ApEcon Finals

• Business Environment


  Includes all internal and external factors that affect the company's performance and functions. It includes employees, customers, management, supply and demand, business regulations, and competition.
• Environmental scanning


  A process used by organizations to monitor their external and internal environments. The purpose of the scan is to identify the opportunities and threats affecting the business.
• Environmental analysis


  A strategic tool in assessing the level of threats or opportunities that might affect the business. This eventually helps the management team to make better decisions.
• Internal Environment


  • Consists of factors that are controllable by the management, such as the value system, mission/vision/goals/objectives of the organization, structure, culture, quality of employees, labor unions, technological capabilities, etc.
• External Environment


  • Consists of micro and macro elements that are beyond the control of the business but they still minimize the impact if the business has an effective strategic plan.
• Technological factors affect the management and operations of the business.
• Environmental analysis is a strategic tool in assessing the level of threats or opportunities that might affect the business. This eventually helps the management team to make better decisions.
• Internal Environment


  Factors that are controllable by the management, such as value system, mission/vision/goals/objectives, structure, culture, quality of employees, labor unions, technological capabilities, etc.
• External Environment


  Factors beyond the control of the business, divided into micro and macro elements.
• Micro Environment Factors


  • Suppliers
  • Resellers
  • Customers
  • Competitors
• Macro Environment Factors


  • Political
  • Economic
  • Social
  • Technological
  • Environmental
  • Legal
• Technological Factors


  New ways of producing, distributing, and communicating with target markets.
• Environmental Factors


  Increasing scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company.
• Legal Factors


  Health and safety, equal opportunities, advertising standards, consumer rights and laws, product labeling, and product safety.
• Companies need to know what is and what is not legal in order to trade successfully.
• Environmental Scanning


  Identifying micro and macro environment factors that affect a business establishment.
• Environmental scanning is a process used by organizations to monitor their external and internal environments.
• A customer is an individual or business that purchases products.
• Environmental analysis is a strategic tool in assessing the level of threat or opportunity the factors might affect the business.
• Economic factors include economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses.
• The presence of one or more competitors can reduce the prices of goods and services as the companies attempt to gain a larger market share.
• When analysing markets, a range of assumptions are made about the rationality of economic agents involved in the transactions
• The Wealth of Nations was written

  1776
• Rational


  (in classical economic theory) economic agents are able to consider the outcome of their choices and recognise the net benefits of each one
• Consumers act rationally by


  Maximising their utility
• Producers act rationally by


  Selling goods/services in a way that maximises their profits
• Workers act rationally by


  Balancing welfare at work with consideration of both pay and benefits
• Governments act rationally by


  Placing the interests of the people they serve first in order to maximise their welfare
• Groups assumed to act rationally


  • Consumers
  • Producers
  • Workers
  • Governments
• Rationality in classical economic theory is a flawed assumption as people usually don't act rationally
• A firm increases advertising

  Demand curve shifts right
• Demand curve shifting right

  Increases the equilibrium price and quantity
• Marginal utility


  The additional utility (satisfaction) gained from the consumption of an additional product
• If you add up marginal utility for each unit you get total utility
• SWOT analysis


  A strategic planning technique to assess the internal and external factors as well as current and future potential
• SWOT


  Strengths, Weaknesses, Opportunities, and Threats
• Strengths


  • What an organization excels at and what separates it from the competition
• Weaknesses


  • Factors that stop an organization from performing at its optimum level
• Opportunities


  • Favorable external factors that could give an organization a competitive advantage
• Threats


  • Factors that have the potential to harm an organization