildings etc. can be insured > theft/burlary/natural disasters
>the more flammable, the higher the risk(premium) > public liability e.g. (client slips on wet floor)

Household insurance: Vehicle insurance: Money in transit insurance:

>burglary >monthly payments >insures against money in the vehicle
>claim from other persons insurance >pay a set amount

Fidelity insurance: Crop insurance:

>protects the business against financial loss by dishonest employees > droughts
> theft
> amount of farms in SA

Advantages and disadvantages of insurance

Eg. transfers risk can be expensive

-SANTAM piece of mind must check cover
-Discovery bank requires it for finance insurers look for reasons not to pay
-Liberty cash back bonus
could be cheaper

Advantages and disadvantages of assurance

dependents standard of living do research

mortgage loans - policy linked over-insure
provision for future admin fees
medical aid
life assurance sector is regulated
policies ceded(transferred)
RA’s offer tax benefits
retirement annuity