TERM 1
CHAPTER 1
NOTES ON MICRO ENVIRONMENT
CONTENT DETAILS FOR TEACHING, LEARNING AND ASSESSMENT PURPOSES
Learners must be able to:
• Define/Explain the meaning of the micro environment
• Outline/Describe/Explain/Discuss the various components of the micro (internal
business environment.
• Identify a vision, mission statement, goals and objectives from given scenarios.
• Formulate/Evaluate a vision, mission statement, goals and objectives of any business.
• Explain, Discuss the purpose of the organisational culture
• Outline/name/identify/Explain the organisational resources from given
statements/scenarios.
• Describe the purpose/importance of a business organisational structure with specific
reference to an organogram.
• Explain the differences between leadership and management.
• Briefly explain the purpose of the eight business functions
• Outline/Describe/Explain/Explain the importance of the eight business functions.
BUSINESS ENVIRONMENTS (refer to the 2021 exam guideline pages 9-11)
1 Micro environment/Internal environment
Meaning of micro environment/Internal environment
• It is the environment within which a business operates and consists of the business
itself.
• It is the decision-making environment because management make decisions that help
the business achieve its goals.
• It can also be referred to as the immediate environment in which a business operates
and includes all the internal factors of the business.
2 Components/Features/ Elements of the Micro environment
The components of the micro environment include the following:
• Vision
• Mission
• Objectives
• Goals, strategy
• Organisational resources
• Leadership and management
• Business function
• Organisational structure
• Organisational culture.
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2.1 Explanation of the components/features/elements of the micro-environment
Vision
• Refers to a statement that explains what a business aims to achieve.
• Answer to the question: ‘where are we going from here?’
• Sets out where the business needs to go to be successful
• The dream of the business and what it wants to achieve in future.
• Gives businesses a clear idea of what they want to achieve.
• The inspiring statement about what a business wants the future to look like.
• Explains what a business aims to achieve taking into consideration its purpose.
• Example ‘To provide job opportunities for the local community
Mission statement
• A statement that explains the reason for the business existence.
• Enables businesses to develop strategies to achieve their vision.
• The answer to the question such as what businesses do to make a profit?
• Explains what the business does to achieve it vision.
• Gives clear direction on how the business intend to achieve its vision.
• Describes the purpose and basic activities of the business.
• Example ‘To become a word-class communication company
Goals
• Can be defined as long term objectives of what the business want to achieve.
• Goals break down the business objective into specific and measurable parts.
Example Increase profit margin by 50% in 2020.
• Goals give the business a sense of direction.
Objectives
• Short- term tasks/steps to reach goals.
• Contain a deadline for achievement.
• Explains how the goals of the business will be reached.
• Explains targets and strategies that will help the business fulfil its mission.
• The purpose of the business, for example, a business may have a primary objective
of making a profit and a secondary objective of social upliftment.
Strategy
• The strategy outlines how the business will achieve its vision in line with its mission
statement and objectives.
• It is a plan of action taken by Top management to achieve their vision.
2.2 Purpose of the organisational culture
• It influences people’s actions and attitudes.
• The culture determines how things are done.
• It is the “personality” of the business.
• Shared understanding of how things are done in a business.
• Every business has a culture that is influenced by everyone who is part of it.
• It is based on three key issues: values, beliefs and purposes e.g. dress code/office
décor/employee behaviour etc.
• Influences the way people in the organisation interact with each other and with
stakeholders.
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2.2.1 Examples of the business culture
• Personality/ ethos of the business
• Norms, values and expectations.
• Business code of conduct
• Floor plan of the business.
• The working environment of the business.
• Respect for other employees’ values.
• The way managers are addressed
2.3 Organisational resources
• These are assets that the business uses to produce goods/services and to achieve
its goals.
• The following four groups of resources are controlled by management:
Physical Financial Human Information &
resources/operating resources resources Technological
resources (People) resources
• Natural • Capital • Employees • Technology,
resources • Own Capital • Contractors the use of
• (raw material) • Cash computers
• Machinery • Bank over • Research
• Vehicles drafts • Production
• Buildings • Short and technology
• Infrastructure medium term
• Assets from loans
nature such as • Money invested
water, minerals in the business
and wood to acquire
production
goods such as
land, building
and machinery
2.3.1 Explanation of types of organisational resources
Human resource
• People with knowledge and skills such as employees/consultants/managers etc.
• The people needed to perform the work and keep the organisation functioning.
• People who contribute towards achieving the goals of the business.
Natural resources
• Assets from nature that are used to offer services and products, such as minerals,
water and wood.
Physical resources
• Include raw materials/office furniture/equipment/machinery/plant necessary to
operate the business successfully.
Financial/Capital resources
• Money invested in the business to acquire production goods such as land,
buildings and machinery.
• Can be in the form of cash/bank overdrafts/short and medium term loan
.
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Technological resources
• Resources that include computers/voice mail/emails/production technology that
gives the business an advantage over its competitors.
Entrepreneurial resources
• The person responsible for combining the factors of production in such a way that
the business will make a profit
2.4 Importance of business organisational structure
• It shows who report to whom and which department fall under which managers.
• The structure show the flow of instruction and feedback in the business.
• Every business must be organised into a structure that show each person’s task,
the level of authority and responsibility.
• It is the hierarchy that shows the position of management, the departments and its
employees.
2.5 Differences between leadership and management
MANAGEMENT LEADERSHIP
Managers ensures that tasks given to Leaders inspires other people
subordinates are completed
Task orientated People orientated
Uses Instructional approach Uses motivational approach
Managers hold a managerial position in theA leader does not hold a managerial
business position
Management is the process of achieving Leadership is the process of inspiring and
business goals influencing other to achieve business goals
Guides human behaviour Influences human behaviour
Communicates through management Communicates by means of
functions, e.g. line function. interaction/behaviour/vision/values/
charisma.
A person becomes a manager because Leaders are born with natural/ instinctive
he/she is appointed in the position leadership skills
Manage by planning/organising/leading and Lead by example/trust/respect
controlling
2.6 Business functions
• General management
• Administration function
• Financial function
• Purchasing function
• Public Relations function
• Human resources function
• Production function
• Marketing function
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