UNIT-6 Introduction to the Business Environment PATHWAYS TO OTHM Level 3 Diploma In Business Studies
Learning Outcome: 1 In this lesson you will be covering the following learning outcomes: Understand different types of businesses and their functions. 1.1 List different types of businesses found in the public and private sectors. 1.2 Identify the various stakeholders involved with a business. 1.3 Describe an organisation’s business objectives. 1.4 List a range of benefits of socially responsible business behaviour.
Introduction
A business aims to satisfy customers’ needs and wants. Businesses operate in the private, public or third sectors of the economy and in the primary, secondary or tertiary sectors of industry. The three main sectors of industry in which a company can operate are:
• Primary • Secondary • Tertiary
Primary The primary sector of industry is concerned with the extraction of raw materials or natural resources from the land. Any business that grows goods or extracts materials from the land would be classed as a primary sector business. Examples of businesses that operate in the primary sector would be Farming • Mining • Fishing
• Oil production.
Tertiary The tertiary sector of industry is concerned with providing a service. Services are activities that are done by people or businesses for consumers. Examples of businesses that operate in the tertiary sector would be • Hairdressers • Banks • Supermarkets • Cinemas
Business activities are the core of every organisation. After incorporation of the firm or starting a business and being idle will not create revenue. It will remain as a cost-incurring node. It’s the function of input and activities that generates revenue. Hence the collection of day-to-day operations, financing, and investing activities powers the entity to run efficiently and generate revenue. Types of Business Activities Different activities in an entity are segregated into different types primarily based on their nature. The three main types of business activities are operating, financing, and investing activities.
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Operating Operating activities refer to the core activities performed by an entity daily like production, sales, and marketing. Operating activities are inherent to every entity. It helps produce goods and services to the target market to achieve the desired result. These activities cause cash outflows, and its successful conduct contributes significantly to the cash inflows. One of the main sources of operating activities is administrative units like accounting and human resources. Similarly, other departments like manufacturing, marketing, and sales department entail various operating activities.
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Investing Investing activities originate when an entity engages in tasks like purchasing and selling property, plant, and equipment. The investment activities section in the cash flow statement portrays the cash inflow and outflow during a specific period when the company engages in investments. Illustration only
Cash outflow commonly occurs due to investing in fixed assets, and inflows are obtained from the sale of fixed assets.
Financing Financing activities are associated with collecting funds for a firm’s growth and attaining financial strength. They may use the fund for investing in long-term projects and support daily operations. It portrays cash flow between the business, its investors, and creditors. As a result, an entity’s financing activities throw light into its capital structure: the proportion of equity and debt used. The activities include collecting long-term funds and settling the long-term liabilities or other obligations. The financing activities section of the cash flow statement comprises dividend payment, proceeds from stock and debt issuance, repayment of long-term loans and purchase of treasury stocks, etc.
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Different types of organisation have different advantages and disadvantages. These must be considered when owners decide on which form their organisation should take. Types of organisation In business there are different types of organisation categorised by different types of ownership.
• Private sector • Public sector • Third sector
These different categories of ownership make up what we call the sectors of the economy.
Private sector Private sector organisations are owned by individuals. These businesses are driven by profit.
• The profit from private sector organisations benefits the owners, shareholders and investors. • They are financed by private money from shareholders and by bank loans.
The private sector has different types of business ownership. The most common ones are: • Sole trader • Partnership
• Private limited company
Public sector ▪ Public sector organisations are owned by the government. They provide goods and services for the benefit of the community. ▪ They are run by the government. They operate with money raised from taxes. ▪ The public sector means the organisations run by government that exist to provide a service for the population and communities. Money to pay for these is raised through a variety of taxes, eg: • Income Tax • National Inurance • VAT • air passenger duty • fuel duty
Once this tax is collected it is allocated to various government budgets.
Third sector ▪ Third sector organisations are owned and run voluntarily by trustees. ▪ These organisations are not run by the need to make profit but by the need to help the community. ▪ They operate with money from donations and gifts. Any profits are reinvested in the organisation. ▪ Third sector organisations can be run as a social enterprise. The third sector is not about making a profit but rather making a difference to society. Third sector organisations are categorised into: • Charities and community groups • Social enterprises
Efficiency cannot exist without structure. Without structure, businesses would struggle to reach that well-oiled machine status every company strives to obtain. In business, this structure comes from ownership style. Because no business is exactly the same, there are different types of business ownership, all with different traits that make them suited for some companies and wrong for others. When deciding the business ownership, the first step is learning what the different structures are, depending on your situation, your long-term goals, and your preferences.
There are 4 Types of Legal Structures for Business: 1. Sole Proprietorship 2. General Partnership
3. Limited Liability Company (LLC) 4. Corporations (C-Corp and S-Corp) Illustration only
1. Sole Proprietorship
A type of business entity that is owned and run by one individual – there is no legal distinction between the owner and the business. Sole Proprietorships are the most common form of legal structure for small businesses. 2. General Partnership An association between two or more people in business seeking a profit. Partnerships can be created with little formality, but because more than one person is involved, a partnership agreement should be created. A partnership agreement stipulates the terms of the partnership by formalising rules for profit/loss sharing, ownership percentages, dissolution terms, and management rights among many other things.
3. Limited Liability Company (LLC) A hybrid between a corporation, general partnership, and sole proprietorship. Owners of an LLC are called members. Members may include individuals, corporations, other LLCs and foreign entities. Most states permit an LLC with only one owner, called a “single member LLC.”
4. Corporations (C-Corp and S-Corp) Corporations are the most complex business structure. A corporation is a legal entity that is separate and independent from the people who own or run the corporation, namely shareholders. A corporation has the ability to enter into contracts separate from that of the shareholders, but it also has certain responsibilities such as the payment of taxes. Corporations are generally more appropriate for larger established companies with multiple employees or when other factors apply (i.e. corporation sells a product or provides a service that could expose the business to sizable liability). Ownership is designated by issuing shares of stock. The two types of corporations are C-Corps and S-Corps. The major difference among the two types of corporations is the tax treatment of the two entities:
Stakeholders involved with a business Stakeholders are parties invested in the success of a business or organisation. Many decisions and results need to be considered from the perspective of various stakeholders to ensure all investments are honoured. There are many roles you can serve in that require you to understand the needs and wants of different stakeholders (Civera &Freeman, 2020). Who are Stakeholders in Business? Stakeholders are parties that take interest in a specific company, often for financial investment. They can directly impact decisions or successes of an organisation through: ➢ Sharing their feedback on company decisions or processes ➢ Providing continued loyalty or participation ➢ Increasing or decreasing financial investment ➢ Taking a position or making a decision that goes against a company's goals and strategy
External stakeholders Internal stakeholders ▪ ▪ ▪
Owners Managers Employees
COMPANY
▪ ▪ ▪ ▪ ▪ ▪ ▪
Customers Communities Shareholders Creditors Government Labour unions Competitors
Managers • Managers directly oversee employees within their department and execute the tactics communicated to them by the owner in the strategy in addition to delegating tasks and making sure the employees have the right directions in performing certain tasks. Overall, managers hold the responsibility of completing their tasks and having their employees meet their objectives in the process of successfully reaching business goals. • All managers impact the same comprehensive strategy that the owner decides to implement and measure success off of. Here are some levels of management; ➢Senior managers: These high-level leaders include a Board of Directors, Chief Executive Officer or the President and other C-level executives who delegate direct supervision duties to the middle and lower managers. ➢Middle manager: These include Regional Managers, Department Managers or Section Managers who usually work in a specific region and represent a larger company. They carry out tactics to ensure success in their region to employ lower-level managers to hit their performance goals. ➢Lower managers: Direct supervisors or other Front-Line Managers execute plans and distribute tasks to front-line employees who report to them.
Employees • Employees are hired by the company as an instrumental asset in completing tasks that result in products or services provided to clients or consumers. These stakeholders contribute in exchange for compensation, benefits, training and professional development. Their time and effort are investments made to the organisation, and they depend on the organisation's success to ensure their continued employment. • Employee feedback can be considered to determine if they are satisfied with their environment, role and work-life balance and other factors. Their satisfaction can directly impact their productivity, which can then affect overall output and success as well as the satisfaction of other stakeholders.
External Stakeholders • An external stakeholder is someone who a company recognises that makes decisions concerning operations. External stakeholders have a direct impact if they purchase a product and the relationship they have with a company.
Customers • Customers purchase a product or service of the company. Sales, marketing, public relations and the overall strategy centred around the customer, and their interest in these strategies determine whether they buy a product. Customers buying products greatly affect the success of an organisation, and customers can be given access to new products if the company has the profit to expand their product line. Overall, the customer is vital to the success of a company, and their satisfaction can directly influence whether internal stakeholders are also satisfied.
Communities • Communities are made up of the people who live near an organisation's physical location. The opinions of people living in those communities influence an organisation because their opinion of a company's facilities and adherence to environmental and other local, state and federal regulations can impact a company's reputation. Positive relationships with communities can ensure internal stakeholders and other external stakeholders, such as customers, shareholders and investors remain satisfied. • A company's relationship with the community that surrounds them can also impact whether they purchase products and services and contribute to the company's financial success. • Companies enact corporate social responsibility initiatives that benefit a local or global community. Programs such as volunteering build a relationship with a company's local community to create an image that persuades them to interact with a business. Companies must focus on the communities that can compile the most sales with their business and establish and core relationship to increase the prospect of future sales.
Creditors
• Creditors can be a person, company or a government that lends property, service or capital to an organisation. There are two types of creditors, including: ➢ Secured creditors have a legal benefit of collateral over some of all of the assets pertaining to a business. ➢Unsecured creditors can be suppliers, customers or contractors that can lend capital without having collateral they can get in return. • A creditor can charge collateral after an organisation purchases or acquires a product, service, property or another factor. Making payments to creditors is crucial in building a positive relationship with them while having the capital to scale a business. If a company is doing well, then it is likely making on-time payments to a creditor and forging a strong relationship.
Government • The government is the ruling body of the country in which a business operates. The government takes taxes out of the company's revenue as well as from employees' income. It also enforces labour laws that organisations are required to follow to ensure safe working conditions for employees. in addition, it sets regulations on the financial system to protect consumers.
• A business must follow federal, state and local rules and regulations to continue and grow its operations, making this external stakeholder especially vital to an organisation's success. Following these regulations, remaining transparent as necessary and seeking opportunities to partner with government agencies to provide mutually beneficial services can help a company build a positive relationship with the government.
Labour Unions • Many industries and organisations work with labour unions that legally represent the employees of an organisation and work with all levels of management to secure pay, benefits and adequate working conditions for all staff. Employees pay fees or union dues to earn this representation and negotiate contracts to guarantee or improve conditions of employment. If there are alterations to a company policy that affects employees, then labour unions intervene to ensure that the terms are agreed to on the employees' behalf. • Since labour unions work closely with employees, their satisfaction is directly related to how the organisation's employees feel. This external stakeholder's satisfaction is very important to the company's productivity as well as financial and cultural success.
Competitors • Competitors are an entity that has a conflicting goal with another business that offers similar products and services. These external stakeholders compete for the same opportunities to profit within the same market. Having strong competitors can motivate an organisation to innovate better products and services, improve marketing to their audience and increase their profit over other companies in its industry.
Stakeholders
Area of concern
Managers - Top managers - Middle managers - First line managers
To make decisions and manage/coordinate the business activities such as follows; - Planning - Organising - Leading - Controlling
Owners/shareholders
Profitability Dividends Security of investments (ensure the safety of the capital invested) Stability (going concern of the business )
Employees
Salaries and wages Job satisfaction Job security Working conditions Opportunities for career development
Creditors
Reliability (ability to pay) Period of paymen
Society
Impact to the environment Job creation Contribution to society
Stakeholders
Area of concern
Competitors
Product prices Fairness of competition Market share
Government
Payment of taxes Contribution to economic growth Job creation Impact to the environment
Consumers
Quality and price of the products/services After sales services Credit facilities Discounts offered
Business objectives
• The purpose of the business objectives are to lead the business successfully. • Objectives are statements of specific outcomes that are to be achieved (Johnson, Scholes and Whittington, 2011). • The aims and objectives – both at the corporate and strategic business unit level – are often expressed in financial terms. They could be the expression of desired sales or profit levels, rates of growth, dividend levels or share valuations. • The organisations also have market based objectives, many of which are quantified as targets such as market share, customer service, repeat business and so on.
The hierarchy of objectives are:
• Corporate Objectives Examples: Increase client satisfaction from 82.0% to 90.0% by December 31, 2020 Improve corporate reputation by 10% by the end of the financial year 2021 • Business / Strategic Objectives Example: Improve market penetration by 2% by the end of 2020
• Functional Objectives Example: Reducing the cost of operation by 5% by the end of financial year • Tactical Objectives
Example: Increase Business to Customer sales by 4% by the end of 2nd quarter of the financial year Corporate Objectives derive the main scope and direction of the organisation. If the organisation has been divided into several business units, each business unit would develop separate strategic objectives for themselves based on the corporate objectives. Thereafter, business and functional objectives would have to be developed in order to specify the scope and direction of the main functional activities leading to tactical objectives in the operational level.
Business Objectives need to be SMART • Specific – The objective should be simple and clear. It should include precise terms. • Measurable – The objective to be achieved must be numerically measured. Without numeric measurement it is impossible to identify how much has already been achieved from the objectives. • Achievable – The company or the staff should be well aware of the resources or capabilities they posses to reach a certain level. If it seems to be unachievable it would simply be ignored, or the company should strive to allocate the necessary resources. • Realistic – The objectives that have been set need to match with the organisational values and beliefs. Achieving the objective must contribute to the company’s success. • Time-bound – Without a time frame, no task can be effectively completed. If there is no time scale, achieving the objective can continue indefinitely and there will be no way of measuring success.
Learning Outcome: 2 In this lesson you will be covering the following learning outcomes: • Understand a range of basic business and management structures. 2.1 Explain the function of different business departments. 2.2 Explain an organisation’s staffing and management structure. 2.3 Describe a range of factors that can influence business culture.
Distribut ion
The purposes of functional areas The main purpose of functional areas is to ensure that all important business activities are carried out efficiently. This is essential if the business is to achieve its aims and objectives.
Producti on
Research and developme nt (R & D) Adminis tration
Finance Functional areas in business organisations
Human resource s
ICT
Custom er service
Sales Marketi ng
The administration function Administration is a support function required by all businesses – and this does not mean just doing keyboarding or filing. Senior administrators carry out a wide range of tasks, from monitoring budgets to interviewing new staff for their departments.
Routine administrative tasks include opening the mail, preparing and filing documents, sending emails and faxes. Others require more creativity and flexibility, such as arranging travel or important events, from staff meetings to visits by foreign customers. In a small organisation, an administrator is often a ‘jack-of-all-trades’ who can turn a hand to anything – from checking and paying invoices to keeping the firm’s website up to date. In a larger firm administration may be carried out in every department, rather than just one.
The customer service function All businesses must look after customers or clients who have an enquiry, concern or complaint. Today, customer expectations are high.
When people contact a business they expect a prompt, polite and knowledgeable response. Unless they get a high level of service they are likely to take their business elsewhere in the future. For this reason, many businesses have customer service staff – or a customer service department – where trained staff handle enquiries and complaints positively and professionally. This does not mean that other staff can ignore customers and their needs. It simply means that one group specialise in assisting customers.
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The distribution function Distribution means ensuring that goods are delivered to the right place on time and in the right condition. Some companies, such as Amason and Debenhams, deliver direct to the customer, particularly when goods are bought online. Other businesses, including B & Q and Sainsbury’s, hold stocks in giant regional warehouses, for delivery to stores around the area. Illustration only
Distribution involves more than just arranging for goods to be collected. For it to be cost-effective, costs must be kept as low as possible. This means, for example: • Planning vehicle routes to avoid back-tracking. This keeps fuel costs down and saves time • Ensuring that vehicles do not return empty. This is only possible if goods are both delivered and collected. • Vehicles that only deliver goods normally operate on a regional or local basis to minimise ‘empty journey’ time
The finance function Most entrepreneurs consider this is the most important function in the business. This is because all businesses need a regular stream of income to pay the bills. Finance staff record all the money earned and spent so that the senior managers always know how much profit (or loss) is being made by each product or each part of the business and how much money is currently held by the business.
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The human resources (HR) function The human resources of a business are its employees. Wise organisations look after their staff on the basis that if they are well trained and committed to the aims of the business, the organisation is more likely to be successful. HR is responsible for recruiting new employees and ensuring that each vacancy is filled by the best person for the job. This is important because the recruitment process is expensive and time-consuming. Hiring the wrong person can be costly and cause problems both for the individual and the firm.
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The ICT function Today, even the smallest businesses need someone who understands ICT and what to do if something goes wrong. This is vital, because the number of crucial business tasks now carried out on computer and the importance of the data stored in the system mean that any system failure can be catastrophic. Most organisations have a computer network where staff computers are linked through servers. Maintaining the servers, installing new (communal) software and additional hardware, such as printers and scanners, is all part of the ICT function. ICT staff may also be involved in the purchase or issue of computer supplies, such as cabling and network cards and consumables such as printer cartridges – to ensure that they are compatible with the system.
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The marketing function Marketing is all about identifying and meeting customer needs. Many businesses consider this so important that they are said to be marketing-led. In this case, everyone in the organisation is trained to put the customer first – from the production worker, who has to produce high quality goods, to the accounts clerk, who must respond to a customer enquiry promptly and accurately. The sales function Sales is a crucial function for all businesses. It is pointless having superb products or services if no one buys them. For that reason, most businesses have sales targets as part of their aims and objectives. Meeting these is the responsibility of the sales staff or sales team. The job of the sales staff varies, depending upon the industry. Shops that sell basic products, such as chocolates or magazines do not need to do much selling. Most customers call in to buy something, choose the goods they want, pay and leave.
The production function Production refers to the manufacture or assembly of goods. Production staff must ensure that goods are produced on time and are of the right quality. Quality requirements can vary considerably. Whilst an error of 0.5 mm would not matter much for a chair or table, for an iPod or DVD player it would be critical. Checking quality does not mean just examining goods after they have been produced. Today quality is ‘built-in’ at every stage of the process, starting with the raw materials. Many buyers set down a detailed specification for the goods they order, such as Marks and Spencer which sets down precise standards for all its producers. For clothing, this includes the type and weight of material and the thread and fastenings too. The research and development (R & D) function This function is concerned with new product developments as well as improvements to existing products or product lines. In many industries, it also involves product design as well. Improvements to existing products are often ongoing as a result of market research or customer feedback (see page 00). You can see these improvements around you all the time – such as ring-pull cans, microwavable containers for ready meals, transparent jug kettles and memory sticks for computers.
Functional area
Links
Sales and Production
Sales must know production schedules and agree delivery dates of orders with Production so customers are not promised dates which cannot be met. Production must tell Sales about production problems which will affect customers
Sales and Finance
Finance must know about customer enquiries to check their credit rating before sales are made. Finance will be involved when discounts are agreed or when there are problems with customer payments.
Distribution and Finance
Finance must know when goods have been despatched so that invoices can be sent out
Distribution and Sales
Sales must be able to inform customers when deliveries are due and be aware of any problems.
Sales and Marketing
Must liaise over sales promotions and adverts so that sales staff can expect/handle enquiries.
Functional area
Links
Finance and all other departments Finance monitors departmental spending and the achievement of financial targets. Human Resources and Finance
Will liaise over salary increases and bonuses.
Customer Service, sales and marketing
Customer Service must pass on customer feedback that could affect future product developments or future sales.
R & D and Production
Liaise over new product developments and methods of production
Human resources and other functional areas
HR handles job vacancies, promotion opportunities, training courses and CPD for all areas/staff.
An organisation’s staffing and management structure An organisational structure defines how activities such as task allocation, coordination, and supervision are directed toward the achievement of organisational aims. Organisational structure affects organisational action and provides the foundation on which standard operating procedures and routines rest. Structure will give employees more clarity, help manage expectations, enable better decision-making and provide consistency.
Organisational charts also assign responsibility, organise workflow and make sure important tasks are completed on time.
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There are seven common types of org structures: 1.
Hierarchical org structure
2.
Functional org structure
3.
Horizontal or flat org structure
4.
Divisional org structures (market-based, product-based, geographic)
5.
Matrix org structure
6.
Team-based org structure
7.
Network org structure
1. Hierarchical org structure The pyramid-shaped organisational chart we referred to earlier is known as a hierarchical org chart. It’s the most common type of organisational structure—the chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees), and each employee has a supervisor. 2. Functional org structure Similar to a hierarchical organisational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Primarily, though, employees are organised according to their specific skills and their corresponding function in the company. Each separate department is managed independently.
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3. Horizontal or flat org structure A horizontal or flat organisational structure fits companies with few levels between upper management and staff-level employees. Many start-up businesses use a horizontal org structure before they grow large enough to build out different departments, but some organisations maintain this structure since it encourages less supervision and more involvement from all employees.
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5. Matrix org structure A matrix organisational chart looks like a grid, and it shows cross-functional teams that form for special projects. For example, an engineer may regularly belong to the engineering department (led by an engineering director) but work on a temporary project (led by a project manager). The matrix org chart accounts for both of these roles and reporting relationships. 6. Team-based org structure It’ll come as no surprise that a team-based organisational structure groups employees according to (what else?) teams—think Scrum teams or tiger teams. A team organisational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control.
7. Network org structure These days, few businesses have all their services under one roof, and juggling the multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices can get confusing. A network organisational structure makes sense of the spread of resources. It can also describe an internal structure that focuses more on open communication and relationships rather than hierarchy.
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The key functions that managers perform include planning, organising, leading, and controlling. This module focuses specifically on the organising function. Organising involves coordinating and allocating a firm’s resources so that the firm can carry out its plans and achieve its goals. This organising, or structuring, process is accomplished by: • Determining work activities and dividing up tasks (division of labour) • Grouping jobs and employees (departmentalisation) • Assigning authority and responsibilities (delegation)
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The result of the organising process is a formal structure within an organisation. An organisation is the order and design of relationships within a company or firm. It consists of two or more people working together with a common objective and clarity of purpose. Formal organisations also have welldefined lines of authority, channels for information flow, and means of control. Human, material, financial, and information resources are deliberately connected to form the business organisation.
Some connections are long-lasting, such as the links among people in the finance or marketing department. Others can be changed at almost any time—for example, when a committee is formed to study a problem.
Firms typically use traditional, contemporary, or team-based approaches when designing their organisational structure. In the traditional approach, companies first divide the work into separate jobs and tasks. Managers then group related jobs and tasks together into departments. Five basic types of departmentalisation are commonly used in organisations: ▪ Functional: Based on the primary functions performed within an organisational unit
▪ Product: Based on the goods or services produced or sold by the organisational unit ▪ Process: Based on the production process used by the organisational unit ▪ Customer: Based on the primary type of customer served by the organisational unit ▪ Geographic: Based on the geographic segmentation of organisational units
The Factors that can influence business culture There are several factors which affect the organization culture:
The first and the foremost factor affecting culture is the individual working with the organization. The employees in their own way contribute to the culture of the workplace. The attitudes, mentalities, interests, perception and even the thought process of the employees affect the organization culture. Example - Organizations which hire individuals from army or defence background tend to follow a strict culture where all the employees abide by the set guidelines and policies. The employees are hardly late to work. It is the mindset of the employees which forms the culture of the place. Organizations with majority of youngsters encourage healthy competition at the workplace and employees are always on the toes to perform better than the fellow workers.
The sex of the employee also affects the organization culture. Organizations where male employees dominate the female counterparts follow a culture where late sitting is a normal feature. The male employees are more aggressive than the females who instead would be caring and softhearted. The nature of the business also affects the culture of the organization. Stock broking industries, financial services, banking industry are all dependent on external factors like demand and supply, market cap, earning per share and so on. When the market crashes, these industries have no other option than to terminate the employees and eventually affect the culture of the place.
The Factors that can influence business culture Market fluctuations lead to unrest, tensions and severely demotivate the individuals. The management also feels helpless when circumstances can be controlled by none. Individuals are unsure about their career as well as growth in such organizations. The culture of the organization is also affected by its goals and objectives. The strategies and procedures designed to achieve the targets of the organization also contribute to its culture. Individuals working with government organizations adhere to the set guidelines but do not follow a procedure of feedback thus forming its culture. Fast paced industries like advertising, event management companies expect the employees to be attentive, aggressive and hyper active.
The clients and the external parties to some extent also affect the work culture of the place. Organizations catering to UK and US Clients have no other option but to work in shifts to match their timings, thus forming the culture. The management and its style of handling the employees also affect the culture of the workplace. There are certain organizations where the management allows the employees to take their own decisions and let them participate in strategy making. In such a culture, employees get attached to their management and look forward to a long term association with the organization. The management must respect the employees to avoid a culture where the employees just work for money and nothing else. They treat the organization as a mere source of earning money and look for a change in a short span of time.
Learning Outcome: 3 In this lesson you will be covering the following learning outcomes: Understand basic marketing in business. 3.1 Define the term ‘marketing’ in relation to a business. 3.2 Define ‘needs’ and ‘wants’ in relation to marketing. 3.3 Identify a range of market segment categories. 3.4 Explain market research and the ‘marketing mix’.
Marketing puts customers at the centre of a firm's activities. Rather than producing goods and services and then seeing if people buy them, companies should focus on understanding customers' needs and meeting these needs better than the competition. Marketing is now more diverse than it ever was before, with more focus being made on the customer, giving them more power over an organisation with the aid of technology. Due to its recent advancement and sophisticated nature, marketing, like any other discipline, can be split into different specialisms. Given the vast scope that it now covers, it is becoming increasingly difficult for the marketer to reflect expertise in all these areas. There are many definitions of marketing which generally revolve around the primacy of customers as part of an exchange process. Customers' needs are the starting point for all marketing activity. Marketing managers try to identify these needs and develop products which will satisfy a customer's needs through an exchange process. The Chartered Institute of Marketing provides a typical definition of marketing: "The management process which identifies, anticipates and supplies customer requirements efficiently and profitably"
Marketing is therefore much more than just selling. To many people, marketing is simply associated with a set of techniques. As an example, market research is a technique for finding out about customers' needs and advertising is a technique to communicate the benefits of a product offer to potential customers. However, these techniques can be of little value if they are undertaken by an organisation which has not fully taken on board the philosophy of marketing. The techniques of marketing also include, among other things, pricing, the design of channels of distribution and new product development.
• A want is a requirement arising out of the desire, aspiration, or motivation of an individual to get satisfaction. • These are elements that an individual desires but could live without. Furthermore, these requirements might change frequently depending upon several factors like surroundings, perception, environment, culture, and even age. • Some examples of wants include entertainment, travel, electronic devices, fashion, etc.
Market segmentation Organisations which make presumptions about customers' needs, or produce goods and services which are chosen for their convenience in production, are probably not practising the marketing concept. A true marketing orientation requires companies to focus on meeting the needs of individual customers. In a simple world where consumers all have broadly similar needs and expectations, a company could probably justify developing a marketing programme which meets the needs of the "average" customer. In the early days of motoring, Henry Ford successfully sold as many standard, black Model T Fords as he was able to produce. In the modern world of marketing, few companies can have the luxury of producing just one product to satisfy a very large market. Some still can, for example water, gas and electricity utility companies generally produce a single standard of product for all of their customers. But this is the exception rather than the rule. Most companies face markets which are becoming increasingly fragmented in terms of the needs which customers seek to satisfy. So, while the customers of Henry Ford may have been quite happy to have a plain black car, today's car buyers seek to satisfy a much wider range of needs.
Segmentation is essentially about identifying groups of buyers within a market who have needs which are distinctive in the way that they deviate from the "average" consumer. Some consumers may treat satisfaction of one particular need as a high priority, whereas to others this need may be regarded as being quite trivial. Consider the case of the new car market. Buyers no longer select a car solely on the basis of a car's ability to satisfy a need to get them from A to B. Additionally, a buyer may seek to satisfy any of the following needs: ➢To provide safety and security for themselves and their family.
➢To provide a cost-effective means of transport. ➢ To give them status in the eyes of their peer group. ➢ To project a particular image of themselves. ➢ To be seen making a gesture towards the environment by buying a "green" car.
There are many more possible factors which might influence an individual's choice of car. The important point is that the market is composed of buyers who have quite different priority needs and who approach the decision to buy a car in very different ways. Therefore the features which they each look for in a product offer may differ quite markedly from the "average" consumer. It follows therefore that a marketing plan which is based on satisfying the needs of the average buyer will be unlikely to succeed in a competitive marketplace. If another company can satisfy the needs of small specialist groups better, then the company which seeks to serve them with just an "average" product offer will lose business from this group. The process of identifying groups of buyers who differ in the needs which they seek to satisfy from a purchase is often referred to as market segmentation. We will define the process of market segmentation as: "The identification of sub-sets of buyers within a market who share similar needs and who have similar buying processes".
Market segmentation, then, is at the opposite end of a spectrum of marketing strategy from mass marketing. Some of the important distinctions between these two extremes are summarised below: In an ideal world, each individual buyer would be considered as having a unique set of needs which they seek to satisfy, and firms would tailor their product offering to each of their customers. In the case of some expensive items of capital equipment bought by firms, this indeed does happen (for example, there are very few buyers of hospital body scanners in the UK, so firms can justifiably treat each customer as a segment of one). In the case of products which are relatively low in value and high in sales volumes, however, it would be impossible for firms to cater to each individual's unique needs.
People or firms within a market can be segmented according to a number of criteria. For sales of goods and services to private buyers, the following are typical segmentation criteria: ➢ gender ➢ socio-economic status
➢ age ➢ lifestyle ➢ frequency of purchase ➢ purpose of purchase ➢ attitudes towards the product
➢ geographical location. A number of specific methods of segmenting markets are considered in more detail below. These are not watertight definitions and you will recognise that they show considerable areas of overlap.
(a) Demographic bases for segmentation
(b) Socio-economic bases for segmentation
It has been traditional to talk about class differences in the way that goods and services are purchased. A person's occupation is often a good indicator of the products they are likely to purchase. You may have come across a number of measures of socioeconomic groups, for example the frequently quoted terms A, B, C1, C2, D and E which describe groups with different socio-economic circumstances. Marketers find the concept of social class too value laden and imprecise to be of much practical use. Instead, more objective indicators of social class are used, in particular occupation and income.
(c) Psychographic bases for segmentation So far, most of the bases for segmentation have been reasonably measurable. However, they are often criticised for missing the unique personality factors that distinguish one person from another. Under the heading of psychographic factors, we can identify a number of factors: • lifestyle – for example, compare the differing lifestyles of your colleagues, expressed in such ways as their need for excitement, status, etc.; • attitudes – for example, compare people's attitudes towards organic food; • benefits sought – for example, some people may buy a watch for telling the time accurately, whereas others may buy it as a fashion accessory; • loyalty – for example, some buyers may feel more comfortable sticking with suppliers who they are familiar with, while others may be more adventurous.
(c) Psychographic bases for segmentation and Behavioural
(d) Geodemographic bases for segmentation Marketers have traditionally used geographical areas as a basis for a market segmentation. Very often, there have been very good geographical reasons why product preferences should vary between regions (e.g. preferences in beer have traditionally varied between the north and south of England). Many companies have managed to adapt their product offer to meet the needs of different regional segments. National newspapers, for example, produce regional editions to satisfy readers' needs for local news coverage and advertisers' needs for a regional advertising facility. More recently, geographical segmentation has been undertaken at a much more localised level, and linked to other differences in social, economic and demographic characteristics. The resulting basis for segmentation is often referred to as geodemographic, the underlying idea being that where a person lives is closely associated with a number of indicators of their socio-economic status and lifestyle. This association has been derived from detailed investigations of multiple sources of information about people living in a particular neighbourhood. (e) Situational bases for segmentation A further group of segmentational variables can be described as situational because an individual may find him-/herself grouped differently from one occasion to the next – for example, an individual may seek a relaxing social meal at a restaurant on one occasion, but a faster business lunch on another occasion.
(d) Geodemographic bases for segmentation
Marketing Research Alan Wilson, 2018 has laid out the steps of a marketing research process.
The key areas to understand are: •The occurrence which led to the decision that marketing research was required to understand the context. For instance, if a company is keen to assess customer satisfaction levels subsequent to a sizeable drop in sales, the management would be keen on assessing the customer behaviour towards products, rather than simply conducting research to obtain inputs for performance measurements.
•The alternative courses of action available to the organisation. It is important to define the problem clearly to identify alternative solutions. Usually, there is a danger of including peripheral research questions, which may significantly change the nature of the project. Due to such occurrences, the research may lose focus. •The individual pieces of information that are required to evaluate alternative courses of action. •The timescale within which decisions have to be taken and the budget available.
As per Chartered Institute of Marketing, 2019 official terminology, a research brief is the description of a research problem used to inform potential suppliers of solutions. Therefore it provides the specification with which the researchers will design the research project. The research brief consists of the following elements: •Background – This section should set out a brief explanation of what is happening within the organisation. •Project rationale – Sets out the reasons for the research being required. •Objectives – Sets out the precise information needed to assist marketing management with the problem or opportunity. •Outline of the possible method – States the broad indication of the approach to be undertaken in the research.
•Reporting and presentational requirements – This sets out how the research progress will be updated in terms of interim reports, and how the final research findings will be presented, i.e. how many hard and soft copies and the need for an oral presentation. •Timing – Sets the time-scale for the proposal submission and research completion.
3. Develop a proposal and research design & Agency selection
Develop a proposal and research design - On submission of the research brief, a research proposal will be developed. This is the submission prepared by the research agency for a potential client, specifying the research to be undertaken. Based on the research proposal, the client will select an agency to undertake the research. The proposal then becomes the contract between the agency and the client company. Just like the research brief, the research proposal is also very important. The research proposal needs to include details on the company background, research rationale, objectives, approach and method, reporting and presentation procedures, timing, fees, personal CVs and related experience, and references. All these details have to be presented from the research agency’s perspective. Agency selection - When a client organisation presents the research brief, potential research agencies present their research proposals. After assessing the proposals put forwarded, the client company will select the agency.
After selecting the most suitable agency, the actual research will be undertaken. In this regard, formulation of suitable research objectives is vital as these objectives provide the necessary guidance. Based on the research problem and objectives, a suitable methodology has to be laid out. The following sequence is followed: 4. Collection of Secondary data (internal, external)- This is information that has been previously gathered for some other research purpose. There are two basic sources of secondary data: internal data and external data. Internal data is available within the organisation, e.g. sales reports, information from customer loyalty cards and marketing information systems. Whereas external data is information available from published and electronic sources originating outside the organisation, e.g. government reports, newspapers, the internet and published research reports. 5. Collection of Primary data – This is collected through a programme of observation and qualitative or quantitative research, either separately or in combination. Quantitative research uses a structured approach with a sample of the population to produce quantifiable insights into behaviour, motivations and attitudes. Qualitative research uses an unstructured research approach with a small number of carefully selected individuals to produce non-quantifiable insights into behaviour, motivations and attitudes.
Piloting and data capture – All primary research should be tested to see that the data collection methods are sound. Pilot questionnaires assist in developing the structure and question sequence. They ensure that the data collection device is effective. ‘Fieldwork’ is the generic term used for data collection. It may cover the collection of a range of data. Data input, coding and editing - Data which is gathered from respondents must be recorded and edited to produce a data set that can be analysed. In qualitative research, it is the production of a transcript of the interview, and in quantitative work it is the creation of a data set that the computer can work with. All potential responses must be given a different code to enable analysis. Data is checked for completeness and consistency, and if there are significant problems the respondent may be called back to check details. 6. Data analysis - Data analysis may differ from project to project, depending on data collection methods, and also on the expected use of the findings. The data used for analysis should undergo validation, editing and computer data entry. It may then be tabulated or analysed using a wide variety of statistical and nonstatistical techniques before being fed into any presentation of the research results.
7. Results and findings, Presentation and recommendations Results and findings - Based on the research findings, marketing decisions should be made. Research findings need to be clearly presented to solve the research problem. Thus, results need to be presented in a manner that can be accessible to the audience. Report/presentation - Research results will be presented in the form of a written report, and it may be supported by an oral presentation. The supporting data will also need to be presented but this should be in the appendices. The body of the report remains solutions-focused. Members must ensure that research conclusions disseminated by them are clearly and adequately supported by data. Business decision - The output should be marketing decisions that are made at reduced risk, and a feedback loop to the business situation should exist.
Marketing Mix It’s essential to have a comprehensive knowledge about the fundamentals of the marketing mix and how its elements have to be shaped in order to successfully implement the marketing strategies and achieve the marketing objectives. The key components of the Marketing Mix are: • Product • Price • Place • Promotion • People • Physical Evidence • Processes
Learning Outcome: 4 In this lesson you will be covering the following learning outcomes: Be able to utilise a number of key business concepts. 4.1 Explain the difference between a micro and macro business environment 4.2 Explain why quality is important in business 4.3 Create a SWOT analysis for an organisation 4.4 Carry out a PESTLE analysis on an organisation
The micro-environment includes all those micro factors that affect business strategy, decision making and performance. It is vital for business success to conduct macro environment and micro-environment analysis before decision-making process. Macro environment factors include political, economic, social, technological, and legal factors. On the other hand, company micro-environment factors include customers, suppliers, competitors, employees, shareholders and media. Mostly, in the marketing environment, micro factors do not affect all the businesses in the industry in the same manner. The reason is that every business is different in size, capacity, financial resources, human resources and overall strategies.
Examples of Micro-Environment Factors Affect Business: 1. Customers The customers are the central part of any business as they tend to attract and retain most of the customers to generate revenue. Therefore, organisations must adopt a marketing strategy that attracts the potential customers and retains the existing customers by taking into consideration the wants and needs of customers and by providing the after sales services and value-added services. Illustration only
2. Competitors The competitors of an organisation can have a direct impact on business strategies. The organisation must know how to do a competitive analysis of competitors and have a competitive advantage. An organisation must understand, what value added services their competitor is providing or the unique selling point of their competitors. How they can differentiate from their competitors. What benefits a company can offer to the customers which competitors does not offer. Illustration only
3. Employees Skilled employees can help an organisation to achieve organisational goals and objectives. As skilled and experienced employees has expertise to support organisation to get success. This begins with the hiring process and continues through regular and timely training and development sessions. The training and development process helps the employees to work effectively and efficiently in order to achieve the organisational goals, specifically in service sector.
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4. Shareholders Shareholders of an organisation have an influence as the company want investors to increase for this, they might make a decision to increase money by buoyant on stock market, i.e., shifting to public from private ownership. This change will pressure the company as the public shareholders seek returns on their investment.
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5. Media and Social Media
The way media acts can make or break an organisation. Organisation should manage to keep a good relationship with media as whatever it shows will directly influence the organisation business. If media will show positive aspect, this will increase the business of organisation and vice-versa. In order to maintain good relations with media some organisation do maintain a public relation department who manage events and deal with media on behalf of company Organisations must understand the ways which they can reach their customers and have positive company and brand image in their mind. For this, some organisation approaches newspapers to let people know about their business and some approach consumer television programs to have the attention of a large number of direct audience.
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A macro environment refers to the overall, broader economy and the forces affecting it versus a microenvironment, which focuses on a specific sector or region’s economy. There are macroeconomic conditions or factors that affect how all businesses operate, which, in turn, affect the economy as a whole. In general, macroeconomics deals with: • Spending • Price levels • Aggregate production Macroeconomic factors affect companies that are more dependent on the overall health of the economy. Industries involving the production and distribution of staple goods and services tend to function more independently. It is cyclical industries – which largely involve luxury goods and travel – that are more heavily affected by macroeconomic factors.
Macro Environment In order to strategically manage a company, analysts often perform a DEPEST analysis, which identifies the demographical, ecological, political, economic, socio-cultural, and technological factors in the macro environment that can affect how companies operate.
Demographical
Technological
Ecological
DEPEST Political
Socio-cultural
Economic
Demographic Factors Demographic forces ultimately involve human populations that patronise businesses and contribute to the economy. There are a variety of statistics that must be analysed when it comes to demography, including age, gender, size, occupation, and need. Ultimately, fulfilling the needs of any demographic is the reason that businesses operate in the first place and why they are ultimately successful. Demographics, then, ultimately drive how a company chooses to operate and how broader markets develop. Marketing, for any business, depends heavily on paying close attention to changes in demographics. Knowing how to target new or emerging demographics is critical. Changes also must be passed on to operations and production to make sure the company continually meets its clients’ needs.
Political Factors Businesses are always limited by the political environment in which they exist. Laws and governments regularly shape how a company can operate and even have sway over the markets that companies can serve. The primary instance where political factors play a critical influence is when a company tries to move into a new market – specifically one in a different country. The company must understand the laws and regulations that dictate both the industry it operates in and any specific rules it may be subjected to.
Economic Factors Economic factors affecting the macro environment relate to forces that affect how consumers spend and their purchasing power. It is important to understand a variety of metrics and data, including: • Gross Domestic Product (GDP) and its real growth rate • Unemployment rates • Inflation • Disposable personal income • Existing spending patterns Every business should closely monitor data regularly and be fully aware of such numbers before moving into new markets in different countries.
Socio-Cultural Factors Socio-cultural factors relate to demographics in a sense but are more related to populations and how they behave based on preference and values. Different societies and cultural groups are characterised by different needs, which are often based on different core values and preferences. Cultures often develop a group mentality, which passes along core values and general beliefs. It shapes how the individuals in such cultures shop and what they choose to spend their money on. A business needs to pay attention to socio-cultural variances, especially when moving into new markets.
Technological Factors
Technological factors refer to the creation of new technologies and how they shape products, product development, and access to new market opportunities. A perfect example of a strong technological force today is wireless communication.
Nearly everyone in the world owns a smartphone, tablet, or laptop that can quickly and easily be connected to the internet. It exerts a serious impact on individuals and societies and their ability to patronise companies freely.
Mobile technology is also shaping the development of new technological devices and replacing ones that have become outdated. A company needs to continually use the most up-to-date technology in order to operate at its highest capacity and be aware of how technological applications can better serve customers.
Conduct a SWOT analysis on a business • SWOT analysis was invented in the 1960s by a management consultant named Albert Humphrey at the Stanford Research Institute. Previously, corporate planning had not met with much success. Fortune 500 companies needed a way to produce long-term planning that was executable and reasonable.
• SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company's competitive position and to develop strategic planning. SWOT analysis assesses internal and external factors, as well as current and future potential. (WILL KENTON, March 2021)
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• SWOT analysis is a technique for assessing the performance, competition, risk, and potential of a business, as well as part of a business such as a product line or division, an industry, or other entity. • Using internal and external data, the technique can guide businesses toward strategies more likely to be successful, and away from those in which they have been, or are likely to be, less successful. • Independent SWOT analysts, investors, or competitors can also guide them on whether a company, product line, or industry might be strong or weak and why. • Analysts present a SWOT analysis as a square segmented into four quadrants, each dedicated to an element of SWOT. This visual arrangement provides a quick overview of the company’s position. • Although all the points under a particular heading may not be of equal importance, they all should represent key insights into the balance of opportunities and threats, advantages and disadvantages, and so forth.
Strengths
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Strengths describe what an organisation excels at and what separates it from the competition: a strong brand, loyal customer base, a strong balance sheet, unique technology, and so on. For example, a hedge fund may have developed a proprietary trading strategy that returns market-beating results. It must then decide how to use those results to attract new investors. Weaknesses
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Weaknesses stop an organisation from performing at its optimum level. They are areas where the business needs to improve to remain competitive: a weak brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or lack of capital.
Opportunities Opportunities refer to favourable external factors that could give an organisation a competitive advantage. For example, if a country cuts tariffs, a car manufacturer can export its cars into a new market, increasing sales and market share. Illustration only
Threats Threats refer to factors that have the potential to harm an organisation. For example, a drought is a threat to a wheat-producing company, as it may destroy or reduce the crop yield. Other common threats include things like rising costs for materials, increasing competition, tight labor supply. and so on.
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How to Use a SWOT Analysis ▪ Internal What occurs within the company serves as a great source of information for the strengths and weaknesses categories of the SWOT analysis. Examples of internal factors include financial and human resources, tangible and intangible (brand name) assets, and operational efficiencies. Potential questions to list internal factors are:
(Strength) What are we doing well? (Strength) What is our strongest asset? (Weakness) What are our detractors? (Weakness) What are our lowest-performing product lines?
• Business environment analysis is the study of both the internal and external environmental factors related to a business, with the aim of finding out how such factors affect the business. The effect of such environmental factors may either be positive or negative. • This includes such internal factors as the type of corporate culture in place in the organisation and the corporate structure. • The external environmental factors include factors like the competition, consumers, location and government regulations. In this chapter we will be focusing on the external environmental factors. External factors Businesses operate in an ever-changing world. External factors are things outside a business that will have an impact on its success. Their impact can be positive or negative.
A business cannot control external factors. All it can do is react to them and make decisions to help it remain successful. External analysis, also called environmental analysis, is the process by which businesses objectively assess the changes made to their industry and broader world that could affect their current business operations. Companies do this to ensure they can adapt to changes and continue to succeed within an industry. External factors are analysed using the tool PESTLE analysis. PESTLE stands for • Political • Economic • Social
• Technological • Legal • Environmental factors.
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PESTLE analysis Political factors - relate to government controls and influences over economy or industry. Government factors may be legislation or economic policies. The political environment can affect an industry through a range of factors, including: · Trade tariffs · Conflicts · Taxation · Fiscal policies
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Economic factors – have a direct impact on a company’s long-term prospects in a market. The economic environment may affect how a company prices their products or influence the supply and demand model. Environmental factors can include: · Inflation rate · Disposable income
· Unemployment rate · Interest rates · Foreign exchange rates · Economic growth patterns
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Social factors, such as demographics and culture can impact the industry environment by influencing peak buying periods, purchasing habits, and lifestyle choices. Society is important as people’s culture and lifestyle can influence when, where and how they are likely to engage with products and services. Social factors can include: · Religion and ethics · Consumer buying patterns · Demographics
· Health · Opinions and attitudes · Media · Brand preferences
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Technological factors - may have a direct or an indirect influence on an industry. While some industries will be more affected by technology than others, innovations in technology may affect the market and consumer choices and buying power. Technological factors can include: · Automation · Technological development · Patents · Licensing · Communication
· Information technology · Research and Development · Technological awareness
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Legal factors - may affect both the internal and external environment of a company. The legal and regulatory environment can affect the policies and procedures of an industry, and can control employment, safety and regulations. Legal factors can include: · Employment laws
· Consumer protection · Industry specific regulations · Regulatory bodies · Environmental regulations
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Environmental factors - include all those relating to the physical environment and to general environmental protection requirements. While the environment is more important to some industries, such as tourism, agriculture or food production, these factors may influence a range of different industries and are worth being aware of. Environmental factors include:
· Geographical location · Stakeholder and consumer values · Environmental offsets · Weather · Global climate change
Conduct a PESTLE analysis on a business. A PESTLE analysis studies the key external factors (Political, Economic, Sociological, Technological, Legal and Environmental) that influence an organisation. It can be used in a range of different scenarios and can guide people professionals and senior managers in strategic decision-making. For the environmental portion of the analysis, Feiman said to look at environmental evolutions and regulations to determine how they could impact a business.
How to conduct a PEST analysis? 1. Identify the political factors. 2. Identify the economic factors. 3. Identify the social factors. 4. Identify the technological factors. 5. Determine necessary action.
1. Identify the political factors. Conduct internal research to identify what types of laws or policies impact you, such as the below: • Material or product sourcing (import quotas, tariffs, price supports and subsidies, and preferences)
• Human resources (visas, EEOC requirements, vaccine requirements, etc.) • Manufacturing/operations (OSHA requirements) • Accounting and finance (IRS requirements, tax hikes, breaks and deductions, and SEC reporting requirements) • Marketing and customer demand (online business law requirements, the CAN-SPAM Act, etc.)
2. Identify the economic factors.
Determine which economic factors will impact your business and research online to see where these factors are now and where top economists are predicting they will be in the future. Talk to your internal managers to see if they are experiencing or anticipating any issues in their areas. The economic factors that affect you depend on the type of business and customer you have. • If you sell consumer goods and services, look at the consumer price index, inflation, employment, consumer confidence, disposable income and wages.
• If you sell high-ticket items that require financing, look at interest rates. • If you sell B2B services such as marketing or consulting, look at unemployment and other recession measures. • If you sell or buy products as components, look at supply chain issues and tariffs.
• If you employ relatively low-wage workers, look at salaries and employment to see if you will need to raise wages to attract talent.
3. Identify the social factors.
If you have done market research on customer or target market perceptions and demographics, this step is at least partially done. It’s also a good idea to read industry publications, which frequently highlight social factors that impact the industry as a whole. Talk to your customer service and sales staff to get feedback from customers on why they buy and why they return or cancel. If you have a local business, periodically conduct an area market analysis to understand your potential customers. 4. Identify the technological factors. This is particularly important if you are in a tech industry such as software, but it impacts every industry in some way. Read industry publications and research competitors to stay informed about new technology and innovative ways of using it to deliver products and services in your field.
Feiman also suggested evaluating each factor against the following grid.
• Potential impact: Low, medium or high • Time frame: Immediate, short term or long term • Type: Positive or negative • Direction of impact: Increasing or decreasing
• Relative importance: High, medium or low
5. Determine necessary action. Once you have evaluated each factor against the grid, you and your team should determine if you need to take action in any of the areas. Here are some examples of actions you might need to take.
• Political • Lobbying against or for specific proposed laws and regulations • Bringing operations into compliance with new laws and regulations • Changing suppliers • Economic • Offering promotions and discounts
• Raising prices • Bundling products and services to offer more value • Increasing wages • Social • Adjusting marketing message
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