5tbe lecture guide

QCFUnit Title: The Business Environment

Learning Outcome: 1. Understand the significance of the environment on business activity.

Please note that the content of this Lecture Guide is listed in its recommended teaching order, rather than in numerical order. Indicative Content: 1.1.1 Explain the business organisation as a transformation process:

Business organisations undergo a transformation process from inputs into outputs, using physical inputs plus finance and skills to produce both goods and services.

Use examples from both manufacturing and service sector organisations to illustrate the process.

1.1.2 Describe the different ways in which a business may structure its activities:

Organisational structures can be based on the functions of the organisation, its product ranges, or geographical regions. Alternatively some less hierarchical organisations may use a matrix structure, especially if the firm is project based.

1.2.1 Discuss the complexity, volatility and uniqueness of an organisation's

environment:

The organisation in its environment has to face a wide range of internal and external influences which affect business activity.

The immediate or operational environment interacts with suppliers, competitors, the labour market and financial institutions.

The general or contextual environment consists of economic, political, legal, and social factors. Each functional area of the organisation may be affected.

Whilst organisations have some control over their internal environment, the external environment is more volatile (e.g. technological change), and wide ranging and this makes decision making more difficult.

The uniqueness of organisations means that each one is affected to different degrees by external environmental factors.

Examiners tips: Throughout the course emphasis will be on applying theory to practical business scenarios to bring the subject to life. Case studies should be used wherever relevant to look at both internal and external influences on the business organisation, with discussions on problem solving. Other factors causing a volatile environment for business, such as globalisation, can be introduced here, but will occur later in the course. Exam questions will in many cases include short business scenarios, and be in two parts, the first part theory and the second part practical application. Recommended reading: ABE Study Manual The Business Environment chapter 1 and chapter 2. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) Chapters 1, 2 and part of Chapter 10.

QCF Unit Title: The Business Environment

Learning Outcome: 1. Understand the significance of the environment on business activity.

Indicative Content: 1.2.2 Outline the nature of the external environment (PEST):

The basic description of PEST factors should be made clear, as it is a recurring theme across the course.

PEST analysis can be used to analyse the firms current and future environment.

1.3.1 Discuss the need to monitor changes in the external environment:

The business organisation can be viewed as an open system in constant interaction with its environment.

Changes in the environment can cause changes in inputs, in the transformation process and in outputs. This may lead to further environmental changes.

The key drivers of change should be discussed in outline, using practical examples, with emphasis on why these need to be monitored (detailed methods of monitoring occur later in the course).

1.3.2 Discuss the implications of environmental change for a business, its stakeholders and society:

Environmental scanning will identify trends and changes, generating opportunities and threats to firms strategies.

Informal scanning involves getting market information about and from stakeholders, which is especially useful for small firms.

The impact of change will affect different stakeholder groups to varying degrees.

1.3.3 Explain reasons for resistance to change by firms, managers and employees:

A common reaction to change by both managers and employees is to resist change.

The management of the change and communication processes need to be clearly and carefully planned.

1.3.4 Describe ways in which resistance to change may be overcome:

Management of change is very important in overcoming resistance.

An overview of management techniques in this field can be explored, emphasising the need for a firm to be flexible in its approach.

Examiners tips:

PEST analysis is a very useful tool to examine the external and internal influences on organisations. It can be practised for many business scenarios. Encourage students to follow business news items, to discuss in class. Emphasis should be on the dynamic business environment and how businesses cope with the inevitable changes that this brings about. Group work and discussions should help students understanding. Recommended reading: ABE Study Manual The Business Environment, Chapter 2 Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 1 and 18. Needle D Business in Context (4th edition Thomson) chapter 5.

QCFUnit Title: The Business Environment

Learning Outcome:

2. Understand the structure and organisation of business.

Indicative Content: 2.1.1 Classify businesses by sector primary, secondary and tertiary - and discuss

reasons for changes in industrial structure, including concentration:

Using examples, look at primary, secondary and tertiary sectors.

Discuss changes in employment and output in industrial sectors such as the UK as a result of deindustrialisation.

Compare with industrial structures in developing economies, where there is much more emphasis on primary sector and development of secondary sector businesses.

2.1.2 Discuss the advantages and disadvantages of different legal forms of organisation:

The legal types of private sector organisation in the UK should be studied, from sole traders, to partnerships, to Ltd companies and plcs., and the formalities required to set them up.

The comparison between these forms of organisation should be explored in terms of advantages and disadvantages, e.g. liability for debts, advantages of larger scale, increasing specialist expertise and economies of scale.

2.1.3 Discuss the use of franchises, licensing and joint ventures as means of doing business in both national and international spheres:

Use examples to discuss the spread of franchising as a method of setting up a business.

Licensing is a method used to authorise firms in another country to use copyright, patents, trade names etc.

Joint ventures are contractual arrangements between 2 or more parties for specific business ventures. They are popular with international companies.

Examiners tips: Exam questions will be based on the advantages and disadvantages of different legal forms of organisation, using examples from short scenarios. Encourage students to analyse the decision making required by organisations at particular stages of growth, linked to different business objectives. Also how firms might cope with the decline phase of their life cycle. Recommended reading: ABE Study Manual The Business Environment chapter 1 and chapter 3. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapter 10.


Learning Outcome: 2. Understand the structure and organisation of business.

Indicative Content: 2.1.4 Distinguish between public sector and private sector organisations and their

objectives:

The various types of public sector organisation in the UK, in particular, include central government departments, public corporations, municipal enterprises such as theatres, leisure services and museums, and the BBC.

(Refer back to political environment under PEST analysis.) The private sector organisations discussed above can be analysed in terms of

their objectives, ranging from profitability, market share, customer service, sales maximisation to survival.

The objectives of public sector organisations can be compared with those in the private sector. These consist much more of value for money for taxpayers and service level targets and performance indicators.

2.1.5 Explain the advantages and disadvantages of large and small firms:

The advantages of the small firms sector, both in the UK and in home countries can be discussed. There should be many local examples to research, emphasising customer service and convenience of location.

Economies of scale achieved by larger firms can give competitive advantage over small firms. There are many different types of economies of scale which can be discussed, including financial, marketing and managerial.

Firms growing too large can experience diseconomies of scale. The reasons for these diseconomies can be looked at, with practical examples.

Examiners tips: In this section have a look at case study scenarios, and real businesses locally. Get students to come up with advice that could be given to particular businesses to help them with problem solving. This could be done in the format of short research assignments or group work. Recommended reading: ABE Study Manual The Business Environment chapter 3 and chapter 5 Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 10 &11. Needle D Business in Context (4th edition Thomson) chapter 5.


Learning Outcome: 3. Understand the competitive and political environment facing businesses.

Indicative Content: 3.1.1 Discuss the need to monitor the competitive environment of businesses:

External influences and competitive pressures operate at different levels from local, to national, to global, and most businesses are affected by these.

It is important to identify competitive trends and changes in the environment to plan effectively future trends in business activities, and ensure the organisation is prepared to meet competitive challenges.

3.1.2 Analyse a business organisation, using SWOT analysis:

Opportunities and threats to a business can be identified either informally by observing trends, or using the SWOT matrix, to review both internal and then external factors. As we have seen already, limitations to this analysis may be due to external factors and changes, which cannot be accurately predicted.

SWOT analysis can be examined for its effectiveness in different business sectors, some of which are easier to predict than others, depending on information already available.

3.1.3 Apply Porters Five Forces Analysis of the competitive environment to a

business organisation:

An alternative method of analysing the competitive environment is to use Porters model.

Aspects of this model can be summarised in terms of current competition and potential competition.

If existing firms can build barriers to new entrants, they will be able to beat off competition.

Examiners tips: This part of the syllabus equips students with the analytical tools to research organisations. As such it is recommended that case studies, which can be found in the recommended text, as well as local businesses, are used to look at the challenges firms face. This will help prepare students for the short business scenarios which may be used in the exam. Recommended reading: ABE Study Manual The Business Environment chapter 3. Further reading: Worthington, I. and Britton, C., The Business Environment (6th edition, Prentice Hall), chapters 15 (note case study) and 18.


Learning Outcome: 3. Understand the competitive and political environment facing businesses.

Indicative Content: 3.2.1 Describe the characteristics of perfect competition, monopolistic competition,

oligopoly and monopoly:

Theory underlines the use of market structures as benchmarks to assess the degree of competition in a market, and to predict behaviour of firms in that market in pricing and product decisions.

3.2.2 Describe forms of anti-competitive behaviour and their impact upon other organisations and consumers:

Examine barriers to entry preventing competitors from entering the market.

Cartels and collusion, illegal in the UK, can be researched.

Look at particular business sectors where there is less competition and the impact of this on consumers.

3.3.1 Describe the different ways that a government may affect business:

Governments can affect many aspects of business activity (relate back to PEST analysis).

As well as the legislative environment, the most significant impact on business activity is the macro economy, which is largely controlled by government economic policies (these will be examined in Lectures 7 and 8).

3.3.2 Assess the role of pressure groups and lobbyists on business and government:

Pressure groups are important stakeholders in some business sectors, and aim to modify business objectives related to areas such as the environment, human rights and animal rights.

3.4.1 Describe the need for government intervention to control the competitive

activities of business organisations:

The role of the Competition Commission should be examined critically in terms of its effectiveness in regulating anti-competitive practices.

Examiners tips: Ensure students understand economic terminology such as monopolistic competition being completely different from monopoly. Small firms in these markets may compete by differentiation of products and services, rather than by price. Local examples of each type of market structure could be looked at. Short research assignments done in groups may be a good way to prepare students for this, and help by practising application of theory to practice. Discuss economic and political influences both from government regulation and outside groups. Recommended reading: ABE Study Manual The Business Environment chapter 4 and chapter 5. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 15 and 17. Needle D Business in Context (4th edition Thomson) chapter 8.


Learning Outcome: 4. Understand the impact of the macro-economic environment on business.

Indicative Content: 4.1.1 Assess the advantages and disadvantages of centrally planned and market

economies:

Study the effect of state ownership and control and its effects on economic decision making.

Economies in transition in Eastern Europe can be researched and the advantages and disadvantages discussed.

4.1.2 Discuss the need for the provision of public goods and merit goods in a mixed economy:

Market economies under-provide certain goods and services and this market failure results in the need for public and merit goods.

Comparison between UK economy and home economies of students can be discussed, with particular reference to health and education.

4.2.1 Describe the four main macro-economic objectives of government: low inflation,

economic growth, low unemployment and balance of payments stability:

Detailed explanation of objectives should be researched and discussed.

How these economic objectives are measured should be examined. 4.2.2 Explain the nature and characteristics of the business cycle:

Look at the reasons and ways in which economies fluctuate between recession and boom.

Examine why economies grow and what influences a slowdown in growth and downturn towards recession.

4.2.3 Discuss the impact of the stages of the business cycle on business and the economy:

The role of business expectations and confidence is important in decision making.

Investment decisions are more likely to be made when the economy is growing rather than declining in the business cycle.

Examiners tips: Questions on this part of the syllabus are likely to be more general, requiring an overview of the macro economy. Emphasise the role of government and limitations in both centrally planned and market economies. Discuss comparisons between the UK economy and home economies of students. Get students looking at the statistics of the UK economy on the internet to compare with other countries. Recommended reading: : ABE Study Manual The Business Environment chapter 5 and chapter 6. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 5 and 13. Use the internet, in particular www.bized.co.uk macroeconomics for a study of the business cycle, and www.statistics.gov.uk


Learning Outcome: 4. Understand the impact of the macro-economic environment on business.

Indicative Content: 4.2.4 Discuss the role of fiscal policy in the control of the economy:

Look at how changes in government spending and taxation impact on the economy, and also the level of government borrowing.

The circular flow model of the economy can be used to demonstrate the effect of changes and to consider the multiplier effect on GDP.

The incidence of different taxes can be explored.

The aims of tax in redistribution of wealth and influencing consumers away from demerit goods (e.g. with additional taxes on cigarettes and alcohol) can be examined.

4.2.5 Discuss the role of monetary policy in the control of the economy:

Too much money in the economy can cause a rise in consumer spending and demand-pull inflation.

Emphasise the role of interest rates on the economy, in particular on components of aggregate demand as they relate to business.

Business investment decisions are affected by interest rates, but they are also dependent on consumer spending, which is equally affected by interest rates.

Examiners tips: A detailed knowledge of the banking system is not required. The main emphasis of exam questions will be on the effects of economic policies on business decision making. Make sure students understand the impact of fiscal policy and monetary policy, to debate which may be more effective in controlling the economy. In addition recent experience in both the UK economy and the global economy can be linked to wider influences than just national governments. A good class exercise might be to collect economic news items for class discussion. Recommended reading: ABE Study Manual The Business Environment chapter 5. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapter 5. Needle D Business in Context (4th edition, Thomson) chapter 5.


Learning Outcome: 5. Understand the influence of the global economy on business.

Indicative Content: 5.1.1 Explain the reasons for international trade and barriers to free trade:

The theory of international trade should be explained, and the gains from trade due to specialisation.

Barriers to trade should be studied critically, looking at examples, and advantages and disadvantages.

Globalisation as a phenomenon should be introduced here.

The role of the WTO in trying to prevent trade disputes between countries and in removing trade protection should be evaluated.

5.1.2 Describe the importance of regional trading blocs such as ASEAN, NAFTA, SADC, CARICOM and the EU:

With globalisation it is increasingly difficult for individual countries to trade alone, leading to the need for trading blocs.

The advantages of these blocs should be discussed with particular reference to students home countries economies.

The effectiveness of the EU in promoting trade between member states can be evaluated against the problems for exporting countries from outside, subject to common external tariffs against their goods.

5.1.3 Explain the impact of exchange rate fluctuations on international business:

A study of how exchange rates are determined should be made briefly.

The factors affecting both demand and supply of a currency should be examined, including the destabilising effect of currency speculation.

The effect of rising or falling exchange rates on prices of exports and imports, and the subsequent effect on balance of payments should be examined.

In general lower exchange rates will help a country promoting cheaper exports, and more expensive imports will help domestic firms to compete.

Examiners tips: Exam questions will be looking for comparisons and analysis of free trade versus trade protection, globalisation versus trading blocs, and the effects of exchange rates on competitiveness in international markets. To prepare for this, the impact of international trade on developing countries could be studied, including the difficulties of breaking into international markets, dominated by global corporations. The emphasis of the WTO is often seen as biased towards the western developed countries, so articles on this topic would make for interesting classroom debates. Recommended reading: ABE Study Manual The Business Environment chapter 7 and chapter 8. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 3 and 16.


Learning Outcome: 5. Understand the influence of the global economy on business.

Indicative Content: 5.2.1 Describe the main causes of globalisation:

Following on from lecture 9, the developments in globalisation can be summarised.

The background to the global context of business and the development of emerging economies and their role in international trade can be investigated.

5.2.2 Describe the advantages and disadvantages of globalisation:

Analyse globalisation with particular reference to developing countries, which often lose out to competition, using examples.

The problems of exploitation of workers on very low wages and poor working conditions should be highlighted.

There is often a high environmental cost of transporting goods round the world to take advantage of cheap labour costs.

5.2.3 Describe the advantages and disadvantages of multi-national corporations, franchises and joint international ventures:

There is a tendency for tax avoidance schemes, and exploitation by cross-subsidisation.

The scale and size of multinationals makes it very difficult for companies to compete, as there are huge barriers to entry into some of the markets dominated by them.

Examiners tips: Refer to case studies and articles on this part of the syllabus as the environment of international trade is constantly changing. Short scenarios will be used in the exam questions, to encourage students to apply theory to practice, and to encourage discussion of issues relating to international competition. Encouragement will also be given to comparisons between home countries and the UK. Encourage students to develop a critical and analytical approach to this topic by classroom discussion and debate. Recommended reading: ABE Study Manual The Business Environment chapter 7 and chapter 8. Further reading: Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 3 and 6. Needle D Business in Context (4th Edition Thomson) chapter 2.


Learning Outcome: 6. Understand the impact of socio-cultural influences and technology on business decisions.

Indicative Content: 6.1.1 Describe the implications of demographic changes for business activity (e.g.

the age profile of the countrys population): The effects of rapid increases in the birth rate, or the ageing population

predominantly in the west, will put strains on the natural resources of a country, its public finances and social care provision.

Discuss the challenges this will create for businesses, and the economy as a whole, as the dependency ratio increases, and more demands are made on government expenditure.

A recommended case study in the textbook looks at this issue. 6.1.2 Describe the impact of social and cultural changes on the conduct of business

and business activity:

Businesses should assess and provide for changing patterns of consumption and lifestyle.

Time saving goods and services may have a much higher priority with more women in the workplace.

Social class and social mobility should be addressed in business plans, looking at market trends of consumers, which is especially important for the marketing of goods and services.

Business planning should look at potential new markets to enter. 6.1.3 Explain the impact of national culture on the conduct of business and business

activity:

The participation of women has an impact on culture and family life.

Hofstedes research (recommended case study in textbook) has looked at cultural variances in different countries. This can have an impact on management styles.

Businesses need to monitor closely different national cultures, when planning to expand into new, previously unknown markets.

Examiners tips: The subject addressed here should be looked at carefully in terms of the impact on business activity. Students should be encouraged to be very specific with exam answers, and avoid just general discussion, which has been a feature of answers in the past that have scored low marks. Questions here are likely to be linked to short business scenarios. Exercises in class investigating business opportunities for local firms to take advantage of social and cultural changes could be set, and provide interesting comparisons in feedback. Recommended reading: ABE Study Manual The Business Environment chapter 8. Further reading:Worthington I and Britton C The Business Environment (6th edition Prentice Hall) chapters 6 and 7. Needle D Business in Context (4th edition, Thomson) chapter 5.


Learning Outcome: 6. Understand the impact of socio-cultural influences and technology on business decisions.

Indicative Content: 6.2.1 Define the meaning of CSR and explain the different views on it:

Businesses have responsibilities beyond mere profit making.

Voluntary activities undertaken by businesses have an impact on people, their communities and the natural environment.

6.2.2 Discuss the role of business in promoting ethical practices:

How far a business should go in promoting CSR can be debated.

CSR varies widely across the globe.

Milton Friedman promoted the idea that businesses should only pursue profit for shareholders and any other actions were unethical.

6.2.3 Discuss the costs and benefits to businesses of implementing environmentally friendly (green) policies:

There are strategic benefits of CSR, where firms can gain competitive advantage, especially if their actions are intrinsic to the business.

By prioritising CSR, firms will encourage investors interested in ethical investments, and consumers wishing to buy environmentally friendly products will be attracted to these firms.

6.3.1 Identify and describe the different forms of technological change, including the introduction of e-commerce and different applications of technology:

E-commerce has provided opportunities for firms to interact with customers and suppliers immediately, saving time and expense.

Other technology applications include CAD, new materials and biotechnology (a detailed knowledge of these is not required).

6.3.2 Assess the advantages and disadvantages for business activity of technological change:

Developments in IT have transformed business activities and created entirely new ones.

There has been a huge increase in demand for business information.

Examiners tips: Class discussions could centre on the pros and cons of taking environmental considerations into account in business decision making, using examples. Students should keep up to date with technological developments in general, as they affect the operation and efficiency of businesses, but not in great detail technically. Case studies would be useful to study these influences. Recommended reading: ABE Study Manual The Business Environment chapter 9 and part chapters 2 and 3. Further reading: Worthington I and Britton C (The Business Environment 6th edition Prentice Hall) chapters 7 & 9.

5tbe lecture guide

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