THE ENTERPRISING ENVIRONMENT COMPLETE NOTES

Business constraints
Lesson objectives
➢ Define the term business constraints
➢ Identify business constraints
➢ Explain the business constraints
Def: These are factors that limit the decision making of businesses and are represented by the
acronym PESTEL
Def: These are external factors that have a direct impact on business activities and are
represented by the acronym PESTEL
P - Political
E – Economic
S – Social
T – Technological
E – Ecological
L – Legal
Political
➢ L
➢ This is a constraint emanating from government policies and economic systems, this
is mainly based on how the government runs the country e.g. free market economy,
command economy and mixed economy.
➢ More so, it is based on the type of government that is implemented by the government
such as democratic, autocratic, socialism and monarchy.
➢ The ideology of the ruling party, the policies that it will set in Zimbabwe such as
indigenisation policy and ZIMASSET, these can either promote or hinder the
development of new business start ups
➢ Political stability and instability can promote or hinder investments in a country.
➢ There are certain stakeholders that can force the government to change its policies
such as:
✓ Trade unions
✓ Pressure groups/ lobbyists
✓ Political parties

‘Together we are stronger’ 0777329822/ 0717140557

 ➢ Political instability is a major factor that hinders business establishment and growth in
an economy through riots and looting of stocks hence discouraging investments in a
country.
➢ Corruption is another factor that curbs or hinders business development due to
increased costs, this is due to greedy people who conduct business deals for their own
benefit.
Economic constraint
➢ This is another constraint that emanates from the political environment, it emerges
from the economic systems implemented by the government such as free market,
command economy and mixed economy.
➢ In a command economy the government dictates what happens on the market rather
the market forces of demand and supply.
➢ The economic policies comprise of the following:
✓ Fiscal policy
✓ Monetary policy
Fiscal policy
➢ This is a policy that is mainly based o government spending [expenditure] and
taxation
➢ Increase in taxation can increase business expenditure which can increase business
expenditure, a burden that will passed on to the customers by the business reducing
consumers marginal propensity to spend.
➢ There are certain businesses that heavily rely on taxes as a source of finance public
corporations [parastatals], this will increase the burden on the tax payers [PAYE]
hence affecting spending levels reducing sales and profit margins of the businesses.
➢ Limited companies pay double taxes namely:
✓ Tax on profits
✓ Tax on dividends, this will cripple the business or may lead businesses to
window dress their accounts to safe guard their profits
Monetary policy
➢ This is a policy that is based on interest rates and money supply
➢ An increase in money supply will influence exchange rates hence products become
expensive due to an increase in the cost of production to businesses that import raw
materials. The government controls money supply so as to curb inflation and stabilise
the local currency visa vee other currencies.
‘Together we are stronger’ 0777329822/ 0717140557
 ➢ An increase in interest rates discourages borrowing which will affect the sales volume
of the businesses as consumers will have less to spend.
➢ The increase in the interest rates is usually passed on to the consumers by businesses
since these rates will increase expenses hence affecting profit margins.
NB// consumer buying behaviour and spending rates are influenced by policies that are set by
the government [economic]

Social constraints
➢ This mainly focuses on customs, believes, practices and cultural aspects, it also deals
with social responsibilities of the business [corporate social responsibility] e.g.
Econet and Edgars [Mhanyame marirangwe trust] they offer scholarships.
➢ If businesses need to operate in a social environment, they need to cater all social
classes and social preferences e.g. a business cannot establish a pork selling butchery
in a Marange or Seventh day communities
➢ One cannot establish a bar in a Christian community or a butchery to sell beef in an
Indian community
➢ If one needs to establish an enterprise in a community he/she should learn the
language, customs and beliefs to ensure the business is accepted and this will
guarantee is survival.
Technological constraint
➢ This is mainly based on sophisticated electronic gadgets used in businesses, thus
making business better.
➢ Adopting to current and sophisticated tech enables businesses to run effectively and
efficiently hence providing quality goods and services and elimination of wastages
[total quality control]
➢ Failure to adopt to tech changes can have negative impacts to the business in terms of
speed, quality, storage and retrieval of information.
➢ Technology can influence business activities e.g. creation of an online selling
platform which will increase sale of the business. i.e. chicken inn has developed and
online platform where they sell products and goods will be delivered to your doorstep.
➢ Technology enables businesses to efficient production methods that ill lower the cost
of production hence selling cheap products and enjoying competitive advantage over
rival organisations.
Ecological constraint
‘Together we are stronger’ 0777329822/ 0717140557
 ➢ This is a constraint that is concerned with the surrounding in which the business is
operating in.
➢ Businesses are now mainly concerned with pollution levels such as air, so
manufacturing firms are now using carbon filters to try to reduce ozone [O3 ]
depletion, the government has also come up with a tax termed carbon tax.
➢ Some businesses involved in fish business are over fishing hence leading to depletion
of fish in the seas. While those organisations that are mainly concerned with the
environment such as lake harvest have developed fish farms to conserve fish
profitably
➢ Some organisations such as Sodbury school have developed a policy to conserve the
environment termed Cut One Plant One policy [COPO] reducing the chances of
desertification.
➢ Some enterprises such as Trek have dedicated themselves to recycling metal and
develop bulls that resemble their business hence adding value to their gas stations
Legal constraints
➢ This is a constraint that is mainly concerned with laws, regulations and policies set by
the government and local government.
➢ The laws can be legal formalities laws required when one needs to establish an
enterprise e.g. limited company:
✓ Memorandum of association
✓ Articles of association
✓ Certificate of incorporation
✓ Trading certificate [for public limited companies]
➢ A sole trader only requires a trading licence that is obtained from the local
government or council
➢ All businesses should comply with national and local laws which can influence
business activity either negatively or positively, businesses need compliance with the
following laws:
✓ Labour laws
✓ Health and safety needs
✓ Tax laws
✓ Environmental laws
✓ Intellectual property laws.

‘Together we are stronger’ 0777329822/ 0717140557

THE ENTERPRISING ENVIRONMENT POSSIBLE QUESTIONS
distinguish between internal and external stakeholders
explain the role of each internal and external stakeholder
differentiate resources and capabilities
explain the need for resources in an enterprise
explain reasons for analysing capabilities
identify different types of resources required in an enterprise
identify the internal and external environmental factors
describe the internal and external environmental factors
identify different ways of acquiring resources
analyse different forms of resource ownership
justify ownership of resources
explain various ways of sustainable use of resources
explain the importance of using resources sustainably
identify business constraints
explain the business constraints
identify opportunities and risks for enterprise
investigate opportunities and risks associated with local business enterprises
identify risks associated with business enterprises

‘Together we are stronger’ 0777329822/ 0717140557