1. Chapter 3: UNDERSTANDING THE BUSINESS ENVIRONMENT
Components of Business Environment
Macro Environment Influence
Micro Environment Influence
Internal Environment of the Organization
Types of Business and Supporting Industries
Identifying Business Opportunities
Evaluating Business Opportunities

2. Components of Business Environment
Environmental scanning can lead to an idea that can be converted into a business opportunity.
Two approaches in scanning the environment:
a. macro perspectives
b. micro perspective.

3. Components of Business Environment
Example: the agricultural sector
Agricultural Sector
Forestry
Fishing
Plantation
Poultry
Veneer plywood
Logging
Furniture
Sawn timber
Fishing equipment
Deep-sea fishing
Fishing processing
Wholesales/distribution
Clearing plantation
Planting
Processing
Wholesales/supplies
Poultry farming
Processing
Wholesales/supplies

4. Components of Business Environment
Macro perspective; agricultural sector offer business opportunities in forestry, fishing, plantation and poultry industries.
Micro perspective; each industry offer specific business opportunities. Eg. Poultry?

5. Macro Environment Influence
Factors in macro environment
a. socio-cultural
b. political and legislation
c. economy
d. technology

6. Macro Environment Influence
Socio-cultural factors. Demographic and cultural trends.
- demographics: ethnic group, age, gender, geographic location, distribution of income.
- social trends: lifestyle, tastes and preferences.
Political and legislation. Policy, legislation & regulations.
- trade barriers, political risks, trade agreement, taxation, government spending.

7. Macro Environment Influence
Economy. Current state of the economy, labour market, interest rates, currency value/foreign exchange rate, overeseas opportunities, etc.
Technology. Technology changes takes 2 forms; pure invention or process invention.
pure invention: semiconductors.
process invention: small changes in design, product formulation, manufacturing, materials and distribution.

8. Micro Environment Influence
Factors in micro environment
a. Consumers
b. Competitors
c. Suppliers
d. Financial institutions
e. Government agencies
f. Non-government organizations

9. Micro Environment Influence
Consumers. Main target group. Maybe individuals, or groups of people, or industrial buyers (dealers, agents, wholesalers, retailers.
Competitors. Businesses that fulfill the same customer needs or have the potential to serve those customers. Can be identified through customers’ input or business directories.

10. Micro Environment Influence
c. Suppliers. Influence the price and quality of products supplied.
d. Financial institutions. Provide loans. Influence loan amount, duration and interest/dividend rates
e. Government agencies. Provide various incentives, training, other types of support.
d. Non-government organizations. Chambers of commerce, consumer groups, religious groups, environmental groups.

11. Internal Environment of the Organization
Resources. Skills, ideas, knowledge and experiences, financial, human resources, technology, reputation (image).
Structure. Structure and strategy must fit.
Culture. Inculcate positive corporate culture. How?

12. Types of Business and Supporting Industries
The output of an industry may require input from other industries.
This form industrial linkages among industries from the same sector or other sectors.
Forward linkage
Car distribution
Service workshop
Supplier of spare parts
Car rental service
Taxi company
Backward linkage
Component industry
Transportation
Tyre industry
Cleaning service
Supplier of equipment
& office supplies
National Car
Project

13. Identifying Business Opportunities
Four major steps in identifying, evaluating and selecting a business opportunity.
1. Identifying the needs and wants of customers
2. Scanning the environment and evaluating of self and the community.
3. Screening of business opportunities.
4. Selecting a business opportunity and preparing a business plan.

14. Evaluating Business Opportunities
Experience
Knowledge and skill
Financial situation
Interest
Networking
Values/Norms of the community

15. Evaluating Business Opportunities
Experience. Many entrepreneurs involved in businesses
that are suited to their own experience.
Knowledge and skill. To establish whether that someone really knows what to do.
Financial situation. Financially able. Access to sources of fund. Financially viable.

16. Evaluating Business Opportunities
Interest. Interest give more confidence and a sense of responsibility.
Networking. Establish network to expedite business processes.
Values/Norms of the community. Business opportunities must be coordinated with the values or norms of the community.

17. Screening Business Opportunities
Legality.
Monopolistic power and level of competition.
Capital requirements.
Risks.

18. Screening Business Opportunities
Legality. Ensure business opportunity is legal.
Monopolistic power and level of competition. Business opportunity is not monopolized. Rank the level of competition.
Capital requirements. Business opportunity chosen must be appropriate for the financial resources available in order to avoid financial problems in the future.
Risks. Evaluate risks. Level of risk depends on three factors; difficulty or ease to enter a business, size of capital and profit margin.

19. Changing Environmental Trend
Economic trends
Teenagers with more cash
and disposal income
Resulting new business, product and
service opportunities
Designer cloths, compact discs, DVD players, games and consoles, handheld computers.

20. Changing Environmental Trend
Resulting new business, product and
service opportunities
Social trends
Increased interest in
fitness
Fitness centers, in-house exercise
equipment, weight-loss centers, health
food stores.

21. Changing Environmental Trend
Resulting new business, product and
service opportunities
Technological trends
Advances in biotechnology
Biotech related pharmaceutical
products, food products, veterinary
products, information services.

22. Changing Environmental Trend
Resulting new business, product and
service opportunities
Political and Regulatory trends
Increased EPA and OSHA standards
Consulting companies, software to monitor compliance, products to help ensure compliance.

23. NEW PRODUCT COMMERCIALISATION?