The Macro Environment And Business (GC005)

Table of Content

Examination context
Topic List
1 The business environment
2 Environmental dynamics
3 PESTEL analysis
4 The international business context
5 Limits to the globalization of  business

Learning objectives
Explain how a business collects and distributes environmental information in order to manage
its strategy
Analyze for a given situation the external factors which may impact a business’s
performance and identify significant issues in the following areas:
Sustainable development
Global macroeconomic forces
International trade and financial systems
Government policies
Cultural environment
Identify the risks attached to operating a global business
Specific syllabus references for this chapter are 1b, 3g.

Practical significance

The wealth of many European countries, and of the businesses within them, can be attributed to their early
industrialization and imperialism commencing in the 17th century. The USA caught up and overtook Europe
during the early 20th century. From the mid 20th century those gains have been gradually superseded by the
development of emerging economies in Asia and Latin America. These have brought new markets and new
challenges that must be addressed by businesses from the developed economies if they are to survive.

Stop and think

You are early in your career as a professional accountant. Where in the world should you be working in
order to make the best of the opportunities over the next 40 years? Which industries around you are likely
to thrive and which to die?
Exactly the same questions are facing business strategists, albeit on a grander scale.

Working context

Many of your clients will be global businesses, or at least have some form of buying and selling relationship
with overseas firms. Your firm may be required to:
 Assist in transnational audits alongside professional colleagues from outside of your home country
 Assess the extra risks the client runs as a consequence of operating internationally
 Advice on taking-on international contracts

Syllabus links

The environmental analysis was covered in your Business and Finance paper under section 6 of the syllabus.
However, its coverage was at the level of core knowledge. In the Business Strategy examination, you will be
required to apply it.

Our Recommended Resources:

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Exam requirements

The scenarios in the majority of exam questions will require you to absorb and understand information
about the external environment in which an organization operates. You will also need to assess the
implications of the environment and changes in the environment for the strategic positioning and strategic
decisions of an organization. To do this you will need to apply your knowledge of the tools and ideas
covered in this chapter.

Importance of management understanding business environment

The environment contains those factors surrounding the organization’. Therefore it includes more than the
‘ecological’ environment. In your answers, you must ensure you discuss environmental factors such as
competitors and legislation as well as factors such as environmental pollution and recycling……….

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