1. Understanding Business – Business Environment
Higher Business Management

2. Contents Internal Factors External Factors Stakeholders Factors
Corporate Culture
Decision Making
Types of Decisions
Models
ICT
External Factors
PESTEC
Stakeholders
Conflicts
Contents

3. Internal Factors
These are the factors within the business that can affect its performance

4. Internal Factors Financial
Cash Flow – there may not be enough finance to purchase new materials meaning production stops.
Objectives – A lack of capital can mean that business aims can not be met e.g. growth

5. Internal Factors Employees
Skills – They may not have the correct skills and therefore the quality of products/services might be low.
Motivation – If staff are not motivated this may lead to low productivity
Employee Relations – if relations are poor this may lead to staff being resistant to change. It may even lead to industrial action.

6. Internal Factors Management
Decision Making – Management might not have the required skills or experience which could result in poor decisions being made (see Decision Making section).

7. Internal Factors Technology
Break-down – if this happens then production will stop.
Lack of technology – may mean that they are unable to keep up with competitors
Availability – technology may not be available to carry out the tasks that the business need.

8. Internal Factors
Think of the consequences each internal factor may lead to for the business? What could the Business do to prevent these things from happening?

9. Internal Factors – Corporate Culture
Corporate culture is the beliefs and behaviours which employees adopt to enable the business to achieve its aims.
It usually develops organically over time and becomes the unwritten rules and values of the business.
The culture will be reflected in every aspect of the business e.g. dress codes, décor of premises, logos, employee incentives.

10. Internal Factors – Corporate Culture
Advantages
employees feel part of the business
increased staff motivation
increased productivity
improved employee relationships
customers loyalty
consistency across the organisation

11. Task
You should research and produce a report on the corporate culture of different organisations.
Consider uniforms, the environment employees work in, employee incentives and motivation.

12. Internal Factors – Decision Making
Managers make decisions on behalf of the organisation in order to meet its objectives.
Effective decision making is a key component of any business. Managers need to be skilled in making decisions

13. Decision Making – Functions of Management (Fayol)
Plan
Organise
Command
Co-ordinate
Control
Delegate
Motivate
POCCCDM
Make sure you can describe these words

14. Decision Making – Types of Decisions
Description
By whom
Examples
Strategic
Long-term, concerned with overall direction of the company
Senior Management/Board of Directors
Merge with a new company
Expand abroad
Diversify the business
Tactical
Medium-term, concerned with how to help achieve strategic decisions
Senior & Middle Management
Find a cheaper supplier
Develop a marketing campaign
Operational
Short-term, concerned with day to day running of the company
First line/Junior Management e.g. team leaders
Staff rotas
Covering absences

15. Decision Making – Structured Decision Making Models
Stage
Identify the Problem
Identify the Objectives
Gather Information
Analyse the Information gathered
Devise possible solutions
Select the best solution
Communicate the decision
Implement the decision
Evaluate the decision P O G A D S C I E

16. Decision Making – Structured Decision Making Models
SWOT Analysis
Strengths (Int)
Build; Enhance
Weaknesses (Int)
Resolve; Reduce
Opportunities (Ext)
Exploit; Expand
Threats (Ext)
Avoid; Thwart

17. Decision Making – Structured Decision Making Models
Advantages
Disadvantages
Decisions are well thought out – time taken to gather info
Wide range of ideas – many solutions
Internal & External factors considered
Decisions are evaluated
Decisions are shared with stakeholders
Time consuming process
Hard to find info and can be expensive
Hard to choose from range of solutions
Instinct and gut decisions are lost
No guarantee that decision will work

18. Example No. 1 – Computer Games Industry
The problem is a falling market share …

19. Example No. 2 – Upgrading Technology
Apply the “POGADSCIE” model to choose a new laptop for the staff in your firm.

20. Decision Making – ICT & Decision Making
Spreadsheets
What if scenarios
Graphs for comparisons
Forecasts can be made
Databases
Info can be stored, edited, searched, presented using reports
Word Processing
Letters, & reports can communicate decisions
Presentation Software
Communicates decisions to a number of people at once

21. Decision Making – ICT & Decision Making
Internet
Wide variety of sources of information
Communicate via websites & social media
Intranet
Documents shared in the organisation
Communicate to a wide number of people 24/7 and cost effectively
Attachments can be sent
Videoconferencing
Meetings can take place over long distances, saving time and money.

22. Decision Making – Constraints
Availability of finance
Number and skill of employees
Employees resistant to change
Ability and skill of the manager
Policies and procedures of the organisation e.g. environment
Quality of the information available
Technology available

23. External Factors

24. External Factors - PESTEC
External factors are those outwith the organisations control.
However it is important companies are aware of these factors and know how to respond to them.
These factors can affect the business in both a positive and negative way.

25. External Factors - PESTEC
POLITICAL – arise from the action of governments
New laws or changes to existing laws
Minimum wage, H&S, Equality, Trading
Changes in taxation
Income, corporation, VAT
Government Spending
Infrastructure e.g. roads, rail, airports
Government targets
Environmental targets e.g. recycling, carbon emissions

26. External Factors - PESTEC
ECONOMIC – factors that encourage spending
Unemployment rate changes
Can be affected by the business cycle e.g. recession
Interest rate changes
Money businesses & consumers borrow from the banks
Economic policies
Changes at the Bank of England e.g. quantitative easing

27. External Factors - PESTEC
SOCIAL – changes in UK demographics
Changing fashions/tastes/trends
New products vs. out-dated products e.g. new technologies
Changing demographics
Where people live, how long people live for, amount of leisure time
Changing working arrangements
Working hours, part-time, flexi-time, tele-working

28. External Factors - PESTEC
TECHNOLOGICAL – rapid changes in new technology
New technology becomes available
e.g. tablet computers
Growth of new tech industries
E-commerce and now S-commerce
Be able to talk about new types of technology that exists:
Tablet computers; Wireless technology; Cloud storage; S-commerce; 4G etc.

29. External Factors - PESTEC
ENVIRONMENTAL – increasing awareness of environmental factors
Changes in weather
Seasonal demand for products e.g. ice-cream. Extremes of weather e.g. flooding
Environmental pressures
Pressures to increase recycling, reduce carbon emissions, reduce packaging e.g. plastic bags

30. External Factors - PESTEC
COMPETITION – someone providing a similar product
New competitors
Growth in an industry will bring about increased competition e.g. app gaming
New competitor products
New technology and inventions being used by competitors e.g. updates to smart phones

31. External Factors – Exam help
With all of these factors you must be able to identify examples of how these factors affect businesses
E.g. One political factor is changing laws for example the national minimum wage…
You must also be able to explain how they affect the business in either a positive or negative way.
E.g. The national minimum wage can have a negative impact as the company will now have to spend more money on employees wages which may mean they have to reduce spending on other areas of the business…

32. Stakeholders

33. Stakeholders
Stakeholders are groups of people who have an interest and an influence in a business.
We also need to the interdependence and conflict of these stakeholders
Interdependence – why a stakeholder needs another stakeholder
Conflict – disagreements between stakeholders

34. Stakeholder Interdependence Conflict Owners & Employees
Owners need employees to carry out tasks, and employees need owners to pay them wages.
Owners need employees to be productive, and Employees need employees to train them.
Owners want to pay low wages to make more profit, whereas employees want high wages for their work.
Owners want employees to work many hours, whereas employees want to work as few as possible
Owners & Customers
Owners need customers to buy products to make profit, and customers need owners to provide them with products.
Owners need customers to be loyal to maintain sales, and customers need owners to reward loyalty e.g. discounts
Owners want high prices to get high profits whereas customers want as low prices as possible.
Owners want to provide a cheap service to keep costs low, whereas customers want a high quality service.

35. Stakeholders
Write down the interdependence and conflict relationships between the following stakeholders:
Owners & Banks
Owners & Governments
Owners & the Local Community

36. Stakeholder Interdependence Conflict Employees & Customers
Employees need customers to buy so they get paid, and customers need employees to give a good service
Employees want customers to spend as much as possible to get commission, whereas customers want as much discount as possible.
Owners & Suppliers
Owners need suppliers to provide goods on time, and suppliers need owners to repeat orders.
Owners need suppliers to provide quality products at a cheap price, and suppliers need owners pay on time
Owners want supplies at a cheap price whereas suppliers want the opposite to maximise profits.
Owners want to wait as long as possible to pay, whereas suppliers want everything paid on time if not early.