This lecture covers organizational structures (network, virtual, hierarchical, divisional, matrix, and flat) and their characteristics, advantages, and disadvantages, along with business environment analysis tools including PESTEL (Political, Economic, Social, Technological, Environmental, Legal) and SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, and Porter's Five Forces model for understanding competitive industry dynamics.
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BUSINESS ENVIRONMENT CLASS 3
Added:Good evening everybody. Can you confirm you can hear me?
Okay. So, today we're going to continue from where we stopped the last class.
>> My screen visible enough.
>> Is somebody saying no? Yes, we can see your screen.
>> Yes, I can see your screen.
>> Okay. All right.
>> Okay. So, hopefully we'll be able to finish this chapter one today.
Um I think we stopped at this matrix and the mix organizational structure.
So, we're going to continue from network organizational structure. Okay. All right, before we even go on with the class, um, so far so good. How how has reading been? Like, how has reading been, you know? Um, I I know it's not really easy um work and um all of that combining it and still trying to like wait for your exam. I don't know if somebody you want to like like have you have you been finding it easy? Have you been finding it difficult? Has it been overwhelming? Is there somebody who feels like okay um you you maybe you you in fact you're already considering dropping the like forfeiting diet and writing next diet because you don't think you'll be able to like meet up for the diet.
I just hope I don't have um somebody like that here.
Anyways, I know it's really not easy.
Excuse me. It's really not easy, but you just have to anyhow. If you know you want to ACA, if you want to, you have to do it. This is what you're going to have to do for you to be a CA. Unless you say you don't want to be a CA, then you can just take a break.
All right. Um I'm wishing everybody strength.
Wishing everybody strength to conquer this diet.
So let's um let's start the business of the day.
We're still on the chapter one which is um what's our chapter one?
What's this topic? Is it I think it's business environment. Yeah, the business process and environment. Okay, so we still trying to understand. So you see that the business process and environment is a whole lot. We are even still trying to we still on it to see how long this how long this chapter is.
So to tell you that the business process and environment is really a whole lot and you know that this is even a summarized note. This the these things are summarized. That means if you're having to read it on your study pack, you're actually going to be actually going to be doing a whole lot of work. Thank God. Thank God for the study pack. Thank God for the Thank God for the Subar making life easy for us.
Okay. So we are going to continue um continue from network organizational structure. So what is network organizational structure telling us?
Network organizational structure is telling us that this is this kind of organiz you know we actually discussed different kinds of organizational structure the centralized centralized and all of that. So you don't understand what excuse me what all of these organizational structure if any organization they choose to say okay this is the organizational struct structure that we want to practice. So what what what like how how does it work how does that particular organizational structure work? So if an organization is saying that okay they want to practice the network organizational structure what does it entail and the organizational structure is a structure that it allows employees with specialized let's say specialized skills trainings he allows them to like come together and they are able to just carry about a specific a specific kind of operation and with what we have here. They told us that a network organizational structure groups employees by specialization and it encourages collaboration across divisions eg marketing and product development. So if for instance now you see that employees that are in the marketing department they have their own specialization. So if you're saying that okay these people from this organ this this department they coming together and whatever goal that they want to achieve their own end goal might be the beginning goal for like it might it might be the beginning um um like strategy for another department. So if if the product this example they gave us the marketing and product development. So the product the products now the people that are in the let's say in the um let's the procurement department manufacturing department whatever they have to do if they finish doing it.
So it is their own finished product that another department is having to to take and so the the marketing department now is having to take whatever the from the from the product the product has been developed so they collect it their own is to go and market it. So the product has to come out well. If it doesn't come out well, how will the marketing department do well? So their own success now is now dependent on the the end product of that that particular product.
This product is coming out well. It's going the the success rate. It will be so easy for the marketing department to tell somebody that this thing you are going to get from us. You're getting the best. You're getting this. you're getting that you're getting value for your money and all of that. But if the product you you're giving the product is really you know that there's nothing to write home about the product, how do you even want to convince somebody to buy even if you say you want to convince because there are whole lot of um um deceitful adverts out there. So if you come now, you use your deceit to make somebody to buy a product. By the time they're buying that product, it they can't come back to buy again.
But if your product is good and they buying it, they're coming back to buy there's some kind of product that even sell without doing too much. So even as a business owner if you for every time you know you want to do something you want to sell a product you want to manufacture a product ensure that but that product is of good quality.
Sometimes we as business owners we are just concerned about how much we want to sell it. We want to sell cheap. We want to we want our price to be cheap. We want people to not complain that our prices are high. that will not forget that at the end of the day, it is the quality of your product that will keep people coming back. If they're coming back to buy that item, somebody can buy one item from you and it is good. They just they're even helping you to do public like they're helping you to just tell people this thing is good, buy it, this thing is good, buy it. So you buy not even have to worry about so much because your product is already doing the work for itself.
So that's what this network organizational structure is telling us that collaboration has to happen between different departments and this example they gave us the marketing and the product department is is a very good example. If product is good, the marketing department, it is easy for them to to come together and when they want to sell this thing, when they want to market it, they they able to achieve a a success rate on it. Then the key features of network organizational structure no rigid hierarchy or chain of command. So because this this company now they are saying okay if we have to record success now if you have to record success on this particular project on this product or this thing what do we have to do okay we're coming together to say this department since you people have specialization in this take it go and see what you people can come um you can come up with they'll tell these other departments okay you what can you people do what can you all right people take this go and see what you can come up with so there's no like you're not having to say okay manager so so manager by the time you are done with whatever you tell those department when whenever you're done with whatever you're doing this manager has to approve this needs to be a high top level management has to say okay yes this can fly. No it's just allowing people it's just allowing people in different department that have that specialized knowledge to just go about it. That's what the network one of the features of the network organizational structure.
The second one is emphasis on collaboration and resource sharing. So once they say marketing department we want to record 24 we want to record 24 billion NRA this year um or we want to record 24 billion NRA in sales on this item whatever people need to do go and do it the marketing department they will get to work they begin to share ideas this one is saying okay um if we need to make the sales let's be like demo let's be like anywhere people go they are seeing us they go to Snapchat they see us. They come to Tik Tok, they see us.
Instagram, they see us. Facebook, we are there. We are on in their face in morning, afternoon, night. Somebody wakes up, picks up their phone to check update online. The first thing they are seeing our our product, they want to sleep, but they say they need to check something. They seeing our updates.
Somebody is um um observing their break.
They say they want to check something on their phone. They come online. It is your ad. So, Well, if you if you're that if you're like that on people's faces, trust me, you that your 24 people will be able to make that your sales. So, it's just people are coming together, sharing ideas, telling you, okay, let's do it like this, let's do like that.
Maybe let's let's reach out to this influencer, let's do this, let's do that. So, once you're doing all of these things, you know that all those things are they're going to increase publicity and at the end of the day, your 24 billion in sales will will be achieved.
The third key features is flexible workflows and reporting relationships.
Of course, one less collaboration.
People are coming together as a team.
They like it's just so easy other than when you know you're having to do something. You need to report to a manager, the manager reports to this, the one reports to that. But within yourselves, you know, okay, you can even you said you can even make an an opinion and you see that okay, if your opinion is good enough, it can fly and you feel okay. Yes, this place my opinion my opinion counts but there are some kind of things that you cannot even be you can some kind of other organizational structure that is just your the top level management those ones they just sit down and make those decisions by for themselves. So that's one there's no really flexible workflows or reporting relationships. Then the advantage is natural communication. It encourages the cross team interaction and shared purpose. Of course, when there's when there's a team coming together to achieve a goal. So, it's easy because everybody's trying everybody's sharing their ideas and everybody's looking into each other's ideas and they're like, "Okay, this is good. This is good. This can fly. Let's let's work on this. Let's incorporate this and all of that." So, it will encourage communication. There's openness to change and there's versatility.
The disadvantages so there's redundancy risk of multi- teams duplicating effort. So if by time the company is saying okay you go ahead get your own plan you go ahead get your plan. So at the end of the day the the the decision or the plans that they can be coming up with can just be similar and at the end of the day you might just be just you're just having risk of multiple um application of effort. Another disadvantages is weak leadership.
There's fewer controls fewer control point for management oversight. So because management is not really on this kind of organizational structure. So it will lead to weak leadership and there's unbalanced workload. Some team may be overburdened while some are underutilized. So this kind of definitely in a team there are people who will not be working so much.
There are people who are putting in so much effort while there will be some that are not doing they not they're not doing enough. They're not even they not really doing anything but because it's a team work. So at the end of the day the success is for the team. Nobody is saying you are the owner of the success you brought about. So it's just like we we did it. So you come up as a team but the people that did the work and the people that did not do the work.
So we have virtual arrangement.
What is virtual arrangement?
A virtual organizational structure is a flexible business model that uses digital technologies to coordinate operations across geographically dispersed teams. It often lead involves outsourcing and partnerships forming a network of independent entities working toward a shared shared goal. So virtual just as we know that virtual it's going to involve the digital technologies and you might not really be in the same location. You just can be anywhere and the the workflow still go smoothly because once you're able to have your digital technologies in place to ensure communication between everybody in that in that team, you'll be able to achieve success. So that's what this virtual organizational structure is. You you use it when you know that most of the team members are not really in the same location. And we have the key features. The key features of course one of the virtual uh organizational structure key features is going to be v remote work enabled by ICT tools heavy reliance on outsourcing and contractual partnerships. We're going to have central coordination with decentralized execution.
And we have implementation steps. So the implementation steps for our virtual organizational structure is one plan and assemble the resources.
The next one is you're going to train employees. After training your employees, you set clear goals. After setting clear goals, you establish communication protocols. When you establish communication protocols, you're going to build trust across teams. Then we also have the advantages and the disadvantages. What are the advantages? Lower operating cost through outsourcing.
Global access to specialized talent and resources.
The third one is you're going to have flexibility to adapt to changing needs.
The last one is better employee satisfaction due to remote work benefits. So I think some people you know that remote work will always like you always prefer remote work to other kind of um having to even the hybrid or having to work on site because when you know during that period when it used to rain like back to every day it was raining that that point that's when remote workers would even they would thank God for their the kind of opportunities that they have because if If you're a remote worker, all you just need to do is you wake up. When you wake up for the day, you just stay at home, do your task.
Sometimes if it's a tax that you're assigned to for the day, they just assign you a tax and they let you tell you, okay, this tax has to be finished today. They don't care whether you're going to they don't care whether you're going to have to do um um whether you are going to do the work in the morning late in the night their own is at the end of that day finish up this report finish up this assignment. So that is what that's one of the um advantages of the the virtual organizational structure. Then we also have better employee satisfaction. Okay, that's what we just explained. Better satisfaction due to remote remote work benefit. The disadvantages is communication barriers. That that's a problem. So if if for instance now you have to talk maybe you have a team member um in another country and you have you know the time zone are not the same. It's actually going to pose a communication barrier because the time when okay you know that it can even be that when they want to schedule the call is when you are supposed to be sleeping and so these things can actually just be it will just conflict when you need to at the point where you need to you can have that call the other person cannot because in their own time zone they they already sleeping when they want to have the when they actually available to have the call you cannot have because it's also it's going to be late um in your own in your own country. So that's one of the disadvantages of the virtual organizational structure. We have weaker team coercion due to remote work isolation. So because of remote work there are some people that don't even know you can even pass your um colleague unless there some some some companies that do like team bonding or sometimes they just call people like they some um after a while they just call um the staff the employees to come together maybe for a get together um um just team bonding and all of that because you just need to get to know the people you're working with. If such thing doesn't exist, you will just maybe always just have your and maybe your the meetings that you have said if it's audio, you don't do video. So you really don't even know who you're working with.
You can just walk past them on the road and you don't know that okay this person is even like um a a colleague. So that's one of the it's going to lead to recent cohion. There's also performance monitoring challenges. somebody you're telling to work from home and um they so if there's really no like there's no timeline to things they can do just give them okay just think somebody's mic is >> okay My voice >> what is >> echoing kids your your mic.
>> Your mic.
>> Okay. So, another disadvantage is technology depend dependence. So you know that there's no way you not do um internet has to be your friend like good internet not just internet good internet has you that's just one of the criteria because if you don't have good internet how do you now do your remote work so that's one of one of the challenge that you're going to have if you going to um you're going to have to use the virtual organizational structure Then there's also security risk from remote data access because of this data.
Sometimes while you're having to like uh maybe access this data or um share this data there there can be some security risk in doing that and we have the factors influencing management decision on organizational structure. So out of all the organizational structure that we have mentioned out of all organizational structure sorry excuse me. So out of all the organizational structure that we have mentioned.
So for so for an organization to sit down and say this is the one we want to adopt these are the things that they are going to factor. They factor in the size of the company and the scale. The size and scale of the company.
Is it small scale, medium scale, big scale?
On what's what's the level of their of their um activities. So you cannot be saying when you are having to you know that your business is a small business and you're having to look for the um an organizational structure that is for bigger firms. So you're going to understand your business, the company size and the skill to help you choose your organizational structure. Then your business goals and strategy. They'll also help you they'll also help you to know which organizational structure are we going to adopt industry and the market dynamics. So you're also going to sorry excuse me you're going to understand the industry and market dynamics before you choose your organizational structure the company's culture and values their technological advancements. So these are things that you're going to have to factor in when choosing an organizational structure.
Then consequences of a poorly designed organizational structure. So if your organization structure is not designed properly, you suffer some problems. And what are they? Poor communication, conflict and lack of coordination, weak strategic management, reduced productivity, high employee turnover, high employee turnover, customer dissatisfaction and reputation damage.
So if your organizational structure is not is not properly planned, it is poorly planned, poorly designed, you're going to have the problem of any of these or even all of all of them. And we will now come to types of organizational charts.
So outside of organizational charts we have the hierarchical the the herical this hierarchical I have problem pronouncing this name last time.
Okay.
>> Hierarch.
>> Okay. Hierarch.
Sorry. Can you >> from hierarchy?
>> From hierarchy. Hierarchical.
>> Okay. Hierarchical. I don't know why it sounds so funny.
Hierarchical. All right. A hierarch hierarchical chart reflect the most traditional organizational structure.
Employee. Each employee has one direct supervisor making it easy to understand authority lines. Then we also have the divisional organizational chart. A divisional organizational chart visually represent a company structure by grouping employees into divisions based on products, services or geographic regions. Each division operates independently with its own resources and leadership. This allows to quickly respond to specific market demands while maintaining accountability with each segment.
So you see these things now some of these things I just like the fact that this these things I don't know why people say sorry excuse me. So I don't know when people say all these theory courses used to be like a problem for them. Some of the these things are just like they're just English language that even if I've never let's say for instance maybe I've never come across organizational charts and I'm being asked in the exam hall maybe let's say they list it for me somehow somehow maybe they give me a scenario and put those things and I'm having to explain I'm having to explain them. If you just understand this hierarchical the divisional you just know hierarchical from hierarchy hierarchy from this to this from this to this from this level to this level from this level to that level but divisional divisional what is it when you have different divisions so all these things by the time you are just making sense out of it you'll just be able to understand what to write division and I is already telling us that grouping employees into divisions like this thing is just English language. grouping employees into divisions. Even if they ask you divisional organizational chart when you start to write and you tell them division organizational chart though is when you as the name implies in fact put that one as the name implies when you just group employees into different division. Is it by you want to group them by division by by um divisions based is it based on the product based on the services based on the geographic geographical region. So anyh how you want to do it but sh know that this one is talking about that you're grouping people you're grouping employees into different divisions and they told us that each division operate independently with its own resources and leadership and it will allow teams to quickly respond to specific market demands while maintaining accountability within each segment. Matrix. Mattress is another organizational structure. And what is it telling us? They said a mattress organizational structure organizational chart I mean sorry a matrix organizational chart represents a dual reporting system. Dual what is dual? Two dual reporting system where employees report to both functional managers and project or product manager.
So now they reporting to functional managers and they report to project or the product manager that after you have finished reporting to the functional manager they also going to report to either the project or the product manager and this structure will promote collaboration across department while visualizing the complex relationships between different roles functions and project teams.
Flat what is flat? A flat organizational chart is suitable for companies within management levels like startups. Flat organizational charts depict a structure with few or no layers of middle management allowing employees and leadership to work directly. It will highlight an organization that values open communication, faster decision making and autonomy by reducing bureaucratic bureaucratic barriers.
So that's what a flat organizational structure. Why am I calling organizational structure? Organizational charts. That's what a flat organizational chart is all about. Then we now have advantages of an organizational chart. Why do we if we say we want to have organizational chart at the end of the day what is it going to help us do? The first thing it will help you do is that sorry okay it's going to show clear reporting clear reporting structure.
Please give me two minutes. I just need to attend to this.
Yes.
What?
Okay, so I'm back. Sorry about that. So the advantages of organizational charts, what is it going to help you do? It will help you show a clear reporting structure. And what do we mean by clear reporting structure? Employees will know who to report to, who to contact when there's an issue that needs resolving or a question that needs to be answered. So a new employee joins the company by time there's an organizational chat and this employee has to go through it you not understand that okay this is if I need to ask question with regards to this this is the person I'm going to meet if I need to tell somebody share information with regards to something this is who I'm going to meet so it just make this thing so clear like you be able so clear that you know that so that you don't go and start doing as a new employee The next thing you don't you have um maybe a client reaches out to you and they want you to do something. The next thing you are going to manager A manager A are you the one I'm supposed to A say no I'm not the one go to manager B. You mean B manager B tells you no I'm not the one go to manager C. But so at that point like it should not really there's not really going to be um it's not going to be structured. there's no structured um way of hand going about things because but with an organizational chart like it just makes life so easy you know that okay once I have a problem with regards to this this is who I should meet if I have a problem with regards to this this is who I should meet another advantage is that so under showing clear reporting structure it will help new employees like yeah I I already explained that. So when it's showing a clear reporting structure, it's helping new employees to enable them get to know the people they are working with even before meeting them.
It will also help them to manage workload. A well-managed organizational chart will help to visualize the workload of individuals. This is especially useful to management to manage the workload of managers because you can clearly see how many people they are managing and in some cases how many departments are under them and it also make planning easier because one can visualize the structure helps in future.
One can allocate resources better quickly find competencies of individuals and much more. Then we now have committees.
Why do we need committees in an organizational structure? We will find out here. A committee is a group of individuals within an organization who are designed to handle specific or focus specific tasks or focused areas.
Committees are often formed to address ongoing concerns, special projects or strategic initiatives by delegating responsibilities to smaller groups, boards and can ensure that specialized knowledge and skills are brought to the forefront fostering more focused decision making and better resource allocation.
So they're just telling us that a comm like why do we what's a committee? Why do we need to have this committee?
Because committees they just make they they make life easy. They like they make life easy in a way that once you you have committee of so and so thing committee of so and so by time if you need to like maybe there's an issue that has gone beyond your control the next thing you just know okay I have people that can take away this problem for me now they will just they are there to solve that your problem for you these people are just there providing guidance they are like they're just there to take off the workload from this to be having mental breakdown, dying to think of what. So you just take whatever issue it is to them. They will do all of the strategic planning all of whatever that you you need to make life easy for you.
So that is what that committee is going to do for you. And we have different types of committees. What are the different types of committees? We have the audit committee, remuneration committee, nomination committee. Even without having to look at what we have in the material, somebody will be able to understand what the audit committee and the remuneration committee and the um nomination committee is going to do. The audit committee, what does the audit committee do? The audit committee is a group of board members. And what are they responsible for? They're responsible for overseeing an organizational an organization's financial reporting, risk management and other internal controls.
These board members ensure that financial statements are accurate and audits are conducted independently composed of independent directors with relevant expertise. The audit committee acts as a key safeguard to ensure transparency in integrity, accountability in a company's financial operations. So this audit committee they're just there any for financial reporting they're just there to ensure that at the end of the day the financial statements is going to be presented in their true and fair view and they also look out for internal controls. They also looking out for internal controls. They're also checking for risk risk that involved in the business. So that's what this audit committee any of anything that has to do with all of these that I've mentioned that's what an audit committee is going to do. So what are the functions of the audit committee? Even from the explanation you already understand what an audit committee is going to do. An audit committee oversight. They they do risk oversight.
They'll review and they monitor the company's risk management strategies and exposures. They will also oversight oversight of independent auditor. So they will appoint compensate and supervise external auditors. They will help to resolve disputes and they will also disputes that arise between auditors and management. So that's one of the things that they they will do. They also do internal audit oversight. The internal audit audit oversight. They will evaluate and improve internal control systems and operational processes. Then we have internal control and risk management. They collaborate with risk committee to assess and mitigate financial operational and compliance risk. They also ensure compliance and regulatory controls. They ensure that there's adherence to laws, regulations and ethical standards review compliance programs. They also serve as whistleblower and ethics programs. They oversee confidential reporting mechanism for fraud or misconduct reviews. They review reports and ensure safe reporting environments.
Then we have like we mentioned the audit committee the remuneration committee. So what's the remuneration committee? Even without them you know that remination will have to do with like salary um staff salaries and anything that has to do with having to pay maybe whoever um offer their services as either a staff maybe a contract staff a full staff. So that's what this remuneration that's what this remuneration committee will do. And what are their functions? They will design competitive comp compensation package such as benchmark salaries against industry standards and develop incentives like bonuses and stock options. They will do performance based rewards. They will ensure transparency and accountability.
They will collaborate with other committees and they will also align payments with company strategy.
So what are the roles of board?
What are the roles of board members? The chairman of the board. So the chairman is the highest ranking officer on the board of directors providing leadership strategic direction and oversight to ensure the company fulfills its responsibilities to shareholders. Does anybody does anybody have a question? Let's see if any hand is raised.
Hand is raised.
Does anybody have a question?
>> Does anybody have a question?
Yes, please. How do I get this material?
Good evening.
>> Okay. So, if you want to get the material, just reach out to Dr. Kabir to get the summarized note.
>> Okay. Thank you.
Okay.
>> Yeah. Good evening, ma'am.
>> Okay. Good evening, sir.
>> Yeah. I thank you for the lectures of today. But while you were explaining or going through the lecture notes and the summarized note, I I did not understand some part of it like let me use the recent one you talked about which is the the functions of remuneration committee.
Now if I am to relate it to a company will I now say the functions of remoration committee are the are the HR that ensure that everybody gets their salary or will I say they are the account department where where expenditures have been recorded.
>> Okay. So >> you know if you know if you like a committee is not it's not just so that committee now is a a um like a a number of persons or a group of persons like coming together to be in that committee. So it's also going to involve the both the accounts department and the the the the HR >> HR >> but but the HR actually has a different the HR is actually not in the in the remuneration committee because although he can be part of the committee but you're not you're not saying that is the HR that is performing the the function of the remuneration committee So it could be that the HR department on their own now you know that HR what they will do on their own is that they they managing um employee recruitment they're also managing training performance performance of employees the payroll and employee relations but they will also be so that that that function too is is is also going to be extended to the the to the to the uh what's it called the remuneration committee because the remuneration committee they their own is they now going to be reviewing that remuneration policies they they reviewing remuneration policies for directors so at the end of the day the so if you're saying the the remuneration committee you cannot take out the HR's function in that um remuneration committee but the HR is not the remuneration committee.
I don't know if if this is clear like the HR on his own what he's doing is that he's earning day-to-day administrative functions of of the company and he's also in charge of like the employee pay and the benefits while the remineration committee what they are doing is they checking they seeing that okay any oversight any oversight any decision that any decision that you need to take with paying this employee. So that's what the remation committee is is is doing which the maybe the HR can also be part of that committee but the HR is not committee.
>> I don't even good evening ma'am.
Sorry. Uh I want to maybe contribute.
>> Okay.
>> Should I continue? So I want to contribute in in this way. I don't know whether I'm I'm right but that's is what is in my mind that this uh uh these all these people that's committees now we are talking about they are they among the leaders the managers in the company now among all of them now they will set up committees among them these are the people you take care of this these people will take care of this this take care of depending the area you are you find yourself in that uh area you find yourself that is the work you are you are going to do so that's the the angle I'm seeing it okay so that's like the let's say the HR now he's even if he's having to prepare the payroll and all of that But there's a a committee that is going to be reviewing whatever he has done like overseeing what he has he has done. That's like and this committee is is is like the the directors like maybe from the directors that's where they setting up the committee from. Yes. Is that what Okay.
Okay.
>> That's what I'm thinking about.
>> Okay. Okay. Yes. Yes. The committee has to be Yeah. It has to be the directors actually. So even if let's say um so they they expect okay let's say the HR now he has prepared whatever he needs to prepare so at the end of the day the directors are the one that going to like um vet whatever he has done so um that actually makes it okay so the person that asked this question I don't know if you have like enough um clarification on it so the HR is not the is not the um remuneration committee the person asking.
>> Okay. Thank you very much. I understand.
Thank you.
>> Okay. All right.
>> Okay.
>> Okay. Good evening, ma'am.
>> Good evening.
>> Can you hear me? Good evening.
>> Can I hear you?
>> Yeah. So, I have a question. Yes. Um I followed um where you talked about the organizational structures. You talked about the organizational charts. So at the point where you started talking about the committee. So I I got a bit confused. I don't know how are they connected to the organizational chart and the organizational structures that you talked about or is it like a different topic entirely where you started talking about different committees that we have.
>> I didn't actually hear you clearly.
I have a record.
I know. Can you take that again?
Okay. Can you hear me now?
>> Yes.
>> So, okay. I said when I heard you when you talked about when you talked about the organizational structures, the organizational charts.
So, the part where you talked about the committees and the type of committees, that's the part I got confused. How is it relating to the organizational structures and the chart or is it a different topic entirely?
Okay. No, it's actually part of the the um it's part of it. So, because the organizational structure organizational structure and the organizational chart, although they they are actually um they're similar, but they they still we still have some differences between the organizational chart and the organizational structure. And when we're talk so with this um what's it called this committee now we we're actually relating them to should be that we're relating them to uh what's it called the organizational structure that's what we are relating this committee now to is the organizational structure they were relating them to yeah so purpose of committee so is yes is the organizational structure that we are relating them to so all of these committees this um we're relating it to organizational structure. Then if you now say when I talked about the organizational chart, the organizational structure, you need to like understand okay what what is this one trying to say? What is this other one trying to say for organizational structure? We are actually talking about >> what what is that system >> that what is that system that is defining how an organization is going to operate >> that is what structure is telling us I'm setting up my business today somebody is disturbing the class let's mute our please let's mute ourselves >> so the organizational structure is telling us that if you just understand this thing like it will just be so easy for you to relate. When somebody's saying structure, >> what the structure of your business?
What's the structure of this? It is telling The structure is telling you what what's the structure like how is your business being structured? What what are you like if you say I'm I'm I'm practicing this this so so and so organizational structure that that is what is defining your own organizational structure. But if you say a chart chart you know we know what a chart is now pie chart um this and this chart it's is it is showing you it is like a a diagram that is showing you that for whatever organizational structure that you have chosen to follow after you have chosen your organizational structure now what how am I going to know that this is how your organizational structure works it is the organizational chart that we now show that so it is at the point where you have taken your organizational structure you say this is the organizational structure that I want to I want to practice decentralized organizational structure centralized organizational structure so whatever structure you have chosen to practice your chart will now say okay from this this person reports to this this one report to this or it could be that your kind of organizational structure doesn't really need anybody reporting to anybody. So that's what the organizational chart is going to show.
That's like the difference. Then when we now so there's no this committees are having to talk about the the structure that you have chosen. That is what the structure is is not another topic. This it is it is still in line with your organizational structure. Okay. I have taken up this organizational structure.
That's what I want to practice. the audit comm um the the committees that you need to set up what are those committees and what are what would they do for you you say I've chosen this particular organizational structure you your audit committee your remuneration committee your nomination committee for this structure that you have chosen I don't I don't know if it's clear >> okay as the question if I get you clearly so this committee See again you get to like function in any kind of structure that you have chosen. So these are the kind of committees that they have that you can decide to let's say set up in your organization based on the structure that you have chosen.
>> Yes.
>> Okay. Okay. Thank you.
>> Welcome.
>> Okay. So I think we were on the Okay. Remineration committee. All right.
So the functions of the remuneration committee, they are going to design competitive compensation packages.
They will benchmark salaries against industry standards and develop incentives like bonuses and stock options. They will also um do performance-based rewards. So link compensation to key performance indicators to align executive actions with strategic goals. They will ensure transparency and accountability.
They will help to collaborate with other committees and they will also align pay with companies strategy. Then we have the roles of board members. Okay. So the chairman of the board, the chairman of the chairman is the highest ranking officer on the board of directors providing leadership, strategic direction and oversight to ensure the company fulfills its responsibilities to shareholders. What are the key responsibilities of the chairman of the board? Board meeting preparation.
You're going to preside over meetings, strategic vision. So you know that it's not easy for you to be chairman chairman of the board like your your thinking faculty is really going to be like really really um um sharp. There's also CEO engagement board communication. There's also he's going to also do company. He's going to represent the company. He's going to serve as spokesperson and ambassador of the company. Guidance to management is going to ensure alignment with mission and values. Then committee appointment is going to form sub committees like audit or governance.
We also have the company's secretary.
What does the company secretary do? The company secretary is going to support the board by managing governance processes, ensuring legal compliance and facilitating effective communication and documentation.
What are the key responsibilities?
Record keeping, governance advisory, meeting planning, compliance oversight, board evaluations, all communication, corporate advisory, training, going to organize orientation and development for directors. And what are the ski key skills that a company secretary is supposed to have? You're supposed to be able to multitask.
You know when they say I work how they say that thing when you want to apply for a job you say I work well under pressure what's the word say ability to work under pressure is going to have it you're going to be able to multitask like be to multitask at the company secretary you're going to have strong communication skill operational understanding you need to understand the operations of the business and you're going to have organizational skills Managing director. Who is a managing director? A managing director is a highle executive.
How did this reduce?
Okay. So, who is a managing director?
A a managing director is a high level executive responsible for leading and overseeing the overall operations and business strategy of an organization.
Managing directors with significant decision making authority serving as the bridge between companies, board of directors, shareholders and the executive team. The roles of the managing director, executive stewardship, strategic planning and execution, business development. What the business development? They will help to drive growth, innovation and innovation and competitiveness.
They will also do performance management that's setting objectives and performance indicators for business units. They also ensure health, safety and environment. So the health, safety and environment of the the the the employees in that organization, they're going to ensure that they implement it.
They implement board approved H health, safety and environment programs. They also manage talent. They also ensure employee engagement.
They also ensure stakeholder relations.
They also ensure board communication and the departmental coordination. The managing director coordinates the activities of all departments and units depending on the size of the company.
The managing director may have one or more deputies to help handle the workload. Then we have the executive director. Who is the executive director?
An executive director is a senior level.
Please, there's there's background noise. I don't know if it's affecting us. Like, can we hear my background noise?
>> Okay. All right. So, the executive director, who is the executive director?
He's a senior level executive responsible for management and leadership of a business unit of a company. The executive director reports to the board of directors through the MD. And if you say you want to be an executive director or you're an executive director, what are the key qualities that you need to have? You have consistent leadership to inspire confidence. You're also going to have strong communication skills for stakeholder engagement. You're also going to have relevant industry experience to guide decision making. And you're also going to be a goal oriented person for strategic execution. And what are the core responsibilities?
The core responsibilities is strategic leadership, functional oversight and team leadership.
Then we have the non-executive directors. So sometime when you see an AFS, you see the directors and you're also having to see the nonexecutive directors. The non-executive directors there is a member of the company's board of directors who does not hold an executive office. Non-executive directors act as independent advisors and are not responsible for daily operations of the company.
However, they face legal responsibilities and liabilities as the executive directors are involved in planning and framing of the company's policies and strategies. Non-executive directors generally receive payments for their services. However, they are not considered employees of the company.
What are their roles?
Their key responsibilities include performance review, strategic direction, time commitment, risk management, external engagement, professional development and committee participation.
Then we also have the independent nonexecutive directors.
Okay, the independent non-executive directors.
Uh where where is that? So let me not even lie to if you're having to read this business environment, trust me, you might just be discouraged from reading it. I won't even lie to you. So I'm going to I don't know if I've mentioned it in this class that you should have reading partners.
You see courses like this to be honest with you.
Even if you say you enjoy theoretical courses, you need to have reading partners. They will help you. They will help you a whole lot for courses like this because if you're discussing these things, when you discuss them, it will stick more. If you say you want to sit down and read it, trust me, you just you you might just be discouraged and you just so for every time you want to read it, you just drop your book and say, "Okay, I'll come back to it." Because it going to feel boring. It's going to feel too bulky like what what am I using this information, all of this information to do? So, I'm going to encourage get reading partners. I don't know if they have like um reading group for ski for foundation. I don't know. Um I I created one for audit students. I don't know if any lecturer in the foundation level has mentioned it or they've like they have a group chat already where um students you can join and you know the lecture groups are locked. So that that group it's going to be open like those groups are going to be open to allow any kind of conversation questions anything maybe you were going through a past question and you got stuck somewhere you just come to that group you you send the information and you be like okay um who can help me with this I was going through this they answer I didn't if you do it that way it it will stick more to stick more if you sit down to say you want to be reading this thing you not really you not be a it might really be difficult for some persons to actually grab anything like so you need reading partners to be discussing all of these things trust me because for the fact that you have made up your mind to say you want to do I can you want to write you you write this course even if you say this course I hate it so much I don't like it I don't it's too much talk it's too much grammar too many information you're going to writes the course. Nevertheless, because for you to be joining class, you you cannot be joining class for for for joining sake.
Some of us if if not for I can by now you know you're already sleeping like you're already sleeping or you're already watching the movie you're on Tik Tok you're on Instagram but because you're you have exam to write you are here. So you're not here to say you want to write the exam and fail it. You're here to pass the paper. Anyhow, it's going to No, the exam is not computer based. Okay. I don't I think they said for foundations today I don't really know but I don't think so. No, no, no. I don't I don't think so. But I don't really know how foundation work. I didn't really write foundation. I was exempted. So I don't know how foundation work but I don't think it come that base or maybe if I don't know but um but I don't think I don't think I've heard that information and you see that's why group chats like that when we have study group chats that you can just ask questions and people who are knowledgeable in that area can okay somebody said it's not all right so it's not computer based okay so that is it it's not just coming to if you coming to the class trust me everything I'm reading to you if you sit down like I always say these things are English language so if you sit down to read what are they writing there you you you some of you understand English language better than I do I don't really understand English language self so some if you sit down to read this thing you you understand better you understand this thing so coming to class is just even but coming to class is just to help you just refresh your memory some of us that have even gone through this chapter before you've already read you've read it. So something you've read if somebody's having to tell you tell you something with regards to it it will stick more you are discussing it you're telling your friend business process and environment that top itself you come here this organizational structure by the time you people you people talk about the when is the exam what is the exam like multiple choice or theory uh maybe somebody that knows can respond somebody asking if it's multiple choice or theory. I don't I don't really know.
I don't really know. Like I said, I didn't write I didn't write foundation.
Okay. So, um like I was saying, like I was saying that you don't really you just need you don't Okay. Somebody said it is both. Okay. Thank you. Simeon said is both.
>> So, just like don't do the study alone.
Don't do it alone. Get somebody to be studying with you. Get somebody to be studying with you and it will make life easy. Make life easy to make understanding the course easier.
>> Okay. I think we already finished we we already finished the independent nonexecutive directors.
Um so we now come to business environments. Okay. Stand everything we've been talking about is um the the business process. So we now we're now in business environment. All right. So business environment. What is business environment? Business environment is just is at the end like business environment is just telling you what are the internal and external factors that will influence the company's operations and decisions such as employees, customers, markets, regulations and technology. So what are those internal and external factors that is that's just your business environment like the environment where once you the the point where you decide to say I want to run a business trust me there are factors that you cannot run away no matter where go to the mountain and pray go to whatever you want to run to you are doing business and you're not doing your business in Nigeria the internal factors cannot run away there internal factors that are there external factors and these things you are going to have to consider them. You check them and you say okay are those internal factors.
Okay. Are they are they things that all right I can these things will not really really okay they can be managed. What are those external factors at at what point would they influence your your your business operations at what point at um how would they be able to affect this your business operations? So that's what your business environment is just about those factors could be internally could be externally.
So what are the key characteristics?
The complexities multiple interacting elements make outcomes hard to predict complexity. So it's telling us that multiple interacting elements will make outcome hard dynamism. So one you know dynamism means change and they're telling us here that constantly changing conditions require adaptability multifaceted nature. It will include economic social political legal technological and environmental dimensions.
Uncertainty future events and outcomes are not always predictable. Then we have interrelatedness.
Changes in one area will affect others.
We have rel relativity v. It varies by location, industry and markets.
Farreaching impact. It influence influences business survival growth and strategy.
Then we now have impact of government policies on business. So what are those impact of government policies on business? So we read together the impact of government policy on business is one taxation.
It will affect your cost. It will affect your profitability and your investment decisions.
subsidies and incentives.
It will encourage growth in targeted sectors.
Then we now have regulations and compliance. It will ensure fair practices and protect stakeholders.
There's also infrastructure development.
It will enhance efficiency and competitiveness.
Then we have the monetary and the fiscal policies. It will influence borrowing spending and economic stability. Then we also have trade policies to affect international trade through tariffs and agreements.
Then what are the legal and regulatory frameworks that affect business business operations? So we have different policies that affect businesses.
We have discussed the government policy.
This is now the legal and regulatory regulatory framework. So for the legal and regulatory framework, their system of laws, rules and policies that govern how businesses operate within a specific industry, sector or jurisdiction. They ensure compliance, fairness and accountability.
And what are the components?
Laws, binding rules enforced by government, regulations, standards set by regulatory bodies and policies guiding principles developed by government or industry. What are the examples of frameworks? We have the company formation and registration, taxation, company laws, labor laws, intellectual property contract law, financial and sustainability reporting. We have the sector specific regulations. We also have foreign exchange control, data protection, corporate governance. So these are examples of the legal and regulatory frameworks. What's the importance? The importance of the legal and regulatory frameworks they ensure compliance. They ensure fairness and transparency. They also ensure stability and stability predict stability. They also ensure right protection and trust building.
So we have and we also have the models for analyzing business environment.
So when you say you want to analyze the business environment, what are those modules that you're going to need? The business environmental analysis tools are strategic tools which help companies know how external and internal environment factors influence their operations and performances. They are used to examine things like economic trends, techn technological advancements, regulatory landscapes, competitive dynamics and social changes that can influence the business ability to meet its objective. The two major models for analysis of the business environment are the personel and the SWAT analysis. I'm very sure that about 80% of us here you must have heard of pastel and must have heard of pastel and the swat analysis.
The pastel and the swat analysis. What the analysis? The personal analysis is a comprehensive business framework used to analyze the external environment that impacts an organization's operations. So the this pest now this pastel is telling us the those things that if your business now those external factors that your business if your if you have if your business is when you your business is existing there's some external factors that these factors there are things that you just need to consider and this person has analyzed them into six for you if it's not political economic, social, technological, environmental, legal. So for political now for political, it's going to examine government policies, the political stability, trade restriction and legislation affecting business operations. So there's no way you want to do your business that you're not going to have to consider government policies. I mean, there's no way. If they start saying businesses that do this, they are paying so so and so tax, they doing this, they doing that and you're saying that you don't want to, you're going to consider it. If you don't consider it and you establish your business, that one is the first red flag that you're going to have to deal with.
Sorry, one minute, please.
Okay. So you're going to have to consider the political factor and the political factor is an external factor. The second one is economic. So the economical factor it considers factors like the interest rates, inflation, exchange rates, unemployment, fiscal policies that impact profitability and financial planning. So if for instance your business when your business need loan, you need loan to um to actually carry out your business activities. you're going to consider the interest rate that is going because the interest rate will also determine you cannot be going to collect a loan and the interest rate is so high that you know at the end of the day you might not be able to even get profit for that money. So and that that's the economical factor that you're going to have to consider. The next factor is social factor. It focuses on demographics, cultural trends, lifestyle and consumer attitudes that shape market demand and product relevance. So say for instance now you say you want to go and open um alcohol. I think Muslims they say alcohol is haram. You now go to canon Kaduna or Zarya where we have this people who practice the Islam religion and you go there and say you want to come and establish um alcohol company for them over there. H you're actually on your own because they will not buy you not sell you not say maybe just few persons that okay just you don't really sell in those kind of place so they're telling us that by time you're having to say I want you cannot so if you come to a place like Lagos or I think there's this other states that if you if you actually go to those kind of place and you establish your your business there. It will try it will try very well. You're in Lagos, you you make mini skirts like you make mini skirts and your your target audience unil student um like students these ladies that just want to look hot and look good. Your your business will really thrive in in a place like that. But you go to places where you know people they actually they they prioritize modesty and they prioritize modesty and you now go there and say you want to come and be selling what do you want to sell mini skirt for them you and your mini skirt will be there you not make sales so that's what this social is telling us whatever environment you are having to say I want to establish my business be be sure that that environment is not even going to hamper the growth of your growth of your business. So technological factor you are going to evaluate it evaluate technological advancement innovation and automation that affects efficiency and competitiveness.
Then your legal the environmental the environmental to assess ecological. So this is supposed to be ecological. I don't know why they putting why it's environmental. It's supposed to be ecological factor. So the ecological factor is the climate change, sustainability practices and environmental regulations influencing operations and CSR strategies. So for legal we have he reviews laws and regulations such as labor laws, health and safety standards, consumer protection and compliance review. So they gave us the summary of I think you can actually read I since I already explained all the factors you can read that up.
Uh okay.
Uh so we have the SWAT analysis. What is the SWAT analysis? The SWAT analysis is an acronym for strengths, weakness, opportunities, and threats. This analysis can help you understand how the business is positioned in relation to the market, competitors. You can use SWAT analysis for any of the following.
Brainstorming, business planning, strategic planning, competitor evaluation, marketing, marketing, product development and business reports.
So for examples of strength for examples of strength you're going to we have the product is superior to other competit competitors. So if you say you want is a SWAT analysis what are your strength what are your your strength your weakness what are the opportunities that available for you what are the threats now for your strength an examples of strength is an examples of an example of strength is the product is superior to other competitive other competitors. So if for instance you know that your product your product like that it has a very very very mad quality that quality that cannot be compromised quality that for people that it is quality over like they want value for their money once they buy your product. So that that's a strength for you. So if for instance now your your the your price is is high but your your quality is good.
There are people that come anytime any day. It is that one that is expensive they will go for because they've already tested the quality and they see that this is good. So by the time you sit down and you say my strength in this business is our quality like our quality cannot be matched in this industry. That one you hold with your hand like this and you know that this is one of our strengths.
Then there's product lifespan or dur durability. is still talking about the quality of your product.
If you're talking about the quality of your product, then there's cost compared to competitors. So if your your your strength is your cost, your cost is very low. By time somebody's having to go and check your competitor, your price is the like the lowest. So that's that's the strength for you. You also have manufacturing processes are efficient.
So if your manufacturing processes are efficient, that's a strength. It system can easily handle expansion. So even if your business moving from a 100 to 10,000 100,000, your technology system can handle it. So what are examples of weaknesses? Competitors products are superior or cheaper.
So if your your weakness is that your competitors their price is the cheapest.
So that means that's going to be like a weakness to you. The budget is limited.
Staff are untrained in new processes.
So we also have the examples of opportunities. So after we've talked about strengths and weaknesses, we now come to opportunities.
What are examples of opportunities? Poor products currently on the market. So if for instance when you just see that okay there are very bad products like in the market and people people have been complaining they just want something good something very reliable something with very good quality. So when by time you're doing your planning you just know that whatever uh product I'm putting out there is the best quality. And once you put out that best quality out there, you see that people will will want to buy from you because if it's just bad bad product that is in the market and one will just realize that this brand is good who will not want to like say so that's you recognizing an opportunity that's you recognizing an opportunity and I'm this like I like it when you see one of the things that make a very good business person is when you just come you just analy the market like this. You just okay what is this that everybody is doing? What is the what is it that I can do that I know that everybody is going to just need these things. So those are like the examples of opportunities.
You're just saying okay this thing I can actually if I if I venture into this business I'm like every other person in the business might not even come close because we are going to be doing so well. Our product is going to really really be the best out there. The second example is potential market for your product or service overseas. So by then you just notice that okay your services can actually or your products you have a market for it overseas. That's an opportunity that you just need to um grab. Then we has we have examples of potential traits. Changes of government or legislation competitors products or services is at a more advanced stage increasing interest rates. So these are examples of potential threats. So the SWAT analysis offers many benefits including helping you to understand the key issues affecting your business.
spot and deal with weaknesses.
Sorry, excuse me. Spot and deal with weaknesses. Minimize risk and detaile threats. Then you also you also capitalize on um opportunities.
Then you also take advantage of your strengths, develop business goals and identify strategies for achieving your goals.
So how can a firm adapt to their environment? Firms adapt to their environment by becoming flexible, innovative and proactive. This includes altering business models, restructuring or changing product service offerings.
They can do this by regularly scanning their environment for opportunities and threats and developing strategies to capitalize or mitigate them. So you see in this Nigeria I used to tell people that if you want to do a business you see this Nigeria see some of us might actually some of us might agree with me some might not agree but if you're strategic if you're strategic as a person and um maybe let's say you don't even have so much so much money but strategic as a person and you want to set up a business in Nigeria you make money.
It's easy to make. I don't know how like this world now I know even if I say if I say now somebody will now come and be asking me how much do I even have? I don't have any money.
Like it's actually easy to make money in this Nigeria. You just need to be if you say you want to do business, you just need to be strategic.
If you're strategic like this e if you're strategic like this, you you make good money in this Nigeria. I'm serious.
There are people who are like they they've just been so strategic with this and um making good money. This is our country that we are saying things are hard. Yeah, I don't have money at this that be strategic. And when you're being strategic, you're meeting the right people. Forget it. You make good money.
So um that's what this that how can you adapt to your business environment? How can how can you sit down and say this is my business environment? How do I even go about ensuring that when you know when people come they say ah this business I'm doing I don't I'm not making sales I'm not this I'm not that well yes some of them may not have been able to apply the the actual strategy that they need for their business while some have have identified those strategies and they they are actually um using it to to their own advantage.
So that is how you can adapt to your business environment and make and and make the best out of it. And we have the key strategies for adaptation when you want to adapt to your business environment, flexibility and adaptability, innovation, continuous learning and development, strategic planning, network and partnerships, network and partnership.
and um technology utilization, growth mindset, change management, sustainable practices, consumer and competitor analysis and we now move to the global and international business. So when we talk about the global and international business, what are we talking about?
So when we talk about the what are we talking about? We're talking about globalization which in which is the worldwide integration of economies, cultures, technologies enabling the free flow of goods, services, capital, labor and ideas across boards. What are the key features? Countries specialize in areas of competitive advantage. They promote efficiency that is lower cost and global economic growth. Then we also have technological drivers. What are the technological drivers?
Internet and communication tech, IoT and AI, blockchain. So these are examples of the technology technological drivers. Then we have the types of global globalization.
So political, economic and cultural. For economic integration of financial markets and trade. For political we have cooperation through international organizations. Then for cultural we have convergence of global cultures via media, travel and tech. What are the benefits? It will help to solve economic disparities. It will help to promote free trade and development.
It will also for foster cultural exchange and global cooperation.
And we move to macro and national environment.
So the macroeconomic environment what does it mean? It refers to a broad economic factor factors that influence business operation within a country or region.
Sorry please.
Okay, sorry about that. Um, then we now have the the macroeconomic. Okay, we already explained that. Then the mic micro microeconomic um variables variables we have this focus on individual or business level economic decisions the price expenditure quantity demanded consumption quantity produced wages cost of imputes individual investments and the market share.
So all right.
Okay. All right.
So then we now move to this chapter one is actually very very All right.
Okay. So, we have environmental scanning. What is environmental scanning?
Scanning is a systematic process of gathering, analyzing and interpreting data about internal and external factors to identify opportunities such as opportunities and threats that may impact business decisions. It supports strategic planning and is closely linked to SWAT analysis.
>> Sorry, please. I'm actually being distracted. Oh my god. Please just one minute.
Okay, sorry guys. I'm having messages from work and I'm having to respond to them. Okay, right. So, we have the types of scanning. We have the ad hoc scanning, regular scanning, the continuous scanning. What the ad hoc scanning? It is shortterm reactive used during emergencies. What's the regular scanning is the periodic reviews. What's the continuous scanning? It's ongoing monitoring across a broad spectrum. So the scanning is it is it is ongoing like it doesn't stop but for for regular maybe that's like periodic review but for ad hoc so it could be asked the differences between these three ad hoc is shortter them regular is periodic while continuous is the ongoing monitoring system then key elements to moni monitoring key elements to monitor the events, the trends and the issues and also the expectation. For events, you check for specific occurrences affecting the business. For trends, you check patterns or tendencies in events.
You also check for issues, imagine concerns from events and trends, expectations, stakeholders demands based on issues. So, we have the sources of information the internal sources for internal sources of information. We have the organizational records. We have the employee insights.
We also have international internal standards and guidelines. Then we also have external sources. For external sources, we have customers and suppliers, competitors, trade journals and media. We also have government publications and market research.
reports.
So, let me see if we can. So, I put the environmental scanning tools.
Okay, we take the five for sixes.
So, if we finish up in our next class, let's see. Okay. Okay. So I think the next class is where we're going to have to finish this chapter one is actually a whole lot a whole lot a whole lot. Okay.
All right. So then the environmental scanning tools.
What are those environmental scanning tools? They are SWAT analysis. The first step analysis. We've already explained the SWAT analysis. your strengths, weaknesses, opportunities and threats.
For personal we have the political, economical, social, the technological, ecological and the legal forest. Then the five diamond please you just have to remember all of these because you can be asked this in the exam. So five forces we'll stop at this Potter's five forces today. These five five forces they are strategic models developed by Michael Eorter to analyze the competitive forces shaping an industry. It helps businesses assess industry attractiveness, compet competition intensity and profitability potential.
And what are these five forces? Industry rival rivalry. So, and it's competition.
High competition reduces pricing power and profitability.
Fewer competitors allow firms to set better terms and prices.
So what this is telling us is that whatever for whatever any way you choose to operate your business that there's some there are some forces that are going to also be guiding your decision and these five forces because if you're in an industry that yes everybody in your industry they're producing good product like you if you go to this one this company a good Company D good product. Company C good product. You company D good product. You now say you want to now use your high price like if anybody that wants to buy like you they are not your target audience. They are not. So at that point you need to understand that whatever price you're going to be setting everybody in the industry produces good product. They have good products.
Everybody in the industry produces good product. So you're not going to say that you want to um say my product is good that's why I want to I want to price my goods as so and so. So you're going to consider your the industry benchmark whatever price that your industry cap their product. So you're going to say okay at least because everybody it is only when maybe in that your industry that they're not really producing good product then you now say you now say you want to use your your your your high because your product is the best that you want to now use your own price to say because my product is the best this is what I'm going to I'm going to do. Then we also have threats of new entrance. Threat of new entrance. Low barriers to entry will increase competition. High barriers protect existing firms and allow and allow for stronger marketing position.
Then we also have bargaining power of suppliers.
So bargaining bargaining powers power of suppliers for fewer suppliers or unique imputes give suppliers more power to raise prices more suppliers or low switching cost reduce power reduce this power. So if there's like few suppliers or there are unique inputs that give suppliers more power to raise prices, it's going to lead to more suppliers or low switching cost that will reduce this power.
Bargaining power of customers. So for bargaining powers of customers.
So for bargaining power of customers fewer more powerful customers can demand lower prices a broad customer base gives more pricing flexibility and there's also threat of substitutes. So for threat of substitute availability availability of alternative products will limit pricing power. Unique offerings with no close substitute strengthen a position. So if you if there's an item you're selling, if if if in the market somebody just brings a substitute and that substitute can do as much as your own product can do and your own product is priced very high. Trust me, that substitute is going to win over your your product because the substitute is as almost as good as what you have and your price the difference is so high. At the end of the day, somebody is going to say, "The difference in this price is so high and I'm going to be getting almost the same value. So why not just go for the substitute? You enjoy the substitute and you're paying less instead of going." So these are things that you're going to have to consider that if there's going to be a substitute, that substitute is already a threat to whatever you have. So it is either maybe you you just do something to to also up your own game like you just need to be at the top of your game as a business owner. You just need to know okay what do I need to do what what the best way to do it better ways to go about these things. So that's what this five the five the five is actually trying to let us know. Then what is the purpose? The purpose is understanding these forces will help companies to develop competitive strategies. It will it will help them to say okay how do we think fast? How can we act fast? Because if you don't act fast, you don't think fast another product and you know it just takes one product to just be there and people just notice it then you you're out of you're out of the market. That new product is already taking um space. Your competitor is already taking over the market. So you just it's going to help you to develop competitive strategies. It will also help you to identify industry strengths and weaknesses and also help improve long-term profitability.
Uh I don't know if you have questions.
Um so we we'll end the class here for the day then for tonight then we'll continue from corporate social responsibility in our next class. And our next class we're going to call chapter one. We'll finish chapter one like finish it. We not have any business with chapter one again. So if I don't know if anybody has any question at this point uh before we call the class to check any question any uh maybe with regards to the any question.
Okay, I think I'm going to take that as no question. Um, so we're going to call the class.
Thank you. God bless you.
Please you people start reading exam is already here. Thank you so much. Thank you so much.
Thank you.
Okay. The material is is a is is a summarized note like you have your study part but for this summarized notes it's um you just text Dr. Caviru it's at a fee. It's a summarized notes. So it's at a fee. But if you if you think um maybe your study part if you want to use your study pack to study but I'll advise you to this summary notes helps like it will help you to understand this thing better and faster and you're just having to read straight to the point but if you're having to read from your study pack is a whole lot a whole lot but the summarized notes makes life easy so just text Dr. Kabiru if you need to get it.
All right. Um in the absence of no question, no observation, uh we're going to end the class today.
Um good night everybody.
Thank you for having me. How do you help in achieving a group reading? Okay, I'm going to create a group chat. I'll create a group chat and I'll send the link to the group so that you people can join. Then you just have your discussion there. That one is not going to be locked like the lecture group. So you just communicate there.
>> All right. Good night everybody.
>> Thank you. Good night.
>> Good night.
>> Good night.
>> Thank you very much.
And good night to everyone.
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