Business environment BBM2052

THE UNIVERSITY OF ZAMBIA
INSTITUTE OF DISTANCE EDUCTION
Business Environment
BBM2052
MODULE
Course Code: BBM2052

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should be addressed to:
The Director,
Institute of Distance Education
The University of Zambia
P.O. Box 32379
Lusaka
Zambia
Tel: +211 290719
Fax: +211 253952
E-mail: director-ide@unza.zm
Website: www.unza.zm
The University of Zambia, Institute of Distance Education Module
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ACKNOWLEDGEMENTS
The University of Zambia (UNZA), Institute of Distance Education (IDE) wishes to thank
Ms. Brenda Makoni for writing this Business Environment module, Course Code: BBM2052
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TABLE OF CONTENTS
KNOWLEDGE ........................................................................................................................................ 6
GENERAL INTRODUCTION ........................................................................................................... 11
OBJECTIVES ....................................................................................................................................... 12
UNIT 1 OVERVIEW OF BUSINESS ENVIRONMENT ............................................................... 13

1.0 Definition and characteristics of business ........................................................................... 13
1.1 Importance of environmental scanning .............................................................................. 14
1.2 Tools of environmental scanning; SWOT, PESTLE ........................................................... 16
1.3 Classification of the business environment ......................................................................... 16
1.4 Components of the business environment ........................................................................... 18
UNIT 2 INTERNAL BUSINESS ENVIRONMENT .................................................................... 22
2.0 Types of organisation .......................................................................................................... 22
2.1 Capabilities and competencies ............................................................................................. 23
2.2 Internal environmental factors ............................................................................................. 27
UNIT 3 THE MICRO BUSINESS ENVIRONMENT .................................................................. 30
3.1 The task environment Introduction ..................................................................................... 30
3.2 The competitive environment; Porter’s Diamond Theory, Porter’s Five Forces, ............... 35
UNIT 4 POLITICAL/LEGAL ENVIRONMENT ............................................................................ 40
4.1 Political ideologies .............................................................................................................. 41
4.2 Functions of government in society..................................................................................... 41
4.3 Political risk and management of political risk ... ............................................................... 41
4.4 The legal environment and regulatory framework .............................................................. 44
UNIT 5 ECONOMIC ENVIRONMENT........................................................................................ 46
5.1 Economic Development ................................................................................................... 46
5.2 Resource and Product Markets ......................................................................................... 47
5.3 Macro-economic objectives ............................................................................................... 47
5.4 Infrastructure ..................................................................................................................... 50
UNIT 6 TECHNOLOGICAL ENVIRONMENT .......................................................................... 53
6.1 Sources of technology ........................................................................................................ 53
6.2 Dynamism in technology ..................................................................................................... 54
6.3 Impact of technology ......................................................................................................... 54
6.4 Diffusion of technology ... ................................................................................................. 55
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6.5 e-business ............................................................................................................................ 56
UNIT 7 SOCIAL AND CULTURAL ENVIRONMENT ............................................................. 58
7.1 Social and customs rituals and practices .......................................................................... 58
7.2 Lifestyle patterns ... ............................................................................................................ 61
7.3 Demographic issues ............................................................................................................. 61
UNIT 8 THE NATURAL ENVIRONMENT ................................................................................. 63
8.1 The natural environment ...................................................................................................... 63
8.2 Shortage of raw materials .................................................................................................... 64
8.3 Increased cost of energy .................................................................................................... 65
8.4 pollution levels ................................................................................................................... 65
8.5 Natural resource management ........................................................................................... 68
UNIT 9 INTERNATIONAL ENVIRONMENT ........................................................................... 70
9.1 Growth of world economy................................................................................................. 70
9.2 Modes of international business ........................................................................................ 72
9.3 International institution IMF, WTO, ILO ...................................................................... 73
9.4 Regional economic blocks - SADC, COMESA, FTA, EPAs ............................................ 76
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INTRODUCTION
Welcome to this Module on BBM 2052: Business Environment. In this module you will be
equipped with knowledge and skills for managing a business entity and the problems
associated with the environment.
Having exposed you to the initial modules in Business management/Administration, we hope

by now you have realized how deep and broad this field is. In this particular module we hope
to build on your earlier experience in other modules. Critical among the components that are
emphasized on include: (I) definitions and characteristics of a business; (ii) internal and
external business environment; and (iii) assessment of international business.
Further, the module will enhance your ability to identify challenges associated with global
linkages in a competitive business environment; develop and implement business strategies to
ameliorate the identified learning challenges. We hope that you will reflect on the content and
activities in this module coupled with your experience in the area of specialization to develop
competencies to be able to identify challenges, develop, grow and implement to Business
Strategies.
Module Outcomes
Learning outcomes are statements that tell you what knowledge and skills you will have
when you have worked successfully through a module.
Knowledge
When you have worked through this module you should be able to:
 Recognize importance of Business and Environmental Scanning.
 Identify the roles of the PESTLE analysis in Business and how it can affect a business
 Discuss
 Be familiar with Key concepts in International business and the role of international
organizations.
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Skills
 Focuses on key business disciplines within an international context from research and
planning to presenting and reporting, and prepares you for international management
or consulting roles.
 Know how to develop skills in international boundaries, trade, global economics and
how to negotiate with diverse cultures.
 Get involved working on individual and group projects, writing reports and presenting
your ideas (Innovation)
 Learn to manage diverse teams and improve financial performance as well as redesign
business processes and research international
Attitudes
 Define a Business and its importance.
 Understand the nature of Business Environment.
 Analyze the trends and changes in the domestic Environment.
 Evaluate the impact of international organizations on a Business.
 Discuss problems associated with the Competitive Environment.
 Explain the growth of global linkages today.
 Discuss the opportunities and challenges faced by international Business.
Module Structure
As you can see from the table of content,, the module is divided into nine (9) units. Each unit
is in turn divided into several sub-units. Each unit has a core text and an exercise at the end.
You are required to read the text and thereafter attempt the exercise before proceeding to the
next unit.
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Assessment
2 Assignment 20%
2 Test 20%
Sub-Total Continuous assessment 40%
1 Final examination 60%
Prescribed Readings
Campbell-Hunt, C., Elkin, G., Geare, A. J., Greatbanks, R. (2009). Management,

Organisations, and the Business Environment: A New Zealand Focus, Australia:
McGraw-Hill.
Recommended Readings
1. Hill C, W, L (2010) International business, Mcgraw-Hill,

2. S Tamer Cavusgil, Gary Knight ,John Riesseberger, International Business: New
Realities, Second edition
3. Fifield P & Lewis K, International Marketing Strategy, Butterworth Heinemann
4. Jeannet J.P, Global Marketing Strategies, Houghton Mifflin
Time frame
You are expected to spend at least 75 hours of study time on this module. In addition, there
shall be arranged contacts with lecturers from the University during the residential session.
You are requested to spend your time judiciously so that you reap maximum benefit from the
course.
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Study skills
As a distance education student, you will meet a lot of challenges in your studies, particularly
that you will not always have a lecturer and fellow students to consult. You need, therefore,
to make a strategy for yourself which will make you succeed. Firstly, draw a working time-
table and stick to it. Secondly, you should know your strengths and weaknesses; capitalize on
your strengths. Thirdly, work judiciously on all the task and assignments. Be truthful since no
one is monitoring what you are doing. Submit all the work that you need to on time.
Studying at a distance
There are many advantages to studying by distance education – a full set of learning materials
is provided, and you study close to home in your own community. You can also plan some of
your study time to fit in with other commitments like work or family. However, there are also
challenges. Learning at a distance from your learning institution requires discipline and
motivation. Here are some tips for studying at a distance.
1) Plan – Give priority to study sessions with your tutor and make sure you allow
enough travel time to your meeting place. Make a study schedule and try to stick to it.
Set specific days and times each week for study and keep them free of other activities.
Make a note of the dates that your assessment pieces are due and plan for extra study
time around those dates.
2) Manage your time – Set aside a reasonable amount of time each week for your study
programme – but don’t be too ambitious or you won’t be able to keep up the pace.
Work in productive blocks of time and include regular rests.
3) Be organized – Have your study materials organized in one place and keep your
notes clearly labeled and sorted. Work through the topics in your study guide
systematically and seek help for difficulties straight away. Never leave this until later.
4) Find a good place to study – Most people need order and quiet to study effectively,
so try to find a suitable place to do your work preferably somewhere where you can
leave your study materials ready until next time.
5) Ask for help if you need it – This is the most vital part of studying at a distance. No
matter what the difficulty is, seek help from your tutor or fellow students straight
away.
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6) Don’t give up – If you miss deadlines for assessment pieces, speak to your tutor –
together you can work out what to do. Talking to other students can also make a
difference to your study progress. Seeking help when you need it is a key way of
making sure you complete your studies – so don’t give up!
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Need help?
In case you have difficulties during the duration of the module, please get in touch with the
Director, Institute of Distance Education, or the resident lecturer in your province.
All enquiries in connection with the payment of fees should be directed to the
Director, Institute of Distance Education:
The Director,
Institute of Distance Education,
University of Zambia,
P. O. Box 32379,
10101 Lusaka
Coordinator, Learner Support Services (Land Cell): +260 978772249
Senior Administrative Officer
IDE Land Line: +260 211 290719
IDE Fax: +260 211 290719
IDE E-mail: director-ide@unza.zm
http://www.unza.zm
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GENERAL INTRODUCTION TO BUSINESS ENVIRONMENT
In your own words, how would you define business environment? According to different
scholars, business environment refers to those aspects of the surroundings of business
enterprise that affect or influence its operations and determine its effectiveness. The birth,
growth and continuous development of organizations is influenced by a wide range of
variables like employees, customers, suppliers, producers and competition and all of these
make up a business environment. More specifically, Keith Davis defines business
environment as, "the aggregate of all conditions, events and influences that surrounds and
affects it”. A proper understanding of the environment by a business executive is very
essential for the achievement of success.
Business Environment presents threats as well as opportunities for any business. A good
business manager not only identifies and evaluates the environment but also reacts to these
external forces. The importance of the business environment can be neatly understood if we
consider the following facts:
1. It enables us to Identify business opportunities. All changes are not negative. If you
understand and evaluate them, you will see that they can be the reason for the success of a
business. It is very necessary to identify a change and use it as a tool to solve the
problems of the business. For example, Mr. Phanindra Sama was troubled by the ticket
booking condition in India so he used to travel a long distance to his travel agent just to
book his ticket but even after travelling such a distance he was not sure if his seat was
confirmed. looking at this, he saw the opportunity to establish an app in the face of the
problem and ended up co-founding the online ticket booking app called ‘redBus’.
2. It helps in tapping useful resources. Scanning carefully in the business environment

allows us to access valuable resources for our business. Scanning allows firms to track or
locate resources and change them to goods and services.
3. It allows us to cope with changes. Awareness of the prevailing changes in the business
environment is important for any business, whether it be changes in customer
requirements, emerging trends, new government policies or technological changes. if the
business is aware of changes that occur regularly then it can bring about a response to
deal with those changes. For example, when the Android OS market was blooming and
the customers were preferring Android devices for its easy interface and apps, Nokia
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failed to cope with the
change by not
implementing Android OS
on Nokia devices. Their
failure to adapt lead to
them losing a tremendous
market value.
4. It provides us with
assistance in planning.
This is another aspect of
the importance of the business environment. Planning purely means what is to be done in
the future. When the Business Environment is presented with a problem, it is entirely the
business' responsibility to decide the plan it will use to solve the problem. After analyzing
the changes presented, the business can incorporate plans to counteract the changes for a
secure future.
5. It helps us in improving performance. Businesses scanning their environment also deal

with the changes presented as well as flourish with them. Adapting to the external forces
helps the business to improve its performance and survive in the market.
Objectives of Business Environment
1. Knowledge of Information: Every businessman should be aware of the ability of the

current environment of the business to change accordingly.
2. Basis of Decision: It contains all the information which is needed for taking good
decision.
3. Helpful in making of policies: To make good business policies, one needs to know
and scan the business through the business environment.
4. Technological Planning: In today's environment, it is very important for the business

houses to keep themselves changing according to technological changes in the market.
5. Survival in the business: Sometimes the industry may face a recession. In such a
condition, only those businesses that estimate this entire situation in advance through
a business environment study will survive.
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UNIT 1
OVERVIEW OF BUSINESS ENVIRONMENT
1.0. Introduction
Welcome to unit one of the business environment course. In this unit you will be introduced
to the current affairs and the recent developments in the world economy. You are expected to
develop an understanding of the factors that explain differences in growth across locations
and time. This course will expose you to the problems and issues that relate to national policy
reforms and their implications on the economy in general and the world of business in
particular. This unit will teach you the strategies organisations use to retain the competitive
edge without compromising their position in the face of political, social, economical and
environmental factors using the PESTLE approach.
Aim
The aim of this unit is to give you an insight of Business environment through the
investigation of the PESTLE factors and how they influence the Business.
Objectives
By the end of this unit you should be able to:
i. Demonstrate an understanding and importance of Business Environment
ii. Identify the characteristics of a Business
iii. Explain the importance of Environmental Scanning and the tools of environmental
Scanning
iv. List the components of a basic Environment
Time Frame
6 hours
1.1. Definitions and characteristics of business
What is a Business? Let us briefly think about it and what would your definition of business
be? Business has been defined in several ways by different scholars for example Malvin
Anshen defines business as “the way by which men make their living”. In this course we
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define business as a human activity that is carried out by the unified efforts of different
categories of people with the aim to produce wealth through production and distribution of
desired goods and services. From the dictionary, the word business is defined as
“Engagement, Trade, Profession or Occupation”. Business is the denial of leisure and
embarking on an activity that produces profit. Business institutions fundamentally differ
from other institutions in that they involve an element of profit or private gain and this is the
driving force behind all businesses
1.2. Characteristics of Business
As we have studied earlier, business is a regular process of producing , purchasing and selling
of goods, with the main objective of earning profit and acquiring wealth through the
satisfaction of human wants. When more people are engaged in production or distribution of
goods and services on a regular basis, a business concern arises. Business has many
characteristics however the essential ones are as follows:
1. The sale, transfer or exchange activities for the satisfaction of human wants
2. The dealing in goods and services such as supplying of water, electricity or repairing
of cars, TVs or mobile phones
3. The regularity of dealings. Thus, if an owner of a motor car sells his car, it does not
constitute business in the real sense.
4. The distinguishing feature of business is the profit motive behind the activities.
5. Finally, undertaking risk is the inherent characteristic of business enterprise.
As you may well know, business occupies an important position in society and helps a
country to attain economic growth, create employment opportunities and make different types
of goods and services available for human consumption. Because of this, business has
captured an important position in human life. Businesses are run in environments
characterized by change known as the business environment.
1.3. Environmental scanning and tools for environmental scanning: SWOT, Pestle
Before we proceed, let us pause and ask ourselves what environmental scanning is? Taking a
look at how other scholars have described environmental scanning, we see that Friday (2015)
defines it as the process of continually acquiring information on events occurring outside the
organization to identify and interpret potential trends. Aguilar (1967) refers to it as obtaining
knowledge on events and relationships of a company from its outside environment, the
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knowledge of which would assist top management in its task of charting the company’s
future course of action. Taking both opinions from both scholars, we can define
environmental scanning as the process of gathering, analyzing and dispensing information for
tactical or strategic purposes. This process requires taking both subjective and factual
knowledge about the business environment where a company operates or considers entering.
In this field, the first notable study was carried out by Aaker (1983), and this study pointed
out that environmental scanning should focus on target information needs.
Organization decipher and learn from their environment by first scanning (information
seeking), followed by interpretation (giving meaning to the collected data) and finally
learning (taking action based on the data) (Daft and Weick., 1984). Scanning according to
Lester and Waters (2004) is a management process that uses the information from the
environment to help with decision-making, keeping in mind that the environment is under
rapid change and can greatly impact the business firm, you will begin to appreciate the
importance of environmental scanning. Friday, (2006) highlights the importance of
environmental scanning as follows:
 All environment tend to be dynamic by nature, therefore scanning is necessary to keep

abreast of change.
 Scanning reveals the elements or factors that constitute threats and opportunity to the
overall objectives of the organization.
 Scanning allows organizations to monitor and put appropriate strategies in place to

check market incursion.
 Scanning provides the necessary input to the formulation and implementation of

potent marketing strategies.
Environmental scanning has different kinds of scanning namely;
1. Ad-hoc scanning which involves short term, infrequent examinations and is usually
initiated by a crisis
2. Regular scanning which involves performing studies on a regular schedule (e.g. once
a year)
3. Continuous scanning (also called continuous learning) which involves continuous

structured data collection and processing on a broad range of environmental factors.
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The basic purpose of environmental scanning is to help management to determine the future
direction of the organization.
1.3.1. Tools of environmental scanning; SWOT, PESTLE
A PESTEL framework can be used to analyze and monitor the macro-environmental factors
that may have a profound impact on an organization's performance. It is useful at the
beginning of a new business. It is mostly utilized together with analytical tools such e.g.
SWOT and Porter's Five Forces to provide a clear understanding of a situation and related
internal and external factors. PESTEL stands for Political, Economic, Social, Technological,
Environmental and Legal factors. Each factor will be elaborated on below in form of a table.
Source: Business-to-you.com
1.4. Classification of the business environment
Now, before we get lost, am sure you are wondering whether we have not done this part yet,
well in the preceding subunits, we only defined what a business environment is. So in this
part we are going to classify the business environment. I hope this clarifies any queries at this
point. Business environment can be classified as static, dynamic, internal, external, market,
and non-market environment. Let us briefly study each one of separately starting with static
running through the rest and ending with non-market business environment.
1.4.1. Static Environment
How can we define static environment? Static environment refers to environments were little
change occurs as regards to change in factors. Businesses are affected by a multiplicity of
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factors and forces that constitute the business environment. Since most of these factors are
usually uncertain and unpredictable, the business firm does not have much control over them.
However, certain factors may remain fairly static for example, the social and psychological
altitudes of people in an economy takes several decades or centuries to change. The static
environment therefore makes the business manager's task quite easy since they can formulate
policies with confidence and certainty. Traditional and backward economies tend to have
comparatively static environment.
1.4.2. Dynamic Environment
Dynamic environments as compared to static environment of course constitute those

environments were factors change very quickly and this change cannot be easily anticipated.
Development in the fields of transportation and communication have made the world a closer
one. In a dynamic economy or population, human wants, capital resources including
technology are continuously changing and as such the economic environment also changes.
In order to meet the needs of the ever-growing population, high-yielding agricultural systems
should be used and more industries should be established as well as increased health care,
medical facilities and educational opportunities. The Government has to change the monetary
and fiscal policies to cope with the changing conditions by regulating or controlling business
activities. In view of this dynamic change occurring, the business manager must be very alert
in identifying the changes in dynamic factors of the environment and should revise the
business policies as per the changes forecasted.
1.4.3. Internal Environment
Internal environment refers to the internal factors of the business. Keeping this in mind, what
factors do you think are related to the internal environment of any business? Internal
environment greatly influences the strategy of business operations and decisions. This is
because the internal environment is related to the value system of the founders, the mission
and objectives of business organization and the business policies adopted contributing to the
success of the business. The structure of the business organization as well as the composition
of the Board of Directors are also important aspects of the internal environment because these
greatly influence the decisions that are undertaken in the day-to-day business operations. The
skill, quality, attitude and morale of the work force in a business organization contributes
tremendously to the strength or weakness of the organization. All these factors play an
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important role in shaping the fortunes of the business and every business manager is required
to have a good understanding of these factors.
1.5.4. External Environment
As you may have guessed, external environment refers to factors that are outside the
business. The business unit normally will have no control over these factors. Business
external environment can be classified into two main types namely; micro and macro
environment.
1.4.4.1. Micro-Environment
The micro environment includes factors that act and react in the immediate environment of
the business enterprise as you may have guessed. These factors will affect the performance of
the company and naturally It includes suppliers of raw materials, marketing intermediaries,
competitors in business, customers and also the public.
1.4.4.2. Macro Environment
The macro environment on the other hand consists of societal forces that have an effect on
the micro environment. These are include demographic, technological, political and not
forgetting cultural factors. International factors such as world economies and war also fall
within the scope of the macro environment. Up to this point you have noticed that factors in
the micro environment are closely associated with the business unit as compared to the macro
factors. The micro or macro factors are not really needed to cause the same effect on all
firms.
1.4.5. Market Environment and Non-Market Environment
Lastly, we look at the market and non-market environment. How can we distinguish between
market and non market environment? What are they? Loosely market environment informs us
about how the business firm’s environment is characterized by market forces like demand
and supply, the number of firms competing in the same market and the number of similar
products in that market resulting in either price competition or non-price competition among
the competing firms. Non-marketing environment on the other hand refers to the laws enacted
by the government, social traditions and many other factors.
1.5. Components of the business environment
Business environment comprises of two components; internal and external environments. We

shall start by looking at the internal environment.
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Source:Presentation-process.com
1.5.1. The internal environment
The internal environmental factors of a business can to a certain extent be controlled. Why do
you think this is so? Well, this is because internal factors are closely related to the business,
for example factors such as value systems and objectives can easily be modified by the firm
to improve efficiency. However, not all internal factors can be changed that easily. These
various internal factors will be discussed in detail in the next unit which is Unit 2.
1.5.2. The external environment
The external environment is generally classified into micro environment and macro
environments. These two components cannot be easily regulated or controlled by the business
manager.
1.5.2.1. The Macro Environmental Elements
Building on the previous discussion, the macro environmental elements are as follows:
1.5.2.1.1. Political environment and Business
This involves the local government's influence on the business environment. Ordinarily it
focuses on new business regulations in areas such as tax administration as well as
adjustments in customs duty. It could also include the fiscal policy of the government and it
might be important in determining which industry gets support from the government. Other
issues include any tariffs the government may impose on certain industries.
1.5.2.1.2. Economic Environment and Business
These are factors concerned with economic performance in the area in which a company
operates. It influences business operations through fluctuations or changes in interest rate,
exchange rates, inflation and competitive environment. It basically entails the business
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organization answering the following questions: Is there a rise in inflation that the company
should worry about when they consider future running costs of the business? Who is the
competition? What models can be adapted analysis of demand and supply? Other things to
critically consider include interest rates, the purchasing power of the consumers and foreign
exchange.
1.5.2.1.3. Social Environment and Business
Social factors are normally concerned with cultural aspects such as norms, beliefs and values.
These influence business based on various psychological factor such as perceptions, religion
and other motivation factors that influence consumer behavior. The social factors can
influence a business through consumer behavior due to different aspects of values and beliefs.
The business must also analyzes aspects of the social environment such as the demographics,
the population size and dominant cultural trends that might affect business strategy.
1.5.2.1.4. Technological Environment and Business
Technological factors have been an integral part for businesses to consider, they have gained
even more importance recently. These represent the prevalent technological trends in an area
and how they can be either beneficial or detrimental to the success of the business. They
include such things as the devices owned, the internet and cellular connectivity and any
emerging trends in technology that might affect the business’s activities in the future. For
example, the readily availability of the internet negatively affected the business of internet
cafe. At first there was a boom in this business but as the internet became more easy to access
and computers became cheaper, few customers continued using internet cafes.
1.5.2.1.5. Legal Environment and Business
This poses a huge effect to the business environment as it basically governs the various
aspects of operations. The business has to analyze the specific laws that affect the businesses
operating in specific area.
1.5.2.1.6. Ecological Environment and Business
These are environmental factors that are critical to running of a business smoothly.
Environmental factors are vital in an increasingly environmentally conscious world. The
company has to determine how its practices and location will affect the surrounding
environment and take mitigating measures to ensure the environment is preserved. A good
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example is the carrying out of environmental impact assessment before any mining and
milling business in order to protect the environment.
1.5.2.1.7. The specific (Micro) Environment Elements
The micro environment consists of Suppliers, Customers, Competitors, Government and

Pressure groups. companies are not all affected by the micro environment in the same way
because of the size, capacity, capability and strategies are different. For example, suppliers of
raw materials giving more concessions to big companies. However, they may not give the
same concessions to small companies due to reduced volumes being purchased. When it
comes to competition, competitors will not mind about the rival company if it is a small
organization, but the will be very concerned if the rival organization is large. Micro
environment might be similar in various firms. In such a case, response of these firms to their
micro environment may differ as each firm will attempt to achieve a higher success level.
Activity 1
1. Identify the characteristics of a business and briefly write on them
2. What is the importance of Business environment.
3. Using an Organization of your choice, discuss how the macro business environment
may affect operations of an organization.
4. With an aid of an example, Demonstrate the importance of environmental scanning to

a business and how best the tools can be used.
1.8 Unit summary
We have come to the end of this unit. let us do a recap of what we have learnt so far. In this
unit we discussed the definition and characteristics of business, the importance of business
environment and the components of business environment. We learnt the importance of
understanding the values, objectives and mission of any business aim as a pre-requisite for
profit maximization and why it is important to scan the business environment. Since we have
understood these, give it a go at answering the questions that follow in the activity.
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UNIT 2
THE INTERNAL BUSINESS ENVIRONMENT
2.0. Introduction
Welcome to another interesting unit. First of all, we define an organization generally as an

organized group of people with a distinct purpose. Organizations can essentially be
businesses, associations or societies. All organizations comprise of people and the
management structure of any organization defines the relationships between various
operations and members. The structure thus outlines the functions, roles and duties that are
assigned to each particular member, and the authority to carry out the assigned functions.
Aim
Unit 2 will enable you to appreciate and understand the different organizational structures
and why they exist as such. It will also spell out the different types of organizations and their
formation.
Objective
i. Explain the competences of the organizations
ii. Demonstrate an understanding of how the internal environment may affect the
organization.
iii. Identify different types of organizations and there functions
Time Frame
6 hours
2.1. Types Of Organization
There are several types of organizations, for example; sole proprietorship, partnerships,
corporations, Limited Liability Companies and cooperatives. The form of ownership, income
tax structure and the owner's legal liability basically determines the type of an organization.
At this point, let us define each one of the types of organizations.
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2.1.1. Sole proprietorship
Starting with the first one, sole proprietorship organization is defined as a business owned by
a single individual and this of course is the most basic and easiest type of organization to set
up. In this type, the owner has unlimited liability and creditors can collect any of his personal
assets when a default in payment arises.
2.1.2. Partnership
In the case of partnership, the business is owned by two people who have agreed to jointly
put resources into a specified investment. The number may not always be restricted to two, it
can also be any number above that.
2.1.3. Corporation
A corporation on the other hand is a business with a distinct legal personality from its owners
and in this system, the share holders as they are commonly known are the owners of the
corporation even though they have limited involvement in the daily running of the company.
Unlike sole proprietorship and partnership, in a corporation, owners enjoy limited liability.
2.1.4. Cooperative
A cooperative is an organization that is owned by a group of people for the sole purpose of
mutual benefit.
2.1.5. Limited liability
Lastly, a limited liability company can be loosely thought of as a hybrid of corporations and
partnerships.
For further information, please watch the video on this link:

https://study.com/academy/lesson/types-of-business-organizations-advantages-
disadvantages.html
2.2. Capabilities and Competences
For any organization, competencies refers to when the resources or capabilities of an

organization meet a certain criteria. An organization that wants to compete in any market and
maintain a huge advantage over its competitors should ensure that its capabilities are
adequate and meet the criteria which is valuable, expensive to imitate, non-substantial and
rare. The core competences of organization are categorized as follows:
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2.2.1. Organic competences
A business enterprise can be said to be an organic entity whose development is analogous to

biological growth. The same way a human being eats, grows and increase its production, so
does a business entity grows and through investment ultimately produces more. Again in the
same manner that a human being goes through childhood, adulthood and maturity, a business
equally goes through the same stages. During infancy, the core objectives of a business is
survival and later on the objective becomes growth and establishment of a prestigious
position in the business world. In this way, we can thus classify organic competency as
follows;
2.2.1.1. Survival objective
With regards to the objective of survival, we can also include the maintenance of a firm's
competitive position in the market and earning profits that are adequate to protect it from
extinction when economic and political odds are against it.
2.2.1.2. Growth objective
The growth objective can be pursued in many other ways and growth can also be measured in
terms of size of the business and ability to capture a large share of the market or obtaining
increased earnings on the total investment.
2.2.1.3. Prestige maintenance objective
The objective of maintaining prestige is a very important factor in any business because the
presentation of a good image in business attracts customers and also allows for borrowing of
funds for the business. In a nutshell, survival, growth, prestige and recognition are all prime
subsidiary objectives of the organic nature of business.
2.2.2. Economic competence
Economic competency refers to the core objectives of business firms during the early times
and these include;
2.2.2.1. Profit
Profit is the basic primary measure of the success of a business. It confirms the economic
strength of the firm and whether the argument is service delivery or not, profit is the primary
objective of the business. Generation of profits is thus an important objective of business as it
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allows for generation of adequate resources for the sole purpose of staying in business and for
development.
2.2.2.2. Creation of customers
The sole purpose of business is customer creation because it is the customer that determines
what a business is and without customers, the business does not make any sense since
business activities are only sustained when large customers buy the products and services of
that particular business.
2.2.2.3. Innovation for better stability and income
Lastly, innovation is important to any business because innovation helps to reduce the cost of
production and acquiring wealth in the highly competitive world. In line of this, management
must be looking out for novel designs and adopt new techniques so as to grow the firm
strongly and rise above competitors, otherwise the firm will be put out of business.
2.2.3. Social competence
Social competence is difficult to define in the clear sense because the needs of society are
always changing. Since every institution is society's tool, institutions are therefore assets
through which society performs constructive functions for the benefit of the society. A
business' social responsibility changes depending on the economic level of development for
that particular country or community and also the people's requirements. Whether in
underdeveloped or developed countries, social competence is stated in the following ways:
2.2.3.1. Supply of quality goods
This is one of the basic social objectives of the business and requires that the goods supplied
are unadulterated, are of adequate quantities and priced appropriately. This objective in real
sense is not fulfilled in underdeveloped countries since most of the businesses thrive on the
peoples miseries. For example, the rubber industry reports huge profits every year through
sales of tyres however, the countries and the laborers especially in Indonesia and the DRC
were rubber is grown and harvested live in unimaginable poverty.
2.2.3.2. Providing employment
The business enterprise is able to provide employment opportunities in backward regions

only if it takes up new projects. The government can extend its cooperation to the business
enterprise through infrastructural facilities.
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2.2.3.3. Avoidance of anti- social practices
Anti-social practices are a great constraint to the success of a business enterprise and
avoiding such should make up one of the primary objectives of a business firm. A business
must avoid profiteering, black-marketing and other undesirable activities. Of course, society
recognizes and understands that the business needs to make profits, however, there is no
justification that society will accept for exploiting the consumer through creation of artificial
scarcities.
2.2.4. Human competence
Human competence implies that the businesses should have a responsibility of looking after
those that make it succeed. For example, the employees of the business must be seen and
considered as human beings and not just mere tools for business and desirable approaches
such as a parental approach must be used. In short, you cannot treat your employees as tools
with little consideration and expect them to perform. This competence consists of the
following :
2.2.4.1. Fair deal
If you are the overall leader of a business firm and you give fair wages and provide better
environmental conditions to your employees and everyone around you, your business will
easily fulfill its objective of fair deal to employees and the business will thrive. When
employees are given fair deals, they spend more time on the task assigned to them and spend
less time worrying and thinking about how they will supplement their merger wages.
2.2.4.2. Participation
Participation is another important concept that is gaining a lot of ground in the modern world
and employees that are given representation in management tend to be more happier and
problems like strike and go slows which of course will negatively interfere with the business
will not be common and when they arise, you as the manager or leader will be able to solve
them by means of healthy cooperation.
2.2.4.3. Job satisfaction
Job satisfaction is a very important obligation of any business to its employees. As a member
of the management of any business, it is your responsibility to select and recruit the right
people for the right job.
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2.3. Internal environmental factors
As opposed to the external business environmental factors, factors in the internal business
environment to a certain extent are controllable because the firm has the power to change and
modify these factors and by doing so improve its efficiency. You should note at this point
that the firm is unable to modify or change all the factors. These factors are as follows:
2.3.1. Value system
The value system refers to the aspects of ethics and morals within the organization that help it
to achieve its mission and objectives. It is a well known fact that how well the value system is
shared among all in the organization greatly affects the success of the firm.
2.3.2. Mission and objectives
For some of us coming from companies i.e. employed, maybe we can pause and ask a
question. Do we all know and understand the mission and objectives of the various firms we
work for? Why is it important to know these? Well, this is because the objectives and mission
of any business guides the business domain, direction of development, business philosophy
and policy of a company. We can split these two for easier understanding. The objective of
the business firm is to maximize profits. The mission on the other hand defines the overall
reason for the existence of the firm and guides and influences the business decision and
economic activities of the firm.
2.3.3. Organization structure
The importance of a good organizational structure, composition of the board of directors and
the professionalism of management cannot be overemphasized in influencing business
decisions. The nature of the organizational structure has a significant influence over the
decision making process in an organization. An efficient business organization contains a
structure that is suitable for fast decision making.
2.3.4. Corporate culture
Corporate culture determines the company's internal environment. In closed corporate

cultures, business decisions are made by managers while lower level managers have no
participation decision making. This kind of system is common in African and Asian firms
and leads to a lack of trust and confidence among subordinate officials and of course secrecy
pervades throughout the organization. Also a sense of alienation especially among the lower
level managers and workers of the company is commonly felt. In an open and participating
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culture, business decisions are made by the lower level managers and top management has a
high degree of confidence in the subordinates. This type of culture doesn't allow participation
of workers in managerial tasks. Development of a work culture that includes and supports
employees is important for maintaining a business with a health internal environment.
2.3.5. Quality of human resources
The quality of employees of a firm is an important factor of internal environment of a firm.

Human resource such as commitment, skill and quality of its employees could contribute to
the strength of an organization. Some organizations struggle to restructure or modernize due
to the resistance by its employees. Due to the importance of human resources for the success
of the company, there are now special courses for managers so as to be able to select and
manage efficiently the human resources of a company.
2.3.6. Labor unions
Labor unions bargain for better wages with the managers for different categories of workers.
For the continuous running of business, strong relations between management and labor
unions is important.
2.3.7. Physical resources and technological capabilities
Physical resources i.e. plant, equipment as well as technology in a business determines its
strength of competitions which is important for determining its efficiency and unit cost of
production. Research and development of companies indicate the company's ability to
introduce innovations which enhances productivity of workers. It is, however, important to
note that the rapid technological growth and the growth of information technology in recent
years have increased the relative importance of intellectual capital and human skills
compared to the physical resources of a company. The rise of Microsoft company and Infosys
technologies is due to the quality of human resources as well as intellectual capital and not
because of superior physical resources.
From what has been discussed so far on the constitutes the internal environment of a
company, Am sure you have understood and noticed the importance of having a conducive
internal environment in any business firm. Next we shall look at the external environment
and how it affects the functionality of a business firm.
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Activity 2
1. Explain the benefits of competences in an organization?
2. With Examples, demonstrate an understanding of how the internal environment may

affect the organization.
3. Identify different types of organizations and there functions
2.4 Unit Summary
Well done!! You have come to the end of Unit 2 and you need to understand the summary as
well where we looked at different types of organizations i.e. sole proprietorship, partnership,
Limited, and cooperatives and their various competences. I am sure you noticed in this unit
that different organizations operate in different environments. In the internal environment the
managers are able to modify and change factors to bring about efficiency. If you are still not
Clear about this unit, Please go back and revise before you proceed to Unit 3.
Source: Market business news
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UNIT 3
THE MICRO BUSINESS ENVIROMENT
3.0. Introduction
Every time an organization embarks on business in a certain market, the success and
sustenance are dependent on a number of factors. Some of these factors maybe beyond the
firms power, some can be easily adjusted by the company. Most of the controllable factors
are contained in the micro environment of the business as we have discussed in unit 2. The
micro environment is the first pillar towards building a successful business. All the strategies,
marketing plans as well as objectives are performed through the micro environment. It is the
executive arm of business and this is where ideas, concepts and thoughts are implemented.
Based on the responses obtained from this, business can progress or stop.
Aim
The aim of this unit is to introduce you to the micro environment of business with respect to
some controllable factors and how it affects the daily running of businesses.
Objectives
i. Understand the factors that make up the micro environment of business
ii. Understand the influence of the external environment on business
Time Frame
6 hours
3.1. The Task Environment
Businesses usually encounter certain environments that if not overcome might spell doom for
the firm. Task Environment therefore refers to the environment that directly affects the
organization and interferes with the business' ability to attain its goals. In short, task
Environment combines a set of conditions that originate from distributors, suppliers, stock
market, competitors as well as customers. All of these have a direct effect on the
organization's ability to achieve its goals.
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3.1.1. The specific (Micro) Environment Elements
3.1.1.1. Micro Environmental Elements
The micro environment comprises of Suppliers, Customers, Competitors, Government

including pressure groups. The micro environment has different effects on different
companies within the same industry. This is due to the capacity, size and capabilities of each
company which most of the times are different. If we are to pick an example, consider how
suppliers of raw material suppliers tend to give more concessions to large companies and give
less concessions to small companies because of the reduced volumes purchased by small
companies. The diagram below depicts the elements of micro-environment elements.
With regards to competition, competitors do not care about the rival company provided it is
small, but the will show serious concern if it is large. even though we said the micro
environment for each business is not the same, they are instances where the micro
environment is almost the same. In such cases, the responses from these firms with respect to
their environment will differ as each firm attempts to achieve a high level of success. Below
is a short discussion on the general micro environment factors;
3.1.1.2. Competitors
A competitive environment comprises of some basic things and businesses have to take these
into consideration. In today's highly competitive environment, the size of the business doesn't
guarantee that the business will monopolize because all companies encounter some form of
competition. Most commonly businesses that produce certain products face competition from
differentiated products produced by other firms and also from complementary products, also
produced by other firms. A good example here is the Toyota land cruiser 200 series. With this
model, several cheaper variants produced by other firms have appeared on the market and
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have interfered with sales of this product making Toyota to consider the profitability of
continuing this product. Also the land cruiser 200 has also faced competition from earlier
versions of the same vehicle i.e. 2008 model or 2015 models which are sold cheaply on the
second hand market.
3.1.1.3. Customers
The customer's influence has a direct impact on the micro economy of a business. Logic here
is simple, you can't continue running a profitable business in the absence of continuous
improvement of product and still expect to attract customers. Coming back to the Toyota land
cruiser 200 story, this vehicle despite being the king of reliability hasn't seen any
improvements to itself and has fallen behind as compared to other firms that have been
continuously improving their vehicles. As such, most customers are preferring to spend
money that could have bought a brand new land cruiser 200 on other alternatives that might
not be as durable and reliable but just because they have better styling and are cheaper and of
course most customers are not so interested in the off road capabilities of the land cruiser so
see no need to spend so much money on it. Thus, knowing your ideal customer wants and
types and of course developing and giving effective marketing campaigns are crucial to
building a customer base and ultimately increase revenue generating streams.
3.1.1.4. Employees
The importance of employees to any business cannot be understated. Employees produce, and
sell goods as well as provide services that allow a business to keep moving. The availability
of motivated, technically qualified employees for any business type is prime to an
economically successful business. If your business operation is a highly technical one, you
might have to consider increasing the salaries of your employees a bit more in order to attract
a limited number of specialized and available workers.
3.1.1.5. Suppliers and Distribution Channel
Another important factor to look out for is the supplying and distribution channel. This
greatly influences the prices of products in a business. Equally important is the sourcing of
goods required in production and/or resale as well as distributing the goods to customers.
Manufacturers rely on suppliers of raw materials while resale companies depend on
manufacturers and wholesalers for transportation of goods. Thus, to ensure smooth operation
as well as good profits, you need to obtain a good value on products and supplies so that you
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can also offer good value to your valued customers with accessible solutions. If you are a
supplier, you are required to have an effective, efficient and reliable supply chain.
3.1.1.6. Investors and Shareholders
Shareholders being the owners of the company spell out the company's vision while investors
help to raise funds for the running of the company. Investors also influence the survival and
growth of the business. Shareholders and investors thus are important to any business
through the provision of funds required for the expansion of the company. You could look to
creditors to finance your operation however you will have to repay loans with interest which
might be quite a difficult and expensive task. On the other hand, if you get investors, you get
to share the operational risks and more often gain support and expertise and you do not have
to pay back the funds obtained, all you have to do is give up some control of your firm, which
is not bad if a good contract is drawn and signed by the involved parties.
3.1.1.7. The General Public and Media
The media has a great influence on business through consumerism. In this case, the media as
well as the general public can affect the ongoing image of your firm through changing
determinants of consumer behavior largely influenced by family factors as well as
personalities. If you firm provides jobs and pays taxes and on top of that operates in a socially
acceptable manner and contributes positives to the environment, it will be very easy to gain
community support and this can greatly advance your business. If your business does not
fulfill any of the things listed above, you are most likely to encounter a negative public
backlash which will also negatively impact the growth and sustainability of your firm.
Whether good or bad publicity, the local media will spread your story, with or without your
consent. This is good if the business is doing well but might be bad if the business is
struggling, all in all the media will provide you with feedback through public opinion.
Over all, understanding of the business environment helps firms to adapt and modify their
directions as well as motives by applying only elements that will enable them to grow,
compete favorably and most important of all, survive.
3.1.2. External micro environment
Micro environment comprises of individuals who are able to make decisions that directly
affect the company. Business has two main aspects and these involve producing and selling
of products and based on this, the micro environment can be dived into various
components/constituents as follows:
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3.1.2.1. Suppliers of inputs
Suppliers of raw materials are an important external factor for a business and businesses tend
to have several suppliers on their list to minimize any risks of break in supply.
3.1.2.2. Customers
These are the people buying finished goods from the business. Sales of a product or service
generates profits for a firm as such keeping customers satisfied is a very important role for
any business. At the same time the business needs to stay competitive and still attract more
customers thus business require to maintain high standards of production and indeed
customer service.
3.1.2.3. Marketing intermediaries
Marketing is an important factor for any business. It allows business to present their products
and services on the market and as such entices consumers to buy especially when it is done
correctly, consumers will tend to buy products even if they don't need them.
3.1.2.4. Competitors
These comprise or refer to two or more businesses that Compete in the industry by trying to
sell goods to the same group of people. Competitors can compete on price as well as quality
of the products and services. Competitors have increased in the business world due to
globalization and liberalization of economies. Liberalization of the Zambian economy in the
90s led to an increased number of competitors which was better for those companies that
could compete especially the large ones but it also destroyed a lot of indigenous small
upcoming companies that failed to cope with the increased number of competitors.
3.1.2.5. Public
This involves the following groups; media, locals, women association, consumer protection
and also environmentalists. Each one of these has a strong effect on any business which is a
good thing because the public ensures that the moral aspect of any business is followed at
least.
3.2. The competitive environment: Porter's diamond theory, Porter's five forces
A short concept of competition and market power is basically illustrated through Michael
Porter`s five forces as shown below:
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Figure 6.0: Porter`s 5 forces.
3.2.1. Competition
If we look at the traditional economic model, we notice that competition among rival firms
usually drives profits to zero and of course firms try to maintain an advantage over their
rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are
interested in these differences.
Rivalry is measured using indicators of industry concentration such as concentration ratio by

Economists. A high concentration ratio implies that the majority of the market share is held
by the largest firms and shows less competition i.e. monopoly. A low concentration ratio on
the other hand shows that the market share is divided among several firms and thus is
characterized by many rivals, none of them holding a larger share than the other. Let us look
at different scenarios in industries that potentially affect competition or rivalry.
When an industry has a large number of firms, you will tend to notice that rivalry will always
increase because firms are competing for the same customers as well as resources. If the
firms have similar market share, the rivalry will even intensify more as firms struggle for
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market leadership. A loose example here would be the rivalry in the sport bike industry were
each company strived to produce the fastest production motor bike. First Honda produced its
black bird which prompted Suzuki to engineer the Hayabusa series which broke all records
set by the Honda. Suzuki also chose the name Hayabusa because when translated in English,
Hayabusa means peregrine falcon and this particular bird hunts black birds. You can begin to
realize just how strong the rivalry was between these two companies
When a market is growing slowly, firms will tend to fight for market share. This is not
usually the case in growing markets because firms can simply improve profits due to the
expanding market and an expanding market always has a high number of customers.
In industries with fixed costs, rivalries can also occur. This is because firms have to produce
to almost near capacity so as to attain the lowest unit costs possible and having produced this
large number of units, another problem arises which is the ability to sale this much units.
Firms that find themselves in this dilemma will tend to fight for market share and of course
increase rivalry.
Again in industries were storage costs are high or perishable products are produced in high
amounts, the producer will become aggressive in selling of the produce and now if you have
several producers taking this approach, competition for customers and basically market share
increases.
3.2.2. Threat of Substitutes
Porter's model describes substitute products as products in other industries and their price
change tends to threaten products demand. What we mean here is that if you have product A
selling at ZMW 200 and suddenly a substitute product B appears on the market selling at
ZMW 50, customers will tend to opt for product B especially if it even performs the same
function as product A. Case of large SUVs versus the medium sized SUVs, all of them
perform the same function but the smaller ones tend to be cheaper. Again the more substitutes
are available on the market, the more elastic the demand becomes because customers have
more alternatives. In Zambia, we have an increase in motor companies providing medium
sized pickups i.e. Nissan, Isuzu, Ford, Mahindra, Toyota, Fiat, Tata and Chinese brands
meaning the customer now has a wide range of products to chose from. To us consumers, the
only advantage we get from such a scenario is that producers will be reluctant to raise prices.
The competition presented by a threat of substitutes can also come from products outside the
industry.
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3.2.3. Buyer Power
The power of buyers is the force that customers possess on a production industry. If you have
an industry where the buyer power is strong, the industry reaches what is known as
monopsony meaning, a situation where they are many suppliers and few buyers in an
industry. In monopsonic markets, the customer has the power to set the price. The good side
for us all is that there are very few monopsonic markets instead we tend to have some
asymmetry between a producers and buyers.
3.2.4. Supplier Power
For any industry to be able to produce goods, the role of suppliers providing labor,
components and other supplies, is very important. This builds buyer-supplier relationships
between the industries and firms that supply it with the raw materials it needs to create
products. If you have strong suppliers, they will influence the prices of raw materials,
routinely selling them at a high price and capturing more than enough profits from the
industry.
3.2.5. Threat of new entrants and entry barriers
In any industry, you do not only need to worry about incumbent rivals but you also need to
worry about that new firms that may enter the industry and of course affect competition.
Theoretically, any firm can desire to enter or leave a market freely. If this is the case then
profits will tend to be nominal. However in reality, industries have certain characteristics that
protect the high levels of profit of firms and inhibit additional rivals from entering the market.
3.3 Generic Strategies to counter the 5 Forces
Having discussed and understood the five forces of Porter, what strategies can we employ to
counter act these forces? The strategy we need can thus be formulated on three levels namely
corporate, business and functional/departmental levels. Michael Porter describes three
strategies namely: cost leadership, differentiation by producing unique products and services,
and focus by providing specialized services in an exclusive market. Each one of these can be
employed at the business unit levels to allow the creation of a competitive advantage. If you
possess a proper generic strategy, it will allow you to position your firm in a manner were
you leverage the firms strengths while defending against the harsh effects of the five forces.
Porter went further to subdivide the strategy of focus as illustrated in the figure below into
two parts namely; Cost Focus and Differentiation Focus.
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Let us look at each one of these separately starting with cost leadership, followed by
differentiation strategy and last ending with focus strategy.
3.3.1. The Cost Leadership Strategy
Porter's generic strategies are a great way of obtaining a strong competitive advantage in
developing that "edge" that gets you the sales you are aiming for and out compete your
competitors. Within the cost leadership strategy, you can achieve this in two main ways;
 You can increase your profits by reducing costs but still maintain the average industry
prices.
 Or you can increasing your market share by charging lower prices than your
competitors but still make a reasonable profit per sale due to the reduced costs you
have implemented
In this strategy, you are only required to assume a leadership role in terms of cost in your
particular industry or market. Just being amongst the lowest-cost producers is not sufficient
because this might leave you wide open to attack by other low-cost producers who
undoubtedly will undercut your prices and block all your attempts at increasing your market
share.
3.3.2. The differentiation strategy
The differentiation strategy requires that you make your products or services different from
your competitors and of course more attractive. How you achieve this task is entirely
dependent on the exact nature of your particular industry and also on the products and
39
services themselves. You will also need to involve catching features such as support,
durability, functionality and brand image that are of value to your customers. As a leader of
an organization or a manager, you need the following to make differentiation strategy a
success:
a) You will need good research, development and innovation.
b) The ability to produce and deliver high-quality products or services.
c) Effective sales and marketing to show the benefits of what your differentiated goods
are.
Any large organizations in pursuit of a differentiation strategy have to stay agile with their
new product development processes or else they risk being attacked from several points by
competitors who are equally pursuing focus differentiation strategies in other market
segments.
3.3.3. The focus strategy
Companies that prefer the use of focus strategies have to concentrate on a particular niche in
the market and must understand the dynamics of that particular market. These companies
should also understand the unique needs of customers within the market so as to develop
uniquely fairly costed and well-specified products. These companies since serve their
customers exceptionally well end up building a strong brand loyalty among their customers.
By so doing, their particular market segment become less attractive to would be competitors.
Just as is the case with broad strategies of markets, it is still important to decide whether you
will chose to use cost leadership or differentiation strategy after selecting focus strategy as
your primary approach because focus isn't enough as a standalone. Whichever one you chose
between cost focus and differentiation, the most important thing is to ensure the success of
the focus strategy by adding something unique since you are serving a particular market
niche. It is also not enough to directly focus on one market segment only due to your
organization being too small to serve a larger and broader market. If you do this you will
definitely risk competition from better-resourced broad market companies that of course will
be offering more. The addition of "something unique" will contribute to reducing costs
through probably your knowledge of some specialist suppliers or through increased
differentiation by deeply understanding the needs of your customers.
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Activity 3
1. Describe the controllable factors that businesses can control for the sole purpose of
making profits and staying competitive
2. What do you understand by the term external environment and how does it influence
businesses
3. What are the five forces that Porter described and why are they important for
businesses
3.5 Unit Summary
Job Well done!! You have reached the end of Unit three. At this juncture you have noticed
and observed that business environment gives an atmosphere were businesses can thrive and
as such, gaining an understanding of the implementation of all the elements of business
environment will provide for adaptation to the environment for the purpose of business
growth and survival. I am certain you have observed from this unit that the sector
environment creates a source for business competition and rivalry via the application of
models like the five forces of Porter can be utilized to establish and of course reposition
themselves in specific industry areas simply by using low cost leadership and market
differentiation as well as strategic focus. This as discussed in this unit can be applied in
almost all structures of market.
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UNIT 4
POLITICAL/LEGAL ENVIRONMENT
4.0 Introduction
As we may well know, politics affect a wide variety of services in every country. Business is
no exception in this. The role politics is firmly present in business. The political environment
not only affects business organizations but also introduces risk factors that can cause loses to
an organization. A number of local, national and international actions by the government
affect company's operations. You need to pay particular attention to these if you are a
business owner and you need to gauge the environment so that you may determine how
certain actions might affect your enterprise. Certain policies made by governments can cause
a drastic change in the political environment and this might produce a conducive or
undesirable environment for business. Businesses should plan for this variability in
government policy and regulations and governments also should ensure sure that policies
developed encompass factors that are appropriate for business growth. In this unit, you will
be introduced to the impact of the political environment on businesses.
Aim
The Objective of this unit is to make you aware of the importance of the political
environment to businesses and how it influences businesses. At the end, you should be able to
describe how the political environment influences businesses and how to contain any political
risks arising from the political environment.
Objectives
i. Understand the impact of politics on business
ii. Understand how business navigate through the political environment and stay
profitable
Time Frame
6 hours
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4.1. Political ideologies
As earlier stated in the introduction, the political environment in any country has a serious
affect on the economics of that country. The economic environment also affect the
performance of businesses. Business is affected by different factor such as social, economic,
political technological and legal, which collectively make up the business environment.
Political factors include factors such as new legislation i.e. the national minimum wage, tax
levels such as Corporation Tax, VAT, Income tax, Royalties as well as debt levels. Economic
factors on the other hand include interest rates, inflation, GDP, unemployment and foreign
currency exchange rates. For example in the Zambian scenario, usually parties that are voted
into power tend to abandon all old projects and start new ones as well as introducing new tax
regimes which might affect the economy negatively and reduce business activities country
wide.
4.2. Functions of government in society
Every time governments change their regulations, businesses are affected. Governments
should introduce regulations that allow young entrepreneurs to compete fairly as these will
not have enough resources. The government must show political will to involve stockholders
and develop viable policies that encourage growth of the business sector. If you have a
government with no political will, any attempts at establishing policies will not be
implemented due to the undesirable political environment. The purpose of the majority of
regulation is protection provision, either individually or environmentally. Now whether the
main topic is protection of the environment, safety and protection at the workplace, it should
be understood that regulations have diverse effects.
4.3. Political risk and management of political risk
The exercise of power in politics that affect the value of a company is known as political risk.
An example is when a government embargo prohibits a foreign country from trading in
products produced by that particular company. Governments also have the power to prevent
to docking of ships from its ports and when a government does this, it effectively prevents the
entry and exit of goods on those ships thus the company that produced those goods is
basically prevented from trading in those goods.
International trade has some risks but these risks tend be lower in developed markets and
higher in emerging markets thus companies need to take great care when doing business in
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emerging markets. Even though political risk is unavoidable especially in global markets,
emerging markets tend to be very advantageous for companies because of emerging markets
are increasing turning into areas of consumption with a lot of attractive opportunities.
4.3.1. Political Risk Effects
Various factors that can negatively affect the income of the company or cause a complication
in its strategy constitutes political risk in international business. Examples of such factors are:
macroeconomic issues e.g. civil unrest and high interest rates. Also actions of governments
for example confiscation assets from a company which of course will make it highly difficult
for the company to access finances and ultimately its ability to supply goods and services are
examples of political risk. Some political events can also impede the company's ability to
access foreign exchange and export or import goods and services. AON, a risk management
insurance and reinsurance company reports that effects of political risk lead to high operation
costs for business firms.
4.3.2. Factors That Contribute to Political Risk
When a company launches its operations into international markets, it needs to be aware of
factors such as change in leadership in that country, deterioration of the economies of the
countries where the company has expanded, the improvement occurring in the economy of
the countries and imminent social unrest. Also important in this regard is the presence of
regulatory changes issued by government agencies. the same applies to changes in
agreements made by multi lateral agencies.
4.3.3. How to Manage Political Risk
Political risk can be managed in the following 3 ways by business:
 Identification of political risks by managers. These can come as higher taxes or

activities of terrorist groups and as a manager you should be able to determine how
these particular issues affect the ability of the company to meet its objectives.
 Secondly, you must quantify political risks impact a company's performance through
the use of financial models for example discounted cash flow.
 And lastly connecting the impact of political risk to the company's tolerance of risk.
A good example here is to consider a company that assumes an international strategy that has
the ability to produce returns in excess of 1 million kwacha but also exposes the company to
potential losses in excess of 3 million kwacha. Now as a manager of such a firm, if you do
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decide to proceed with this strategy, you will need to cover yourself either by transferring risk
to someone else or by purchasing insurance of some form so that when losses hit your
company you will still manage to stay in business and profitable. Thus before taking your
company international it is very important to assess the various forms of political risk that
your company will encounter.
4.4. Legal environment and regulatory framework
The growth of business sectors can be encouraged through promotion policies. The
government has a responsibility of ensuring that the policies developed promote growth of
businesses. A lot of counties have taken measures to formulate policies at national level that
differ in scope and address the private sector concerns. In the case of Zambia, the following
are some of the policies;
4.4.1 The Technology Development and Advisory Unit (TDAU)
TDAU established in 1975 has the following objectives:-
 Provide help and advice on the design of agricultural as well as household equipment
aimed at the local market.
 to serve as a development centre for innovative processes and equipment
 to act as a centre gathering advice from university personnel on various industries
 to act as a centre for information on technology that is appropriate for rural areas
4.4.2. National Council for Scientific Research (NCSR)
NSIR was established with the following functions:-
 Provide guidance to the Government on activities of national scientific research

policies
 To co-ordinate all scientific research in the country
 To encourage research programmes in relation to development plans
 To maintain liaison with bodies such as government ministries and private industries
responsible for the research results application
 To maintain liaison with scientific bodies outside Zambia and to guide on research co-
operation
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 To advise the Government on use of finance for scientific research purposes
 To advise government on the recruitment and appropriate use of research staff
Others include the Zambia Development Agency (ZDA) which aims at facilitating
investment, entrepreneurship and trade in Zambia and also the development of policies that
facilitate the existence of initiatives such as the Nyamuka Zambia project which finances
feasible businesses of young Zambian entrepreneurs.
Activity 4
1. How does politics affect businesses?
2. Using a short essay, describe how businesses are able to take advantage of both
unstable and stable political environments for their personal gain
4.6 Unit Summary
Congratulations, so far so good. We have come to the end of unit 4. In this unit we looked at
the effect politics has on business environments and the various ways in which business take
advantage of the political environment. We also looked at how governments try to encourage
investments while offering legislation for control via the establishments of authorities such as
NSIR and TDAU.
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UNIT 5
ECONOMIC ENVIRONMENT
5.0 Introduction
The economic environment comprises of micro and macro environments. These provide
indicators of economic activities and facilitate the assessment of business and economic
performance. Though we can assume various solutions for future of the economy of an
organization by understanding and predicting what events can occur in the future, this still
does not represent the actual picture of the future.
Aim
This unit will provide you with a wider understanding of macroeconomic aspects such as
Nominal GDP, GDP, Real GDP, GNP, National income, exchange rates, Interest rates and
Per capita income. Having understood the above components of the economic environment
we will then look at insights into the cycles of business.
Objective
i. Understand the aspects of macro economics such as GDP, nominal GDP, GNP,
National income
ii. Understand the cycles of business
Time Frame
6 hours
5.1. Economic development
The advancement of emerging economies into advanced economies id referred to as

economic development. This is basically the process through which country's standard of
living improves from low to high and ultimately resulting in improvements in overall health,
academics and well being of the population. During this time, a population shifts from being
basically agriculture oriented to industries and lastly to the provision of goods and services.
Examples of results of economic developments include better public education, higher life
expectancy, improved productivity and literacy levels.
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If we may pause and think, what does economic development really mean? Scholars such as
Michael Todaro list three specific objectives of development as:
1. Goods and services that sustain life such as food, water, shelter, protection and health
2. increase incomes and jobs which of course raise the living standards
3. Ability to freely make decisions on social and economic issues. This can be achieved
by expanding the range of choices available to nations with respect to social and
economic choices by giving them freedom from servitude not only in relation to other
nations buts also to forces of ignorance and human misery.
5.2 Resource and Product Market
There two types of decision makers in market economies and these include the households
and businesses and markets are also divided into two broad markets namely the resource and
the product markets.
The upper half of the diagram represents the resource market: The resource market refers to a
place where resources are bought and sold while the sources market refers to households
selling resources and businesses purchasing them. Households are the people that own all
resources as workers or entrepreneurs. The resources are sold to businesses which then use
them to produce goods and services. The money paid by businesses for resources is referred
to as costs to businesses. Resources thus flow to businesses from households and money
flows to households from businesses.
The lower part of the diagram, represents the product market and this is a place where goods
that are produced by businesses are either bought and sold. Businesses produce products by
combining resources obtained. Households on the other hand buy goods and services using
income received by the sale of resources.
This circular flow model demonstrates the web of making decisions as well as the economic
activity that involves households and businesses thus both businesses and households are
both sellers and buyers. Businesses buy resources and sell products. Households buy products
and sell resources. The flow of resources and finished goods is counter clockwise while
money flows in the clockwise direction in form income and expenditure.
5.3. Macroeconomic objectives
You can use a variety of ways to measure overall economic activity. The fundamentals of
macroeconomics are basically topics affecting an economy at large and include statistics on
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Gross Domestic Product (GDP), supply and demand, unemployment, inflation and growth
and not forgetting considerations for fiscal policy, monetary and international trade. Key
macroeconomic variables can be divided into two variables for domestic side and
international side. The key variables on the domestic side include output, interest rates and
price level while on the international side, the key variables refer to exchange rates and the
balance of payments. Thus macroeconomic aspects have a considerable level of influence on
business and requires that businesses react in a manner that is positive for the purpose of its
growth and survival. The main macroeconomic issues are as follows:
5.3.1. National Income
This is basically the measure of money from the total flow of goods in an economy annually.
National income shows the value of goods and services that are or become available for
consumption together with total additions to the stock of capital of the nation. To be precise,
we normally use the term ‘national product’ or 'net national product'.
5.3.2 Gross Domestic Product GDP
Gross domestic product (GDP) refers to the monetary measure of the market value of all the
total goods and services that are produced quarterly or yearly or in a specified period of time.
It is the total measure of production factors located within the country with no regard of the
nationality of the owner of the factors of production. A good example here is the GDP of
Zambia. For the GDP of Zambia, you can see that it is a total sum of goods and services that
are produced from the input by both the local and foreign factors.
5.3.3 Gross National Income GNP
GNP on the other hand refers to the total output of production from only the residents of a
specified country. It also consider those assets that belong to the locals but are located
overseas. In simpler terms, we can define GNP as the total earnings from all assets that are
owned by Zambians even if some of the earnings don’t flow back into Zambia. GNP omits
any earnings of Non-Zambians living in Zambia regardless of whether they spend it within
Zambia or not. Thus, it is basically a report on how much you earn as a Zambian through
your business or any other source of income you might have and it doesn't matter where in
the world you decide to spend your earning.
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5.3.4 Nominal GDP
Current market prices are used to evaluate Nominal GDP therefore, it includes all the market
price changes that have transpired over the course of the current year as a result of inflation
or deflation. Inflation in this case refers to a rise in the overall price level while deflation is a
fall in the overall price level. In order to relate to the overall price level, another measure of
GDP called real GDP is often used. When you evaluate GDP using the current market prices
for a particular base year, what you calculate is known as the Real GDP. If you take the year
2000 as your base year, then the real GDP for 2005 can be calculated by taking the quantities
of goods and services that are purchased in 2005 and multiply them by their year 2000 prices.
Nominal GDP is commonly used to estimate the economic performance of a country and also
to make comparisons internationally among countries.
5.3.5 Per capita Income
This is obtained by dividing the total national income by the total population of the country.
It indicates the value of goods and services that an average man obtained during the year. Per
Capita Income simply put is the measure of the money earned by a person in a certain area
and it applies to the average income per-person in a city, region or country. Per capita
income is used to evaluate the quality of life as well as the conditions of living in different
areas.
5.3.6 Economic Growth Rate
This indicates the change in the size of the national income in a given unit of time and it takes
into consideration the periodic growth in terms of percentages. Economic growth rate doesn't
adjust for inflation thus its only expressed in nominal terms. Practically speaking, it measures
the rate of change that a the GDP of a nation undergoes through from year to year. However
if the economy of a nation heavily depends on foreign earnings, the gross national product
(GNP) can also be applied.
Source: https://www.investopedia.com/terms/e/economicgrowthrate.asp#ixzz5MoupfeWn
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5.3.7 Interest Rates
This refers to a return on an investment or the cost of borrowed funds for a specified period
of time. Further you can explain amount of interest due in a given time period as a proportion
of the lent amount, that is deposited or borrowed. It is basically the proportion of an amount
you are loaned which the lender charges to the borrower expressed in terms of the annual
percentage
5.3.8 Exchange Rates
Exchange rates refer to the price of a particular currency in relation to another. This is the rate
at which a particular currency will be exchanged for another in the business environment.
These rates are determined in business market environment by foreign exchange and are open
to a variety of types of buyers and sellers and currency is trading continuous.
5.3.9 Unemployment
This is the number of jobless adult workers (adults) who are actively searching for a job. The
Central Statistics Office (CSO) is a custodian for this information in Zambia. Research has
revealed that officially, the unemployment statistics for developing countries tend to be
highly unreliable due to the fact that high GDP is expected to be coupled by declining
unemployment but this is not the situation in developing countries.
5.3.10. Business Cycle and International Trade
Business cycle refers to the pattern of regular expansion (recovery) and contraction
(recession) with respect to economic activity around the growth trend. Normally, the output
fluctuates around a trend in a cyclical manner with a cyclical peak corresponding to the
highest economic activity relative to the trend and a low point in economic activity indicated
by the cyclical trough. During expansion or in other terms recovery, the utilization of
production factors increases showing increased production.
5.4 Factor Market infrastructure
A factor market is defined as a marketplace where the services of a factor of production are
found. In this market place, factors of production such as labor, land, capital, and raw
materials and other requirements for producing a finished product can be sold or purchased.
This market is very different from the goods and services markets which trade in finished
goods.
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5.3.1 Explaining the Factor Market
Taking an example of the refrigeration market, the market were refrigerators and dishwashers
are sold is defined as the kitchen goods market. In the same way, a market for skilled workers
in fridges and dishwasher assembly is an example of a factor market. A market for steel and
plastic is also another example of a factor market for fridges and dishwashers because both
steel and plastics are required for the manufacture of fridges and dishwashers.
Both households and firms are prime to the economy. Households play the role of buyers
while firms act as sellers in market of goods and services. In the factor market, these two
roles are reversed. What we mean here is, you as the household owner provides labor and
capital in form of any savings you have made while firms become the buyers of your labor
and capital. This combination of factor markets with the goods and services market makes up
a closed system of flow of money. Households provide labor to firms which in turn pays
wages and salaries to households and then household use the salaries obtained to purchase
goods and services from firms. In so doing, the economy benefits from this symbiotic
relationship.
The price of a factor is seen as an income to the owner. For example, considering a land
owner, we see that the income the land owner receives is in form the rent on land. Each
factors price is dependent on the supply and demand. If we are in a booming economy and in
this economy the labor market is tight, the wages of laborers will increase because the
demand for these workers will be high. In the opposite, if the economy is not booming, they
will be lots of laborers without jobs and thus wages will be low because the demand for such
workers will be low.
5.3.2 Factor Markets as a key Element of a Market Economy
One of the defining characteristics of a market economy is the existence of factors markets
that are production-oriented especially for capital goods. In the traditional socialist models,
factor markets were replaced by some form of economic planning using the assumption that
exchanges in markets would become redundant within the production process provided a
single entity that represents society owns the capital goods.
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Source :http//www.investopedia.com/term/m/marketeconomy.asp
Activity 5
1. Discuss how the economic environment can influence your business.
2. As a business owner, explain the effect of exchange rate to your manufacturing

business and growth.
5.4 Unit summary
Congratulation!!! you have come to the end of unit 5. So far you have learnt most of the
aspects of this course and you must be feeling proud of yourself, that is good. Now what were
the highlights in this unit? To start with, we defined the economic environment and showed
that it is a vital component of PESTLE factors and that it relates to all of the elements and
thus influence the way organizations behave by applying macroeconomic aspects such as
exchange rates and interest rates. It also indicates expansion (growth) and contraction
(recession) of any business or even national economy.
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UNIT 6
TECHNICALLGICAL ENVIRONMENT AND THE BUSINESS
6.0. Introduction
Welcome to unit 6. In this unit we shall look at how technology affects business. First of all,
technology is an external factor and it has an impact on business operations. undoubtedly,
technological changes have an effect on how companies conduct business. Changes in the
technological environment can force businesses to drastically change how they conduct
business. In the current dynamic global business environment, competition in business has
become influenced through various information as well as application of technological tools.
Aim
The aim of this unit is to present to you how factors of technology acting as an external
element improves various businesses and also to help you understand the impact that business
cycles pose through technological dynamism and diffusion.
Objective
i. Understand how technology affects business both positively and negatively
ii. Understand the impact that business cycles pose via dynamism of technology
Time Frame
6 hours
6.1. Sources of Technology
Currently we have a lot of sources of technology from which any business can benefit from,
the most common ones being:
6.6.1 Internet
Almost all businesses these days have websites or a social media page such as facebook or a
twitter account and many more which give and help them maintaining a global presence.
Through this, businesses can communicate with their targeted audience easily and still reach
out other potential customers. Furthermore, through internet technology use, you can also
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communicate with your superiors, employees, clients and co-workers in other countries with
relative ease and rapid speed.
6.6.2 Automated Process
Automated process for example vehicle assembly plants were human have been replaced with
robots has benefited companies through reduction of the cost of manufacturing. Although this
system greatly improves the efficiency of the business, you and I can both agree that it has a
negative impact on the level of employment in the economy.
6.2. Dynamism in technology
With respect to technological capabilities, certain variables known as technological factors

are being utilized in the evaluation of available alternatives. Dynamism in technology is
viewed by organizations as an important tool for the improvement of operations and
functions. As you may remember in the earlier sections, technological factors indeed make up
one of the external factors that influence business decision making. Technology is an
important component of the PESTLE and presently, dependence on equipment via
technological factors has more effect on business operation and success on a global scale than
ever before.
6.3. Impact of Technology on Business
Technological environment has the ability to impose positive effects on a business. For the
use of internet for communication smoothens the process of communication. It also impacts
the business negatively for example, technology has the ability to take over jobs that
originally were held by some individual and these individuals might find themselves out of
employment. Another example is the use of Skype and chat rooms to hold meeting. These
types of meetings are not as personal as compared to a physical face-to-face meeting and as
such the personal aspects of business relationships reduce over time. The negative effect
produced by the lack of physical proximity causes a reduction in brainstorming as this type of
communication requires some level of personal touch.
Technological trends also affect levels of business. A business that is up to date with its
present as well potential customers tends to have a better chance of building the a strong
customer loyalty base. Advancement of technology can help businesses communicate
efficiently with their customers. As such, leaders who are strategic tend to be in constant
search for any developments in the technological environment that they can use to improve
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the efficiency of their business. By doing so they are able to improve their operations and
also become aware of business transformational phase.
The rapid advances in the technology environment of business has affected the way
businesses function. Major advances in information technology have replaced most jobs that
were traditionally carried out by humans in most departments of the organization. Also the
way data is stored has changed with firms choosing to store information on clouds and data
servers as opposed to registers and files. In addition, technology has also introduced
marketing strategies that are purely digital and through these, companies can sell their
products and services. Even the research and development departments in companies have
evolved their way of functioning as they employ the use of more and more advanced
techniques in developing products and services.
We can take an example of Siemens and Boeing which are largely investing in the use of 3D
printing technique for product designing based on the belief that this will rapidly accelerate
the designing process, reduce production cost and improve design effectiveness.
Technology has also provided companies with means through which they can collect, record,
retrieve and use data. It has also helped them come up with groundbreaking strategies of
business. Utilizing available data, companies can now monitor and evaluate trends in
customer behavior with regards to demand for a certain product. Technology has also helped
businesses to conduct an analysis of the macro environment and guided the development of
appropriate marketing strategies. Technology is also being used to make meaningful well
informed decisions and conclusions.
6.4. Diffusion of technology
The strategic use of information technology (IT) is essential in the face of rapid economic
and technological developments especially in this globally oriented business world. A lot of
Small and medium-sized enterprises (SMEs) are lagging behind when it comes to the
application of IT and as such it is imperative to encourage the diffusion and adoption of IT
within the business. We can agree that innovation is both pivotal for any organization to
acquire a competitive advantage and it is also a critical part of the survival of a lot of
industries (Klein, Conn,& Sorra, 2001). As the recognition of IT increases, so does the
adoption of a wide array of innovations like business process reengineering and total quality
management. Failures in the application of technology also exist and this can be due to failure
in implementation as well as failure of the innovation itself. To prevent failure, we have
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companies known as technology diffusion agencies (TDAs) which have been created for the
sole purpose of helping companies implement innovative technologies.
The role these agencies play with respect to innovation implementation is limited to only
providing assistance and advice that organizations will accept and tend not to provide advice
or information that they will not get. Implementation of innovation requires more than
assistance on the technical issues of innovation but also with more intangible aspects such as
creating a culture of learning and maintaining a long-term orientation. TDAs are uniquely and
strategically placed to provide this level of assistance but they can also expand their services
to include innovation assistance which will help them to become much more relevant to the
organizations they are seeking to help.
The highly competitive nature of the global business environment is plagued with a high rate
of innovation failure and of course finding ways to help organizations successfully implement
innovations is highly sought after. This is the reason why TDAs have emerged and they can
be an extremely powerful tool but equally powerful will be to develop an understanding of
the benefits for innovating organizations and their possible roles.
6.5. E-business
The conducting of business using the Web, Internet, intranets, extranets or some combination
thereof is known as Electronic business (e-business). E-business is much similar to e-
commerce but instead of just selling and buying goods, it goes beyond to include a wider
variety of businesses processes like management of the supply chain, processing electronic
orders and also management of customer relationship. In short, E-business processes thus
help companies to run more efficiently.
In broad sense, Electronic business encompasses common terms like e-commerce and e-
tailing. e-business processes such as customer relationship management (CRM), content
management and enterprise resource planning (ERP) are becoming important as companies
increasingly prefer to conduct sales and marketing as well as other internal business
processes digitally. This change has also been provided by the ever improving security
measures being employed for online transactions. Sometimes we use the terms "e-business"
and "e-commerce" interchangeably, but you should know by now that they are not
synonymous. E-commerce is the buying and selling using online platforms while e-business
on the other hand involves all businesses conducted online. So how can we understand what
e-business is without cracking our heads? The easiest way will be to use examples. So here
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we go. Sending an email to an existing or prospective customers is considered as an e-
business activity. This is because every time you send any email to anyone requesting them to
buy goods you are offering, you are actually marketing your products. Another example is
when you use an online system to track inventory and send out alerts at specific levels is also
an activity of e-business. perhaps a much more easier example that we can all relate to is
when we visit a website selling, let us say Toyota corollas and after that almost each website
you open will always send you an advert of some company selling a Toyota corolla. In this
case your computer signature has been linked to Toyota corollas and online tracking system
will keep alerting you to companies selling them even when you don't want to purchase one
A lot of processes we describe as e-business could be managed in-house by a company's own

network or might be outsourced from a provider specializing in the desired service. The
difference between a standard business and e-business sometimes could just be how the
business is run. If you run a firm that advises people on which furniture they should buy then
you are basically a business however if your services are online and people can compare the
furniture options listed then you are running as an e-business
Now what about e commerce? how does it compare and contrast from e-business? With
comparison to e-business, e-commerce is clearer and in its basic form just involves activities
such as placing an order and making payments online. A business in this manner sells good to
customers through the business-to-consumer (B2C) relationship. E-commerce comes in a
variety of forms. Buying internet bundles from MTN using an online system is e-commerce.
Also buying a suit from an online shop is also an example of e-commerce and so does all the
other activities such as having the purchased product or good delivered. Internet sites such as
Amazon and eBay, that we refer to as virtual markets are also examples of e-commerce.
The majority of e-commerce involves B2B relationships and this often involves things such
as purchasing necessary supplies in an automated manner. if you have a business that needs a
particular instrument or part for proper function, you may want to have a contract with a
potential supplier so as not to run out of that part during the business processes. Also in order
for you to run efficiently, you can also take it a step further by automating the process so that
you are able to track your levels of supply and when they run low, an automatic order is
placed to your supplier.
Activity 6
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1. Discuss the importance of technology to business
2. How would you apply e-business to enhance the operations of an organization?
6.6.Unit Summary
Well done. Another unit conquered! In this unit we looked at how technology can be
implemented in businesses and how it affects business both positively and negatively. We
also looked at how businesses have employed technology to run smoothly. We also compared
e-commerce and e-business and we said in as much as these two terms tend to be used
interchangeably, they are not the same. Now in as much as technological factors cannot be
avoided in the current dynamic business environment, they have become a source of
competitiveness since they bring out differentiation as well as low cost leadership by using e-
business and as such allowing a convenient interaction of several activities in the business
environment.
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UNIT 7
SOCIAL AND CULTURAL ENVIRONMENT
7.0. Introduction
Welcome to unit 7. In this unit we shall look at how cultural factors relate to business
environment. If we define social business environment, we will say it comprises of the total
sum of the culture in a society that encompasses customs, beliefs, behaviors and practices.
This is just an artificial construct and it can be contrasted with the natural environment we are
living in. So it means every society has a construct of its own social environment based on
cultural community norms and society and also on the perception as well as psychological
effects on consumer behavior in the business environment.
Aims
This units will provide you with adequate knowledge to understand how social factors like
culture impact the business environment. You will learn how values, beliefs and norms have
an influence on the business environment via consumer behavior
Objective
i. Understand the impact of social factors on business
ii. Learn the values, beliefs and norms that influence consumer behavior
Time frame
6 hours
7.1 Social customs, rituals and practices
Let us get the ball rolling by starting with cultural factors. Human behavior largely results
from learning certain things and individuals basically grow up learning values, preferences,
perceptions and behavioral patterns due to socialization that occurs within the family and
outside. Through this, we develop values that determine and of course drive our behavioral
patterns to a large extent. These values include things like achievement, efficiency, success,
progress, material comfort, practicality, individualism, freedom, humanitarianism,
youthfulness and practicality. These values are then influenced by subcultures such as groups
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of nationality, religion, racial and geography, all of them exhibiting degrees of difference in
cultural preferences, ethnic taste, taboos, lifestyle and attitudes.
Further our subcultures are subsequently influenced by social stratification or social class,
which then acts as a determinant of behavior. A series of variables such as occupation,
income, education determine social class. People from the same social class are quite similar
and different from those from different social classes, but people can also move from one
social class to the next over time due to circumstances. Cultural factors further consist of:
Culture, Sub culture and Social class.
7.1.1 Culture
The most fundamental determinant of a persons' needs and want is Culture. Every child as
they grow acquires values, perception preferences and behaviors from family, schools etc
however culture is what influences the pattern of consumption and how the child, now a
grown up, makes decisions.
In business it is important for you to consider social factors like culture because marketers
need to explore the cultural forces and use them to formulate marketing strategies that are
appropriate for each separate cultural category in order to increase sales of their products.
You should also be aware that cultures evolve and do not stay the same and these changes
gradually become part of society. The groups considered under culture tend to be relatively
large and at least in theory, culture is shared by few people. Cultures are passed from one
group to another particularly from one generation to the next through learning and as such is
both subjective and arbitrary. Culture has the ability to undergo change however this change
is slow due to the fact that culture is deeply ingrained into the behavior of people. Thus,
looking at it from the view point of the social environment we can all agree that instead of
trying to change culture, it is much more easier to work within it.
7.1.2 Sub-Culture
Each culture always contains minor cultures known as sub-cultures and these provide more
specific identification and socialization of their members. Sub-culture are a set of beliefs that
are shared by a subgroup of the main culture and include nationalities, religions, racial groups
and geographic regions. A lot of sub-Cultures make up important market segments and all
marketers who desire to be successful must design products and programs that are tailored to
needs of that culture.
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7.2. Lifestyle patterns and social classes
Lifestyle patterns as well as social classes have a lot of influence on consumer behavior. The
classification of socio-economic groups is called Socio-Economic Classification (SEC) and
Social class is basically a permanent and ordered division of society in which members have
similar value, interest, behavior and thus lifestyle. Social class is determined by multiple
factors such as income, occupation, education, authority, power, property, ownership, life
styles, consumption, and pattern. Our society has three different social classes namely upper
class, middle class and lower class and these social classes have different buying behavior.
The Upper class consumers want high-class goods so that they can maintain their status in the
society and the Middle class purchase carefully while collecting information and comparing
different producers of the same product. The lower class on the other hand mainly buy on
impulse. Managers are thus required to study carefully and understand the relationship
between these social classes and their patterns of consumption so that they can take
appropriate measures to accommodate all the people of those social classes to whom the
products are meant to be sold.
7.3. Demographic issues
Demography is the study of a human population and it is based on factors such as age, race,
and sex. Demographics are used by governments, NGOs, corporations as well as other
businesses to learn about population characteristics for several purposes. Some of these
purposes include policy development, community knowledge assessment and economic
market research. For example, National Pension Scheme Authority (NAPSA) can use
demographics to obtain knowledge on the number of people that are nearing retirement age
and how much they should be paid. In a similar fashion, we can use demographics are as a
business marketing tool to assess the best way to approach customers as well as assess their
behavior. Segmenting a population through demographics allows businesses to determine the
potential market size. Demographics also help determine whether the products and services
from a company are being targeted to that company's most important and preferred
consumers. Market segments also help to identify certain age groups that have a certain
buying pattern and characteristics.
7.4.1. Types of Business Demographic Information
Different types of demographic data is available and which data you chose is dependent on
how you would like to use it. If your goal is corporate marketing then the demographic data
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you need to collect should have information to help you build a solid profile of customers for
your organization. The common variables gathered include age, sex, income level, race,
employment, location, home ownership and level of education and from this data certain
generalizations about groups can be made to identify customers. Additionally demographic
data may contain information on preferences, hobbies and lifestyle. Governmental agencies
routinely collect data during national census and use demographic data to predict future
economic patterns and population growth in an effort to manage resources.
7.4.2. Use of Business Demographic Information
In the case of large companies, they conduct demographic research to assess how they can
market their products or services to best capture the desired customers. It is always valuable
to know all your current customers and where your potential customers may come from.
Understanding demographic trends is also equally important because the sizes of different
demographic groups tend to change over time due to economic, cultural and political reasons.
Having this information will help your company make decisions on how to allocate capital
towards production and advertising.
Activity 7
1. Highlight the importance of culture to consumer behavior
2. As an entrepreneur, how would you use demographic information to help with

business decision making
7.5. Unit Summary
Amazing, you have cleared yet another unit. Great!, now let us do a quick recap. In this unit
we looked at how the social business environment is important for running a business
because it brings about an understanding of consumer behavior using demographic data. Also
we learnt that the cultural aspect cannot be neglected and of course the best way to
understand peoples culture is to look at their beliefs, values and norms. All of these provide a
basis for market segmentation with respect to various products. Finally, the use of
demographics guides in determining business sectors as well.
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UNIT 8
THE NATURAL ENVIRONMENT
8.0. Introduction
You may do business across the entire country, or just in the town where you live and grew
up. Whichever way, your business will modeled by the environment in which you are
operating in. Each environment represents its own set of challenges and opportunities.
Businesses are greatly dependent on resources in the natural environment and the availability
of these resources determine what type of business can be established in a country or region.
Raw materials are make up the majority of these resources and firms are usually concerned
with their availability. Business firms need to know whether there will be a shortage in the
critical raw materials as well as the trends governing the costs. Besides raw materials,
availability and the total cost of energy is also of great concern.
Aims
This unit aims at providing you with adequate knowledge to understand how natural factors
increase cost of energy and how shortage of raw materials can impact a businesses. You will
also learn and understand the influence of natural resources management on the business
environment via consumer behavior.
Objectives
i. Understand how increased energy cost affects business
ii. Understand how businesses utilize and source raw materials
iii. Understand how natural resource management influences the business environment
Time Frame
6 hours
8.1. The natural environment
Factors such as climate, land, rivers and oceans are very important but they tend to be
ignored. These have considerable influence on the running of a business because they decide
which resources will be available for each business. For example, manufacturing is dependent
on physical environmental inputs such as raw materials, water, various skills of labor and
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fuel. Geographical factors thus determine how trade between countries or even regions
within a country will occur. This is because some areas lack certain materials which they
need for some processes while other areas have that material. A good example for you here is
the relationship between Zambia and its neighbors such as Malawi. Zambia has lots of
mineral wealth while countries like Malawi don't, so Malawi basically can trade some of their
agriculture produce with Zambia in exchange for Zambia's minerals. Affecting business are
also things like transportation, and of course this is also heavily dependent on the geography.
In the past, countries that managed to build good railway lines also developed quite fast. Bad
and unusable terrain thus becomes a barrier to business for example businesses like coal
mining and oil drilling as well as agriculture depend mostly on nature and in these businesses
the role of the environment can't be ignored and as such, it is given top priority. This should
be the same for any business that is heavily influenced by nature.
8.2 Shortage of raw materials
Another obvious way in which the environment can affect your business is through provision
of raw materials. If you wish to operate a stone quarry, you shall need access to adequate
quantities of stones. So you will ensure that your quarry mining is set up near the raw
materials you need. Am sure you have noticed that sawmills are usually located in wooded
areas and canneries are found where there is a demand for cans such as near fisheries or
agricultural operations. If you set up your business far away from the raw materials and your
competitors are closer to them, it will put you at a disadvantage. In the current world, they is
an ever growing need for raw materials due to global population expansion, increase in the
middle class coupled with the nonstop emergence of new technologies and applications. On
the downside, the supply of natural resources for example crops, minerals, fish, face
increasing constraints due to changes in factors like climate change, scarcity of water and
political instability.
Thus the growing imbalance of between supply and demand of raw materials and products
threatens performance of business across the world cutting through all types of businesses
and firms that are unable to shield themselves from the threat of scarcity shall be faced with
significant challenges and will potentially lose their financial performance, long term growth
and competitive advantages. Almost each business house is aware of this and is trying to
secure a long term supply cost that is efficient and sustainable.
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Research by KPMG shows that firms across over a wide range of industries have been slow
to adapt and implement long term strategies and as such are missing out on opportunities to
make the first move and gain a suitable and competitive position. The key findings from this
research have indicated the following:
 Firms suspect that the scarcity of raw materials has a significant impact on
performance of businesses
 However, they have been slow to develop and implement responses and have ended
up relying on traditional levers of procurement
 In order for a firm to develop comprehensive and innovative responses that have a
long-term sustained impact, businesses must:
1. Raise and ensure that the topic is top of the management agenda
2. Implement strategic capabilities in important functions that are basically

viewed as operational
3. Ensure proper strategic, cross-functional collaboration as well as solving of

problems across important functions
8.3 Increased cost of energy
Starting any business enterprise is a great challenge and what is more difficult is how does
one manage to keep expenses at a minimum. All businesses rely on energy in one form or the
other and with an increase in the cost of gas, oil, electricity, small businesses end up being
affected negatively by the increased cost of doing business. How can a small business go
round this problem?
8.4 Pollution levels
For a normal and healthy conducive living environment that is of course required by all living
beings, including humans, the level of pollution needs to be kept at a minimum. Pollution
basically adds harmful substances to the environment called pollutants. So we can define
environmental pollution as an undesirable change in the chemical, physical or biological
characteristics of any part of the environment be it air, water or soil, that is capable of causing
harmful on various forms of property or life. Environmental pollution occurs in different
types:
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8.4.1 Air pollution
This is the presence of certain substances such as gases, particulate matter and radioactive
substances in the atmosphere with an ability to cause undesirable effects on living being and
the environment. Pollution can be a sourced naturally or from man (anthropogenic). Pollution
occurs naturally for example when volcanoes erupt, from forest fires, biological decay,
oxidation of terpenes and from extra terrestrial bodies. Radioactive pollution occurs from
minerals present in the earth crust that are radioactive. Most houses in the third world as well
as developing countries such as Zambia use fuels such as coal, cow dung, wood and paraffin
in kitchens and all these are sources of atmospheric pollution. For example a house wife who
uses wood as fuel inhales an equivalent of 20 packets of cigarette a day. Air pollution thus
has adverse effects on living beings and can be minimized by:
 Building industries only after critical Environmental Impact Assessment studies.
 Ensuring the use of low sulphur coal in all industries.
 Washing the coal to removing sulphur or using bacteria to remove sulfur
 Regular tuning of engines and replacement of old vehicles with new ones as well as
changing old catalytic converters will reduce pollution from vehicles. The use of
 Encourage the use of mass transport and bicycles
 Encourage the use of alternative fuels such as hydrogen gas
 Planting more trees and protecting the environment
8.4.2. Noise pollution
Every day we hear all sorts of types of sound. Sound is a form of mechanical energy
produced by a vibrating source. Sound can be pleasant or not to some individual and when it
is not pleasant, we refer to it as noise. Sound can be propagated through mediums such as air,
solid and liquid. A sound wave refers to the pressure perturbation in the medium that sound is
using for travelling. The pressure of sound alternates between compression and rarefaction
and of course they are a wide range of sound pressures that our ears encounter all the time.
Sources of noise to the include modes of transportation such as air, road, railroad and water.
Other sources include industries, construction, and even celebrations were loud music is
played as well as fireworks during festivals. In the world, noise causes the following effects;
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1. It Interferes with communication i.e. in noisy places communication affected
severely.
2. Damage to hearing i.e. damage to the ear drum or ears which can be temporary or
permanent hearing depending on the intensity and duration of the level of sound.
3. Changes in psychology and physiology i.e. exposure to continuous noise affects the
functions of different systems in the body and may result in hypertension, insomnia,
gastro-intestinal and digestive disorders, peptic ulcers, behavioral changes and
emotional changes.
Noise pollution can be controlled or prevented in the following ways;
 Restricting the passage of heavy vehicles in urban or residential areas
 Use sound absorbing materials to contain noise making machines so as to prevent the
noise from reaching the workers.
 Ensure all machines are properly oiled
 Ensure the use of silencers to reduce noise via absorption of sound. They are different
fibrous materials that can be used for this purpose.
 Encourage the planting of trees with broad leaves
The most effective way of controlling noise pollution is through legislation. This will ensure
that sound production is totally minimized at some social functions such as festivals and
weddings
8.4.3 Water pollution
The alteration in the in physical, chemical and biological qualities of water rendering it
undesirable for use in its natural state is known as water pollution. Water is essential for
survival, all living beings need good clean water that can be used for drinking, cooking,
bathing, washing, irrigation as well as industrial operations. This type of water is usually
obtained from rivers, lakes and groundwater sources. Water is easily polluted due to its
ability to easily dilute solutes. Point sources or non-point sources both can cause water
pollution. Point sources refer to specific areas near water were effluents are directly
discharged into the water. The major pollutants in these areas are industries, power plants,
and underground coal mines as well as off shore oil drilling wells. Ground water is less likely
to become polluted however, a number of potential pollutants such as Septic tanks, industry
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(textile, chemical, tanneries), deep well injection and mining are responsible for pollution of
ground water and this is irreversible once it happens. Case in point is what happened in 1953
in Japan were people suffered from numbness of body parts, hearing and sight problems
together with abnormal mental behavior after consumption of fish contaminated with methyl
mercury caught in Minamata bay. This disease later came to be known as Minamata disease
and claimed 50 lives, leaving more than 700 people permanently paralyzed.
Source: https://watchers.news/2011/07/21/mercury-pollution-from-power-plants-seen/
Another disease called Itai-itai also was as a result of cadmium pollution through
consumption of rice. The rice became polluted after it was irrigated with effluents of zinc
smelters and water from the mines. This disease affected bones, kidneys, liver, lungs, thyroid
glands and the pancreas.
8.5 Natural resource management
Natural disasters are the most dramatic environmental factors that you'll ever face. In
developed countries such as the united states, states like California build their buildings to
with stand earth quakes and hurricanes. Japan also does the same.. Factors such as these can
greatly affect your business in several ways even if you don't get to experience the natural
disasters directly. For example. You will have to pay more just to get your goods insured or
provide a large emergency fund in an event were your insurer excludes your major
environmental risk. In lots of regions in the world, this general shortage is made worse by the
degradation and destruction of natural resources i.e. soil erosion. This is mainly as a result of
overuse or a failure to adapt to proper use of resources, ultimately the resistance and
regenerative power of nature is exceeded. Water balance issues threaten the conditions of
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living in communities and also limit the use of resources. Presence of these problems
indicates a non-sustainable use and management of natural resources. Because of this, food
production and rural livelihood is threatened and resource use conflicts occur and the
development chances of that specific region become very slim. Thus, in order to achieve
sustainable management of natural resources, the following should be implemented;
• Avoid degradation and destruction of forests and national parks
• Provide lasting solutions for the water balance problems
• Ensure the improvement of the conditions of the resources
This requires careful and competent planning and skilled planners and managers are needed
for this task.
Lastly, in order to run a viable business in the face of adverse environmental hardships, you
may also require to conduct emergency response training for your staff, and also invest in
generators to help you maintain operations when mother nature changes. The continued
concern for the environment has given rise to a lot of green movements and enlightened
companies always go beyond what the government stipulates. For example some companies
only use recyclable raw materials for the manufacture of their goods.
Activity 8
1. Define Natural Environment?
2. How are business being affected by the increased Cost of energy?
3. Explain the impact of scarcity of raw materials in a Business?
4. Why is Natural Resource Management important in a Business?
8.6 Unit Summary
Congratulations!! another unit done. In this unit we have learnt how natural resources are the
basis of human life. We have seen how the we use these different types of natural resources
in various ways to gain satisfaction for our needs and wants such as eating and drinking,
growing food, making clothes, building houses and transport. However, natural resources
have an end and theoretically only a few are renewable with the vast majority being non
renewable. So each community has the responsibility to use the rare resources we have
economically and in a responsible and sustainable manner
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UNIT 9
INTERNATIONAL ENVIRONMENT
9.0. Introduction
Welcome to the last unit 9. In this unit you shall be introduced to the international business
environment. One of the key aspects in this unit will be globalization. Globalization is a loose
concept based on the idea that we live in a global village and each country must maximize on
what it is well suited to produce. For example if a country is good at producing cars, it must
only produce cars and import everything else it needs from other countries producing those.
This unit will introduce you to the concept of business globalization and international trade.
In this unit we shall also look at the reasons why international trade is important and how it
must be conducted.
Aim
The aim of this unit is to introduce you to the concept of globalization and international
business.
Objective
i. To better understand the concept of globalization
ii. To understand the concept of international trade
iii. To understand how globalization influences international trade
Time frame
6 hours
9.1 Growth of the world economy and globalization
Globalization has been at the center stage of the growth of the world economy. Globalization
refers to the movement from self reliant countries towards an integrated system were
countries become dependent on one another in the world. In the business concept,
globalization involves the expansion of focus of companies from a single country to several
countries i.e. the company becomes a multinational company. Changes in policy as well as
new developments in the technological field have resulted in a growth spurt that eventually
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has led the melting of international boundaries and also to products and services reaching a
global outreach. A lot of changes in policies have opened up markets both domestically and
internationally giving local products a chance to compete internationally with international
products.
Globalization involves the extension of social, economical and political activities across
political boarders, regions and of course continents meaning that across the world, people
must have integrated political, social and economic activities that allow international business
to be conducted appropriately and benefiting the countries involved.
Globalization also includes the increasing magnitude of interrelatedness in areas such as

trade, investment, finance, migration and culture as a result of the acceleration in global
interaction facilitated by the improvement of world-wide transport systems which ultimately
have increased the velocity of the diffusion of ideas, information, financial and human
capital. The growing extensibility and speed of global interaction is related with their
deepening impact such that effects of far away events become highly significant elsewhere
and also local developments in a particular area causing enormous global consequences.
Therefore, the boundaries that exist between domestic and global affairs have become
increasingly blurred.
If we look at the situation of our market you will see evidence that countries that adopted an
open policy to international brands and of course opened up their markets allowing
competition with foreign products have benefited a lot from globalization. The economies of
these countries have received an upward thrust that has allowed their economies to grow at an
unprecedented speed. For example, China which we all know was the champion of
communism and adhered to this philosophy well into the 1990s has also opened up parts of
its markets to allow foreign investment and has also formulated policies and strategies that
favor foreign investment. By so doing China's economy has tremendously grown to become
second in the world and of course the citizens have enjoyed an increase in their per capita
income. This is also evident by the number of Chinese people that can be seen travelling the
world as tourist and also the increase in the number of goods and services that are being
purchased by the Chinese people within their country.
Globalization has also been boosted by the fast advancements in technology. This has led to a
world that is very different from that of our forefathers. indeed the world we are living in
today in the 2000s is totally different from the world of the 1990s. This technological
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advancement has been achieved through many discoveries and has led to a technology-
enabled lifestyle. Now the two taken together has allowed people to use of an extensive
number of gadgets in their daily activities. Because of this, technology manufacturers have
been striving to produce goods and services that are better than the current prevailing ones
otherwise the company will lose its market share and of course will be replaced with another.
Globalization has therefore forced businesses to tread on a razor’s edge so that they can
maintain their position in a fiercely competitive global environment.
9.2. Modes of international business
The operation of international business can be achieved in various ways. Regardless of the
way each international business is done, the common factor in all of them is global outreach.
9.2.1. Import and export of merchandise
Merchandise in this regard refers to tangible goods brought into a country from another or
good that are sent to another country from the country of manufacture.
9.2.2. Import and export of services
Services on the other hand refer to the intangible or non-merchandise products such as
transportation and tourism. For example, when Zambians travelling to South Africa via south
African airways and stays in a South African hotel represents a service export income for
South Africa and service import expenses for Zambia. It is important to take note that
international business services tend to be more restricted by local regulations than tangible
goods.
9.2.3. Investments
Foreign investments are in two types namely; Foreign Direct Investment and Portfolio
investment. Foreign direct investment is when a company desires to gain control or wants to
be the sole owner of a business while portfolio investment refers to a form of non-controlling
interest. The world has become much smaller thanks to international businesses. The way
business is also conducted has greatly changed as a result of international business. The way
we are transacting business worldwide is one visible example of the impact of international
business. We also should not forget that international business has been greatly influenced by
globalization.
Through globalization, people and businesses have been brought closer and its impact on
international business has also been huge therefore, globalization and international business
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are thus very interrelated. International business has taken advantage of globalization as well
as contribute to its development. The globalization idea is based on the principle of making
goods and services available in places where it is considered difficult for business and
utilizing useful resources that are not easily available. Both merchandise and service
industries, including small traders have all benefited from international transactions. This has
also helped bring in a rise in entrepreneurship as well as encourage people to start a business
of their own. In loose terms, globalization has brought an era of oneness that was absent
before. So what are the disadvantages? On the consumer side, the world looks the same with
few options and choices with regards to goods and services for example, in Zambia we have
Hungry lion and Shoprite everywhere you turn and we also have KFC which is an
international brand as well as coca cola, and we basically we are forced to buy from these
establishment even when we do not completely enjoy or like their goods and services. On the
business side, they are no disadvantages if each business is able to cope with the rise in
competition because those business that survive this stand to gain a lot from global markets
and resources.
9.3 International organizations
9.3.1 International Monetary Fund (IMF)
The International Monetary Fund (IMF) has been in existence since 1945 and has members
in 189 countries. The IMF aims at ushering in global monetary cooperation, financial
stability, international trade, promote high employment as well as sustainable economic
growth and poverty reduction worldwide. It is operated by its 189 member countries to which
it is accountable.
9.3.2. World Bank
The World Bank is another international organization with the aim of reducing poverty,
promote foreign exchange, foreign investment, capital investment and of course international
trade. Many countries through help from the world bank have achieved their Millennium
Development Goals for 2015. For these goals to be achieved, six criteria were met namely;
strong and inclusive growth in Africa as well as in fragile states, increased effort in health
and education, integration between agendas for development and environment, better aid,
improvement on trade negotiations, and more focused support from the World Bank.
Millennium development goals were replaced with sustainable development goals (SDGs),
however we will still look at the MDGs in this unit.
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9.3.2.1 Eradicate Extreme Poverty and Hunger
The proportion of people leaving in severe poverty from 1990 to 2004 reduced from 33% to
20% The results differ widely within countries but the trend show that the world can meet
the goal of reducing the percentage of people in poverty by half. Poverty in Africa is
expected to increase because most of the countries are not on track to achieving the goal of
reducing under-nutrition by half.
9.3.2.2 Achieve Universal Primary Education
From 1991 to 2005, there was an increase in the percentage of children going to school in
developing countries from 80% to 88%, respectively, however approximately 72 million
children who could have been in primary school are still out of school and 57% of them are
girls.
9.3.2.3 Promote Gender Equality
Women are slowly becoming recognized in the labor market however more women than men
in the world are still working as unpaid workers. The Gender Action Plan was implemented
to foster economic empowerment for women.
9.3.2.4 Reduce Child Mortality
There has been a great improvement in child survival rates globally however accelerated
improvements are required mostly in South Asia and Sub-Saharan Africa. An estimated 10
million-plus children under the age of five died in 2005 from preventable causes.
9.3.2.4 Improve Maternal Health
About half million deaths occurring during pregnancy or childbirth every year are from Sub-
Saharan Africa and Asia. With the right type of medical interventions, most if not all of these
can be prevented.
9.3.2.6 Combat HIV/AIDS, Malaria, and Other Diseases
Although the annual numbers of new HIV infections deaths have reduced, there is still an
increase in the number of people living with HIV. The eight worst-hit southern African
countries have a combined prevalence above 15 percent. Treatment globally has increased yet
it only reaches 30 percent with wide differences across countries, thus AIDS is still the
leading killer in Sub-Saharan Africa accounting for 1.6 million deaths in 2007. In the case of
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malaria, 300 to 500 million cases are reported per year with more than 1 million deaths. 95%
of these occur in Sub-Saharan Africa.
9.3.2.7. Ensure Environmental Sustainability
Clearing of forests for farmland or industrial development is still a critical problem especially
in regions with high biological diversity and this leads to an increase in greenhouse gas
emissions.
9.3.2.8 Develop a Global Partnership for Development
This involves the use of donor countries who are required to fulfill their pledges. The pledges
must match the current rate of core program development.
The operations financed by the world Bank do not compromise any of the above goals
instead it contributes to their realization
9.3.3. World Trade Organization (WTO)
The World Trade Organization (WTO) is also an international organization comprising of

124 nations. It has the aim of regulating all world trade in goods and services such as
intellectual property and also providing a frame work that allows easy negotiation on trade
and dispute resolutions. WTO in a way leads to globalization since it provides a conducive
environment for international trade. WTO has boosted trade, removed barriers to trade and
has highly influenced the contents of trade agreements between regional blocks.
9.3.4. United Nations Conference on Trade and Development (UNCTAD)
Globalization together with trade expansion has helped millions of people out of poverty.
Still heavy challenges remain and not enough people have benefited from this. UNCTAD
allows developing countries access to the economical benefits of globalization fairly and
effectively. It also helps provide them with abilities to deal with potential drawbacks of
economic integration. In doing so it provides analysis, consensus-building as well as offer
technical assistance. This also helps them to utilize trade, investment, finance, and technology
as vehicles for sustainable development. UNCTAD mainly works with governments in an
effort to deal with the size and complexity of achieving the Sustainable Development Goals.
Part of its mandate is to promote partnerships and foster closer cooperation with the civil and
private sectors. Within the frame work of the UN, UNCTAD is a permanent
intergovernmental body that was established in 1964 with the headquarters in Geneva,
Switzerland and some offices in New York and Addis Ababa. It is a UN Secretariat member
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and reports to the UN General Assembly and also to the Economic and Social Council.
UNCTAD has its own membership, leadership as well as budget
Working at different levels, UNCTAD help countries to:
 Understand options addressing macro-level development challenges
 Increase access to digital technologies
 Promote entrepreneurship and innovation
 Help local firms move up value chains
 Protect consumers from abuse
 Curb regulations that stifle competition
 Adapt to climate change and use natural resources more effectively
Working together with UN departments UNCTAD measures progress attained by the

Sustainable Development Goals according to the Agenda 2030.
9.5. Regional Economic Blocks
9.5.4.1 Southern Africa Development Community (SADC)
The southern African development community (SADC) is a regional block that monitors the
affairs of southern African countries. It has been in existence since August 19th, 1992 with
the following members; Angola, Botswana, Democratic Republic of the Congo, Lesotho,
Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania,
Zambia and Zimbabwe and head quarters is in Gaborone, Botswana. Among the many
objectives of SADC, the main one is to ensure economic development, peace and security,
growth, alleviate poverty and improve the quality and standard of life of the people of
Southern Africa through support of the socially disadvantaged by encouraging regional
integration. For this to be achieved, countries must agree and prioritize the issues affecting
the region. The objectives of SADC are:
1. Acquire economic growth and reduce poverty as well as increasing the living
standards of the people of the region through regional integration
2. Achieve common political values, systems and institutions
3. Promote and defend peace and security
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4. Promote self-sustaining development based of collective self-reliance and inter-
dependence of member countries
5. Achieve complementarily between national and regional strategies and programmers
6. Promote and maximize productive employment and utilization of resources of the

region
7. Achieve sustainable utilization of natural resources and effective protection of the

environment
8. Strengthen long standing social, historical and cultural links among the people from
their respective countries.
SADC ensures that it formulates regulations which guide member countries with respect to
trade and international business, since it is very important for member states to have
appropriate agreements on how to conduct regional business.
9.5.2 Common Market for Eastern and Southern African Countries (COMESA)
COMESA stands for Common Market for Eastern and Southern African countries and was
formed in December, 1991 with headquarters in Lusaka, Zambia. It's one of the largest
regional communities comprising of 19 member countries and a population of about 390
million. COMESA aims at ensuring that good and viable trade among its member states
occurs as well as ensure that peace, security and stability as basic factors for investment,
development, trade and regional economic integration are present. As part of its mandate,
COMESA also ensures that tourism between member countries occurs as this is a good
source of income. Tourism also provides platforms on which different ideas can be
exchanged between countries. COMESA also provides guidelines on business in the region
so that international trade and business is conducted in an orderly manner.
9.5.3 Free Trade Agreement (FTA)
This is an agreement that is made among countries to facilitate the free flow of goods and
services. This agreement breaks barriers of trade, reduce import quotas and tariffs and
encourage countries to participate more in international trade leading to globalization. In
doing so, nations that cannot produce certain good can still have access to those goods.
78
9.5.4 Environmental Protection Agency (EPA)
In most development policies, the relationship between the environment and development is
increasingly becoming central in development policy. Environmental issues are present in
any areas of development policy, especially when it relates to economic growth, trade,
industrialization, agricultural development, food production, poverty and natural resources
utilization. Simply put, our development objectives and goals must be dependent on the
environment and the resources we need as inputs and outputs of our entire production system.
This environmental protection agency (EPA) is an international organization that aims to
protect the environment and it is based on the principle that natural resources must be
protected even in the face of development.
Activity 9
1. Using Zambia as a case, Discuss in greater details how globalization has benefited
and affected developing countries.
2. To what extend do you agree or disagree with the statement that "Globalization will
always benefit the developed countries and not the developing countries".
3. Discuss the regional and international instruments and conventions that facilitate
international trade and globalization and their effectiveness.
4. To what extent do you agree or disagree that Brown filed investments fertilities
international trade and globalization.
5. Discuss the various principles and policies that under pin the SADC common agenda
6. Discuss the institutional structure of COMESA.
7. To what extend is the world bank achieving its goals in developing countries.
9.6 Unit Summary
Well done, you have completed yet another unit and have come to the end of the module. In
this unit we looked and globalization and how it has caused several changes in the world.
Globalization has removed boundaries that kept people apart and basically has turned the
world into one big village. The impact of globalization on the international business has been
remarkable as well. Globalization and international trade has brought common brands to
everyone in the world and has made the world a very similar place. This maybe a
79
disadvantage on the consumer as it causes a reduction in choices but it has greatly benefited
businesses especially those that have been able to compete favorably. This unit has ended by
introducing you to the various international and regional organization blocks such as IMF,
world bank, SADC and COMESA and how they are striving to alleviate world poverty and
other factors that bring human misery.
Module Summary
Congratulations, you have come to the end of this module. We hope you can now:
 Define a Business and its importance.
 Understand the nature of Business Environment.
 Analyze the trends and changes in the domestic Environment.
 Evaluate the impact of international organizations on a Business.
 Discuss problems associated with the Competitive Environment.
 Explain the growth of global linkages today.
 Discuss the opportunities and challenges faced by international Business.
However, if you are unable to demonstrate competencies in the above objectives, kindly go
back and read through specific potions where you have difficulties. Remember to attempt all
the activities even as you revise and get ready to write your examination in this module.
REFERENCES
1. Aguilar, F.J. (1967) Scanning the Business Environment. New York: McMillan.
2. Aaker, D. A. (1983). Organizing a Strategic Information Scanning System. California

Management Review, 25(2), 76–83. https://doi.org/10.2307/41165007
80
3. Daft, R and Weick, K. (1984) Toward a model of organization as interpretation
systems. Academy of management review, 9 (2), 284 - 295
4. Davies, K and Blomstrom, R. (1966) Business and its environment. McGraw-Hill.
5. Klein KJ, Conn AB, Sorra JS. 2001. Implementing computerized technology: an
organizational analysis. J. Appl. Psychol. 86:811--24
6. Klein KJ, Sorra JS. 1996. The challenge of innovation implementation. Acad. Manag.
Rev. 21:1055--80
7. Lester, R and Waters, J. (1989) Environmental Scanning and Business Strategy

(British Library, Research and Development Department, London, UK.
8. Porter, M and Miller, V. (1985) How information gives competitive advantages,

Harvard Business Review 63(4), 110–128
81

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THE UNIVERSITY OF ZAMBIA

INSTITUTE OF DISTANCE EDUCTION

Course Code: BBM2052

Institute of Distance Education

The University of Zambia

P.O. Box 32379

Tel: +211 290719

Fax: +211 253952

The University of Zambia, Institute of Distance Education Module

The University of Zambia, Institute of Distance Education Module

UNIT 1 OVERVIEW OF BUSINESS ENVIRONMENT ............................................................... 13

The University of Zambia, Institute of Distance Education Module

The University of Zambia, Institute of Distance Education Module

Having exposed you to the initial modules in Business management/Administration, we hope

The University of Zambia, Institute of Distance Education Module

 Understand the nature of Business Environment.

 Analyze the trends and changes in the domestic Environment.

 Evaluate the impact of international organizations on a Business.

 Discuss problems associated with the Competitive Environment.

 Explain the growth of global linkages today.

 Discuss the opportunities and challenges faced by international Business.

The University of Zambia, Institute of Distance Education Module

Sub-Total Continuous assessment 40%

1 Final examination 60%

Campbell-Hunt, C., Elkin, G., Geare, A. J., Greatbanks, R. (2009). Management,

1. Hill C, W, L (2010) International business, Mcgraw-Hill,

The University of Zambia, Institute of Distance Education Module

The University of Zambia, Institute of Distance Education Module

The University of Zambia, Institute of Distance Education Module

Director, Institute of Distance Education:

Institute of Distance Education,

Coordinator, Learner Support Services (Land Cell): +260 978772249

Senior Administrative Officer

IDE Land Line: +260 211 290719

IDE Fax: +260 211 290719

IDE E-mail: director-ide@unza.zm

The University of Zambia, Institute of Distance Education Module

2. It helps in tapping useful resources. Scanning carefully in the business environment

The University of Zambia, Institute of Distance Education Module

5. It helps us in improving performance. Businesses scanning their environment also deal

Objectives of Business Environment

1. Knowledge of Information: Every businessman should be aware of the ability of the

4. Technological Planning: In today's environment, it is very important for the business

The University of Zambia, Institute of Distance Education Module

OVERVIEW OF BUSINESS ENVIRONMENT

By the end of this unit you should be able to:

i. Demonstrate an understanding and importance of Business Environment

ii. Identify the characteristics of a Business

iv. List the components of a basic Environment

1.1. Definitions and characteristics of business

The University of Zambia, Institute of Distance Education Module

1.2. Characteristics of Business

5. Finally, undertaking risk is the inherent characteristic of business enterprise.

The University of Zambia, Institute of Distance Education Module

 All environment tend to be dynamic by nature, therefore scanning is necessary to keep

 Scanning allows organizations to monitor and put appropriate strategies in place to

 Scanning provides the necessary input to the formulation and implementation of

Environmental scanning has different kinds of scanning namely;

3. Continuous scanning (also called continuous learning) which involves continuous

The University of Zambia, Institute of Distance Education Module

1.3.1. Tools of environmental scanning; SWOT, PESTLE

1.4. Classification of the business environment

1.4.1. Static Environment

The University of Zambia, Institute of Distance Education Module