The Business Environment

The Business Environment

Political / legal factors
Economic factors
the microeconomic environment

the macroeconomic environment

Social / cultural factors

Technological factors
PEST analysis
relationship between the four sets of factors importance of the economic factors

The Structure of Industry

Importance of industrial structure to the performance of firms Classifying production
primary production secondary production tertiary production

Shares in GDP and employment of the three sectors

trends over time current position

Output of industrial sectors

(as % of GDP)
Primary 2.8% Secondary Primary 5.8% Secondary 23.3% 42.3% 54.9% 70.9%

Tertiary

Tertiary

1974

2011

Employment by industrial sector

(% of total employees)
Primary 3.4% Secondary Primary

1.8%

Secondary

18.4%
41.9% 54.7% 79.8%

Tertiary

Tertiary

1974

2011

The Structure of Industry

Classifying firms into industries
nature of an industry industrial sectors why classify firms into industrial sectors?
helps in analysing trends identifying specific needs helps to understand relationships between firms

Standard industrial classification

nature of the system of classification sections, subsections
divisions, groups and classes

Standard industrial classification: 1992

Section
A Agriculture, hunting and forestry B Fishing C Mining and quarrying
CA Mining and quarrying of energy producing materials CB Mining and quarrying except energy producing materials DA DB DC DD DE Manufacture of food products, beverages and tobacco Manufacture of textiles and textile products Manufacture of leather and leather products Manufacture of w ood and w ood products Manufacture of pulp, paper and paper products; publishing and printing DF Manufacture of coke, refined petroleum products and nuclear fuel DG Manufacture of chemicals, chemical products and man-made fibres DH Manufacture of rubber and plastic products DI Manufacture of other non-metallic mineral products DJ Manufacture of basic metals and fabricated metal products DK Manufacture of machinery and equipment (other) DL Manufacture of electrical and optical equipment DM Manufacture of transport equipment DN Manufacturing not elsew here classified

Subsection

D Manufacturing

E Electricity, gas and w ater supply F Construction G Wholesale and retail trade, repair of motor vehicles and personal and household goods H Hotels and restaurants I J L Transport, storage and communication Financial intermediation Public administration and defence; compulsory social security

K Real estate, renting and business activities

M Education N Health and social w ork O Other community, social and personal service activities P Private households w ith employed persons Q Extra-territorial organisations and bodies

The Determinants of Business Performance

Internal aims and organisation
profit maximisation as the prime goal other goals distinction between owners and managers importance of managers own objectives satisficing

The Determinants of Business Performance

Other factors affecting performance
internal structure information competence of management quality of the workforce systems
information systems motivation technical systems distribution systems financial systems