Learning Unit 4 Part 1 The Macro Environment

Learning unit Outcomes 4 reasons why managers need to understand the macro environment. Sub-environments of the macro environment. Briefly explain the sub-environments. What are ‘threats’ and ‘opportunities’. Major economic systems in the world

Learning Outcomes Characteristics of the SA economic system. The SA government structure. Corporate governance principles. Discuss 5 laws that influence management decisions. Discuss BEE and BBBEE in SA. Identify and discuss at least 3 sources provided by SA government to support business initiative.

ExternalMarketMacro

Introduction Macro environment: ▫Furthest away ▫AKA remote environment ▫Volatile, cannot control ▫Variables directly and indirectly impact the business ▫Variables = uncontrollable = AKA mega trends ▫Survival = monitor changes  indentify opportunities (maximise) and threats (minimise)

The macro environment Macro Market Micro International Ecological TechnologicalSocial Political Economic

The macro environment Macro International Ecological TechnologicalSocial Political Economic Change  Opportunity or Threat! Opportunity: Variable has + impact on the business Threat: Variable has - impact on the business

Characteristics Variables are interdependent Increasingly unstable Uncertain Complex Becoming increasingly unpredictable

Why must managers understand the macro environment? Direct or indirect impact on all organisations Adjust to changes in order to survive Opportunity or threat to be managed Knowledge and info on macro  better decision- making Knowledge and info on macro  pro-active response to change

Political Environment Influence of government on organisations such as law Include: ▫Sanctions ▫Wars ▫Terrorism ▫Political unrest and instability ▫Laws

Political Environment Government  Huge impact on business Influence investors decisions Examples: ▫Employment Equity act ▫National Credit act ▫Skills Development act ▫Decrease in subsidies ▫Department of Environmental Affairs and Tourism

Employment Equity Act 55 of 1998 Improve employment equity First step: Affirmative action On the grounds of: ▫Race ▫Sex ▫Sexual orientation ▫Disability ▫Religion

Skills Development Act 97 of 1998 Develop skills of labour ▫Improve quality of life Improve productivity and competitiveness Increase entrepreneurship SETA: Service Sector Education and Training Authority ▫Quality of education/skills training

National Credit Act 34 of 2005 Protect consumers Must be written Greater responsibility of credit suppliers

Group Work: Identify what possible impact the sub- environments (page 72) of the macro environment might have on Starbucks in South Africa

Economic environment Health of the country affecting business and individuals General factors in the economic environment: ▫Employment rates ▫Distribution of wealth ▫Competitive pricing in free market

Economic environment Factors that affect business: ▫Economic growth: Increase in production ▫Employment levels: % people employed ▫Consumer income:  Income  Demand for goods ▫Inflation: Increase in price level of G&S ▫Exchange rate: One currency for another ▫Trade balance: Exports - Imports

Economic environment Characteristics: ▫Interdependent ▫Determine countries prosperity or adversity ▫Specific implications on business and managers

Social environment Concerned with society’s attitudes and cultural values. New trends  Continuous appearance  New type of customer. ▫Healthy eating SA workforce  large % infected with HIV/Aids ▫How does this affect the business?

Social Environment Include: ▫Changing fashion ▫Changing lifestyle ▫Role of women in society ▫Crime and prostitution ▫Growth in subcultures ▫Age and race structures ▫Geographic shifts in population ▫Family life cycles changing ▫Education levels increasing ▫Household sizes decreasing ▫Birth and death rates

Social Environment Other social problems: ▫Unemployment ▫Poverty ▫Crime Social changes not always negative!

Social Environment Changes in social environment which pose a threat or opportunity: ▫More women in the workplace ▫Move to a more balanced lifestyle ▫More single-parent households ▫More single people

Technological Environment Include trends such as: ▫Way customers purchase ▫Internet ▫Sophisticated communication channels ▫Changes in transport

Technological Environment The knowledge of how to do something.  Tech  Affect whole organisation. Information technology: Combination of people and technology to support operations, management and decision-making. ▫Internet ▫ ▫Cellular phones

International Environment Operations in SA or internationally  direct or indirect impact. Operate internationally  Exposed to more opportunities and threats ▫Each country has own unique macro environment

Ecological Environment Conserve limited resources in the physical environment. Corporate Governance recommend reporting on ‘triple bottom lines’ annually.

Ecological Environment: - Triple bottom line Financial Responsibility Social Responsibility Environmental Responsibility To show profit To benefit from investment Go ‘GREEN’ Take responsibility for actions Go ‘GREEN’ Take responsibility for actions People are better off Citizenship Responsibility of organisations toward shareholders, people and environment

Ecological Environment Org to report on: ▫Environmental protection policies ▫Comply with consumer protection standards ▫Comply with environmental laws and regulations ▫Existing and planned pollution control ▫Protection and restoration costs ▫Potential liability and current and pending investigations