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Chapter 2
The Business Environment and Business Functions
By the end of this chapter you should be able to do the following:
■
Demonstrate your understanding of the environment in which business operates;
■
Explain the micro, market and macro environments of a business;
■
Describe the eight business functions.
Short questions
1. Define gross domestic product.
2. What does the economic growth rate of a country mean?
3. What are the two main aims of a business?
4. Define a free market economy.
5. Why is it not appropriate to have a contact centre work station at home?
6. What role does competition play in the free market economy?
7. How will the price of a product be determined in a free market economy?
8. What restrictions and limitations have been set by the government?
9. Define the micro environment.
10. What are the most important factors in the micro environment?
11. Name the eight business functions that ensure that the objectives of the business will
be achieved.
12. What are the most significant variables in the market environment?
13. Name the different types of markets.
14. Why is it important that the business is informed of the buying preferences of
consumers?
15. What are the roles of the intermediary and supplier in the business environment?
16. Name the sub-environments of which the macro environment consists.
17. Which factors influence the economic sub-environment?
18. Name a few changing aspects that influence the society and its trends.
19. Describe the impact that technology has on the business environment.
20. Define general management.
Group discussion
1. Distinguish between the four types of businesses. Discuss in a group examples for
each of the business types. Do not use the examples from the textbook.
Match the question with the correct answer in the left-hand block.
Write the correct letter only.
Question
Select the correct answer
1 Gross domestic product
A The business itself
2 To make money
B Market environment
3 Free market economy
C Social environment
4 Government does not interfere
D Type of markets
5 SMME
E Business
6 New and better ways to satisfy
F Free market economy
customers
7 Presents opportunities and threats
G Consultancy practise
8 Micro environment
H Capital or financial resources
9 Mission, objective, production factors
I Small, micro, medium enterprise
10 Suppliers and intermediaries
J General management
11 Retail, industrial, consumer market
K Wide range of cosmetics
12 Macro environment
L Micro environment
13 Culture, language, religion, customs
M Determine the growth or decline
14 Interdependent variables
N Micro, market and macro environments
15 Manufacturing business
O Business environment
16 Spaza shop products sold to clients
P Source of quality products
17 Service business
Q Capitalist countries
18 Planning, organising, leading, control
R Commercial business
19 Financial management
S Economic, political, legal, social, cultural
20 Suppliers
T Competition
Multiple choice questions
1. The gross domestic product is:
a. the total final production of the country’s geographic boundaries
b. GDP
c. determines the growth or decline of a country’s economy
d. all of above
2. What does a business do:
a.
Manufactures products, provide services or sell products
b. Makes a profit
c. Gives work to employees
d. All of above
3. What is the aim of any business:
a. To be the best business in the country
b. Make a profit
c. Look after its employees
d. Only B and C
4. A free market economy is when:
a. Individuals can buy and sell property
b. Competition between businesses is encouraged
c. Prices of goods and services are determined by the consumers
d. All of above
5. Competition takes place when:
a. A business tries to persuade consumers to buy from other businesses
b. A business does exactly the same as the other businesses
c. A business implements new and better ways to produce their products
and services
d. All of above
6. The business environment can affect the:
a. Establishment, growth, profit or a business
b. Survival of business, its establishment and growth
c. Both A and B
d. None of above
7. The variables of the micro environment include:
a. Mission, vision, objectives
b. Mission, production factors, objectives
c. Strength and weaknesses of the business
d. All of above
8. The variables of the market environment are:
a. Consumers or the market of the business
b. Suppliers and intermediaries to the business
c. Competitors
d. All of above
9. The different types of markets are:
a. Supplier market, distribution market, young market
b. Consumer market, retail market, fashion market
c. Retail market, industrial market, consumer market
d. All of above
10. Success in the business depends on the:
a. Profitability
b. The number of employees, suppliers and customers
c. Buying power of specific markets, buying preference of the markets
d. All of above
11. The role of the supplier is:
a. To provide businesses with the final product
b. To advertise their products to the public
c. To provide raw materials and other resources
d. All of above
12. The macro environment includes the:
a. Economic conditions, legal variables, cultural forces
b. Opportunities and threats
c. Small, medium and large businesses
d. All of above
13. Economic conditions include such things as:
a. Profitability, amount of rich and poor customers
b. Inflation, interest rates, growth rate
c. Income levels of consumers, spending behaviour
d. All of above
14. The social environment includes the following:
a. Restaurants, shopping malls and cinemas in the environment
b. Culture, language, religion
c. Population rate, regularity of customers
d. All of above
15. The physical environment includes the following:
a. Swimming pools, houses, hotels
b. Water, land, rivers
c. Roads, businesses, cities
d. All of above
16. The types of businesses:
a. Manufacturing, service, commercial
b. Private, governmental, manufacturing
c. Service, private, commercial
d. All of above
17. The order of the functions of general management are:
a. Planning, organising, operate, receive feedback, take action
b. Planning, organising, taking corrective action, conclude actions
c. Planning, organising, leading, control
d. Organising, planning, control, leading
18. The additional management functions are:
a. Coordination, decision-making, communication
b. Delegation, motivation, discipline
c. Coordination, discipline, communication
d. All of above
19. How many business functions are usually combined in separate departments:
a. 14
b. 7
c. 5
d. 10
20. Operations management includes:
a. Capacity planning, production systems, product design
b. Business strategy planning, service quality, distribution channels
c. Capacity planning, service quality, product design
d. All of above
True or False questions
1. The gross domestic product (GDP) is the total final production within a
country’s geographic boundaries.
2. Government interference in the economy should be prevented at all times.
3. South Africa does not have a free market economy.
4. Competition takes place when businesses try to persuade consumers to buy from
them.
5. In a free market economy, buying and selling are essential and are very important
to ensure profit.
6. The intensity of competition is the same for every industry in which the business
operates.
7. The micro environment is the business itself and consists of all the variables and
factors that occur internally in the business and which can be controlled through
management within the business.
8. The market includes all individuals, groups or institutions that have needs and are
prepared to pay for them.
9. The social environment includes culture, language, religion and customs.
10. The micro -, market – and macro environments and their variables are
independent.
11. We distinguish between two types of businesses namely manufacturing, and a
combination business.
12. A business consists of various functional divisions, functions or departments in
which related activities such as activities related to the operational aspects of the
business or the employees of the business.
13. The human resource function includes all the activities concerned with the
employment, development, compensation, integration and maintenance of the
employees of the business.
14. General management does not differ from the other functions.
15. Planning involves all those management activities which deal with setting the
organisation’s objectives and determining how these can be achieved.
16. The process of organisation takes place where five or more people co-operate to
reach a common goal.
17. Suppliers are important to any business and they are the source of quality products
as well as useful industry information
18. The smaller the company’s target market, usually the more advantageous it is for
the manufacturer and the intermediaries.
19. Public relations are the deliberate, planned, and sustained effort to establish and
maintain mutual understanding between the business and its various publics.
20. Every business should regard its image as an asset that requires constant
development.
Fill in the missing word
1. The ________ of a country is an indication of how successful a country is in
providing jobs and income to its citizens.
2. The business environment presents _______ and ______ to businesses and is
continuously changing.
3. The most important variables and factors in the micro environment are the ______
and ________of the business, the production factors and the business functions.
4. Countries that have a _______ ________ _______are also known as capitalist
countries.
5. As competitors compete with each other, they discover ____ and _____ ways to
satisfy customers’ needs.
6. _________ occurs when each business competes for its share of the market and
success depends on the type of _______, the _______ and the price of products.
7. Success in business depends on taking the _______ ________ of specific markets
and target markets which are more narrowly defined markets or groups of
consumers and their preferences into account.
8. The technological environment includes technological development that can
present _________ as well as ________ to businesses.
9. ___________ is the starting point of the management process.
10. Marketing is the process of __________ _______ and _________ to customers in
order to satisfy their needs as well as the activities that make the transfer possible.
11. Success in business depends on taking the buying power of __________ and
________.
12. No business can be managed without ________, ________ and _______
information.
13. The ____ the company’s target market, usually the more advantageous it is for the
manufacturer and the intermediaries.
14. Internal publics are inside the business and include_________,_______, _______
the board of directors and shareholders.
15. The purchasing function ensures that the input or production means are of the
_______ ________, are supplied to the business in the________ ________, at the
right time, to the right place, from the right suppliers at the right price.
16. Inputs are money or capital, _________, ________ and ______. Outputs are
_______ or ________ that can be sold or exchanged for money and clients want
and are prepared to pay for.
17. The process of organisation takes place where ______ or _______ people cooperate to reach a common goal.
18. The ________ ___________ is responsible for the orderly collection, processing,
retrieval, distributing and storing of information in a business.
19. The marketing function would like information on clients and potential clients,
their ________, ________, _________, _________, _________, ________
market segments and needs.
20.
The public is more informed than before and will not stand for _____ _______,
_________ _______ or __________ simply for the sake of loyalty towards a
business.