Lesson 2: Business Environment
Business and Accounting Studies — Grade 10
2.1 Business Environment
The business environment is made up of all the factors — within or outside a business — that affect its
existence, either directly or indirectly. Since these forces keep changing, successful businesses study their
environment continuously and adapt to new opportunities.
Classification
INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT
Owners — supply capital; their knowledge & Customers — buy goods/services; their buying
experience drive success patterns affect the business
Managers — make decisions to achieve Suppliers — provide raw materials/services on
owners' objectives time and in good quality
Employees — perform tasks; dedication & Competitors — rival businesses; their
attitude matter price/quality/marketing influence the business
• Political environment — government policies (e.g. fiscal policy)
• Legal environment — laws & regulations (e.g. Companies Act, Consumer Affairs Authority Act)
2.2 Technological and Economic Environment
Technological Environment
Rapid innovation (computers, internet, nano/digital technology, transport) keeps changing how businesses
operate and how people live.
• Manual weaving → computerized fabric production
• Postal mail → telephone, e-mail, websites for advertising
• Manual accounting books → computerized information systems
• Caution: goods and services can quickly become outdated due to fast tech change.
Economic Environment
Interest rate Rate given on deposits / charged on loans
Inflation Continuous rise in general price levels
Income distribution How national income is shared among people
Employment level Full employment = everyone seeking a job has one
International relations Relationships between countries via trade zones/agreements
Foreign exchange rate Rate at which one currency is exchanged for another
Income kept rather than spent — higher savings means more
Savings
funds for investment
2.3 Global Environment and Business Activities
Globalization is the mutual economic, social and cultural relationship among countries, enabling business
activity across borders with fewer restrictions — turning the world into a single global village.
POSITIVE IMPACTS NEGATIVE IMPACTS
Access to the latest technology Highly competitive environment
Quality raw materials from abroad Skilled workers migrating abroad
Access to efficient machines Instability of domestic businesses
Inflow of foreign capital Negative changes to local culture
• Possibility to find foreign markets for domestic goods and services
2.4 Importance of Studying the Business Environment
Studying the internal environment reveals a business's strengths (to build on) and weaknesses (to
minimise). Studying the external environment reveals opportunities (to exploit) and threats (to guard against)
— i.e. a SWOT analysis.
STRENGTHS WEAKNESSES
Adequate capital Owners' insufficient business knowledge
Experienced managers Limited financial capability
Skilled, dedicated employees Scarcity of trained workers
Specialized production methods Outdated knowledge of new technology
Recognized brand name Unfavourable location
OPPORTUNITIES THREATS
Changing consumer lifestyles New competitors entering the industry
Low-interest government loans Natural disasters
Tax incentives for businesses International trade embargoes
New cities / highways being built Difficulty adapting new technology
Key takeaway: Clever businessmen continuously monitor their environment — exploiting strengths and
opportunities, while minimising weaknesses and threats — to ensure growth and stability.
Mind Map — Lesson 2 Overview