The Copperbelt University

School of Business – Lusaka Campus

Department of Accounting and Finance
Bachelor of Accountancy/ Business Administration

Name: Andrew Chipwalu

SIN: 19146071

Course: BS 153 Business Environment

Task: ASSIGNMENT 1

Lecturer: MR. CHISHALA

Due Date: 28TH OCTOBER 2019

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Question 1
Internal business environment are factors that exist in a firm affecting the business positively or
negatively, these are factors that a firm can have control over and use them for growth of the
business. These are combined forces that manager use to steer productivity and growth in firms
while,
External business environment are combined forces/factors that affect the business in a positive
or negative manner externally, where the business has no control over despite its existence the
effects are felt, these external factors stems from the large community norms, the government
and the international laws equally creates such effects to the business external environment.
(Kotler.P. & Amstrong 2004)
Internal factors identified as follows:-
I. Organization structure.
The structure of the organization has an effect on the effectiveness and efficiency of the business,
thus to say tall structure have long, delayed and complicated channels of communication
compared to flat structures were maybe only three levels of hierarchy are in existence.
II. Organizational culture.
Some strong culture have an advantage to weak cultures despite sometimes strong cultures may
be hindrances or stoppages to innovativeness and new ideas from managers, employees and
technological advancements
III. Human capital/resource
Skilled labor force has an advantage than a non skilled labor force because using skilled labor
quality of work produced is high as well as production levels are efficient and effective, the job
is well understood.
IV. Financial Resource
The financial strength of the business will determine the growth, expansion and overall
operations of the business; thus, the financial base of the business may restrict a business’s
operations for a business to flourish it needs to be liquid and well financed.
V. Capital Resource
The machinery of the business is crucial to production thus a business that uses machinery with
high technology have efficient and improved productivity and also a business cannot produce
without machinery support, that is to say internally employees and manager’s performance may
be affected depending on what machinery and technology they are using, these effects may at the
larger view affect the firm and paint a picture of a firm.
VI. Raw materials

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Raw materials are basic essentials to production thus; availability of raw materials allows a
smooth flow of operations in a firm where the opposite or inversely operations becomes difficult
leading a firm’s failure to perform. These factors also prevent managers and employees to
perform as it is beyond individual’s performance ability.(W.L Gore and associates Company).

External factors identified as follows:-

Under external environment we consider the micro factors and macro factors considering the fact
that these factors a business has no control over.
Micro Factors
I. Public perception/Company Good will.
Operations of a company are equally affected by how the public looks at it; the public may
consist of customers, suppliers, intermediaries, the state and many other entities, when a
company is associated in dealing with genuine products like (PHILIPS) penetrating the market
and retaining the market share is not difficult but inversely some products associated with
healthy matters say cigarette producing company may be perceived negatively by Christians
populous, an accepted company good will speaks volume.
II. Market intermediaries and Suppliers.
These are equally keen to the business as the business does not operate in isolation, it needs to be
supplied with raw materials and other goods and services it equally need some intermediaries
like insurance companies, clearing agencies and many other agencies, these may affect either
positively or negatively to a firm say, the suppliers chose not to supply the firm or intermediaries
hikes there service charges or rather shift their target market the firm will have little or no say to
such changes.
Macro Factors
III. Political. The political state of a country plays a major role in the external business
environment, as the political environment dictates the types of rules and laws that govern the
operations of different business entities, some laws may favor certain industries leaving out
others. Civil unrests caused by political players may cause the economy to collapse due to
unstable or conducive business environment; entities will be affected negatively or positively due
to such factors beyond their control.
IV. Economy. A healthy economy supports businesses to flourish while an ill Economy creates a
lot of challenges to a business environment, some of the benefits a business can get from a
healthy economy are goods being traded at favorable exchange rates, the economy will have a lot
of business players, consumers will have a lot of disposables income to use on extra goods and
services, this interprets business growth. While in an ill economy the business will suffer from
unfavorable exchange rates, taxes, reduced growth, unstable markets, business wind ups, and
reduced market share.

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All these effects mentioned above the business has no control over but it has to leave with them
and apply methods of working with and around them, thus the business is affected.
V. Social. Social factors, such as demographics and culture can impact the industry environment
by influencing peak buying periods, purchasing habits, and lifestyle choices. Society is important
as people’s culture and lifestyle can influence when, where and how they are likely to engage
with products and services.
VI. Technology. Technological factors may have a direct or an indirect influence on an industry.
While some industries will be more affected by technology than others, innovations in
technology may affect the market and consumer choices and buying power.
VII. Legal. Legal factors may affect both the internal and external environment of a company.
The legal and regulatory environment can affect the policies and procedures of an industry, and
can control employment, safety and regulations.
VIII. Environment. Environmental factors include all those relating to the physical environment
and to general environmental protection requirements. While the environment is more important
to some industries, such as tourism, agriculture or food production, these factors may influence a
range of different industries and are worth being aware of.
Source: https://libguides.library.usyd.edu.au/ibus
The Business environment- Ian Worthington and Chris Britton

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Question 2
Once you’ve made the decision to treat your business as a business, you’ll need to choose an
entity. Follows is a brief rundown of the most popular forms of business entities:
1. Sole Proprietorship
The sole proprietorship is the most simple form of business entity, it is run by one person. There
is no formal procedure to form a sole proprietorship and there are few formal accounting
requirements. These are the most common types of businesses in Zambia.
Advantanges
-The top advantage is that it is easy to set up the business. It does not have many legal
requirements and does not need a lot of capital to start it up. Anyone can be able to start this kind
of business.
-The profits are only shared by the owner. Therefore, in an event that the business makes a profit,
the owner will choose how he will use the profit as he is the sole owner of the business.
-No special taxes are included, because the business and the owner are one, therefore pay only
one tax. This reduces the cost of doing business
-There is no need to produce financial reports
Disadvantages
-Unlimited liability is the one of the top disadvantages of a sole trade. In an event that the
business is in debt, the creditors may be able to get the sole trader’s personal properties to cover
the debt..
-The business discontinues where the owner dies. The owner is the business if he dies the
business stops to exists.
-Lack of financial controls: The looser structure of a proprietorship won’t require financial
statements. The lack of accounting controls can be a serious issue if financial controls are not
strictly managed, the business might close.
-Maximum privacy; It is not by law required to produce reports to the public on its operation say,
profit and loss statements.
Partnership
A partnership is a legal form of business with two or more owners. Partners legally share a
business assets, liabilities, and profits according to the terms of a partnership agreement. The law
does not require a written partnership agreement, but it’s wise to make one. The partnership
agreement is a document that states all of the terms of operating the partnership for the protection
of each partner involved.
Advantanges

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-The capital is easy to rise than a sole trader, the partners agree to put capital together and as
such the capital is also higher.
-There is better decision making because there are two or more partners. Two heads are better
than one.
- Transfer of interest to externals; with the consent of the partnership a member can transfer ones
interest to the third parties say a son or any other.
-Shared responsibility; partners understand their roles and responsibilities as prescribed in a
partnership deed, there is no ‘jack of all trades’ that is to say work load is shared and this gives a
member to have time on other things.
Disadvantages
-The liability of the partners for the debts of the business is unlimited
-There is a risk of disagreements and friction among partners and management
-Banks may prefer the greater accounting transparency, separate legal personality and sense of
permanence that a limited company provides. To the extent that a partnership business is seen as
higher risk, a bank will either be unwilling to lend or will only do so on less generous terms.
-All the profit or the loss is shared among the partners. If using the act of 1890 the profits will be
shared equally therefore causing conflict.
Private Limited Company
A Private Limited Company is a closely held company whose shares are controlled by a
relatively small number of people, often family members, relatives, friends or employees. In
most cases the advertisement of shares is done in secret. It is larger than a partnership and sole
trader. It has a well-organised structure.
Advantanges
-Limited liability, the owner(s) of the company are separate from the organization itself. In an
event that the company has debt, the owner’s assets will not be paid as part of the debt.
-It has the capacity to sue and be sued, it can go to court under the company’s name.
-Business continuity, the company shall not cease to exist if the owner dies, because it is a going
concern therefore it will operate for the foreseeable future.
-It has a better capacity to borrow, than the two above mentioned forms of organization. The
banks are willing to lend the private limited company money because of the lesser risks.
Disadvantages
-The company cannot issue a prospectus to the general public because of it’s terms of existence.
-Increased legal compliance. They must follow strict legal rules in order to remain in existence.

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-Higher administrative costs. Because of it’s large set up, the costs of production are higher, they
need to pay the worker and for their certificates and other operating costs
-Personal control is limited. You require at least two directors to start a private limited company.
It makes decisions difficult if you and your co-director different on decision making.
Public Limited Company
A public limited company (PLC) is the legal designation of a limited liability company (LLC)
that has offered shares to the general public and has limited liability. A PLC's stock is offered to
the general public and can be acquired by anyone, either privately, during an initial public
offering or through trades on the stock market. The minimum share capital in Zambia is
K1,000,000.
Advantanges
Raising capital through public issue of shares. The most obvious advantage of being a public
limited company is the ability to raise share capital, particularly where the company is listed on a
recognised exchange. Since it can sell its shares to the public and anyone is able to invest their
money, the capital that can be raised is typically much larger than a private limited company.
Finance opportunities. The demands of being a public limited company and maintaining a stock
exchange listing, banks tend to favour them when giving loans
Business Continuity. The business is able to run for the foreseeable future which means even if
one of the shareholders dies the business will still continue in existence. It’s a going concern
therefore it provides for more job security.
Prestige. Having PLC at the end of your company's name adds prestige and grandeur to your
business. Future customers, suppliers, and employees will view your business more positively if
it has those letters at the end of the name. Even more so if it's also listed on a stock exchange.
Disadvantages
Higher levels of transparency required. The required level of transparency is much higher for
public companies. As well as needing to have its accounts audited, public limited companies are
generally unable to file abbreviated accounts, whereas smaller private companies can often do so
Stock Market Vulnerability: Public limited company. Stock value dictates success. When the
company’s stock falls to a certain point it can collapse.
Increased Legal Implications: By entering into the public domain, corporations must adopt
more rigorous legal practices to provide transparency to shareholders and protect them against
any potential ramifications the company is subjected to based on PLC law. This means a focus
on compliance with a large number of laws and increased administrative obligations.
Potential for Loss of Control: Ultimately, shares control company ownership, which means if
you sell off more than 50% of your company, there is the potential for shareholders to take over
and even eject you from the business.

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Source: Types of Business". Brunei Economic Development Board. Archived from the original
on 2016-04-29. Retrieved 29 April 2016.

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Question 3
Porter’s model says that the structure of an industry and the ability of firms in that industry to act
strategically depend upon the relative strengths of five forces: current competition(Intensity or
Rivalry), potential competition(Threats of new entrants), the threat of substitute products, the
power of buyers and the power of suppliers.
Competition in the Industry
The first of the five forces refers to the number of competitors and their ability to undercut a
company. The larger the number of competitors, along with the number of equivalent products
and services they offer, the lesser the power of a company. Suppliers and buyers seek out a
company's competition if they are able to offer a better deal or lower prices. Conversely, when
competitive rivalry is low, a company has greater power to charge higher prices and set the terms
of deals to achieve higher sales and profits.
Factors that can reinforce its existence or its strength:
i. High fixed costs and exit barriers; this factor will strengthen competition in an industry as a lot
of firms will chose to remain and compete in an industry due to the cost that is related with
leaving to staying in the industry.
ii. Lack of product differentiation; when products are the same or homogeneous this would mean
firms are fighting the same target market thus rivalry among firms’ increases.
iii. Slow industry growth; this causes existing firms to remain in an industry and fight for market
share with the view that it will enjoy future industry growth that the firm may have projected.
Potential of New Entrants Into an Industry
A company's power is also affected by the force of new entrants into its market. The less time
and money it costs for a competitor to enter a company's market and be an effective competitor,
the more an established company's position could be significantly weakened. An industry with
strong barriers to entry is ideal for existing companies within that industry since the company
would be able to charge higher prices and negotiate better terms.
Factors that can reinforce its existence or its strength:
i. Weak barriers to entry; these would attract new firms to establish firms and join the
competition as joining the industry and exiting may not be difficult.
ii. Existence of high profitability; when an industry has high levels of profit it creates an
attraction for new entrants to join the industry just like is the case in transport industry were
startup capital is less and returns are high.
iii. Low startup capital; this has a positive effect on new entrants just as discussed above, the
other example that could strive to show this is when you consider comparing sole traders.
Power of Suppliers

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The next factor in the five forces model addresses how easily suppliers can drive up the cost of
inputs. It is affected by the number of suppliers of key inputs of a good or service, how unique
these inputs are, and how much it would cost a company to switch to another supplier. The fewer
suppliers to an industry, the more a company would depend on a supplier. As a result, the
supplier has more power and can drive up input costs and push for other advantages in trade. On
the other hand, when there are many suppliers or low switching costs between rival suppliers, a
company can keep its input costs lower and enhance its profits.
Factors that can reinforce its existence or its strength:
i. Luck of substitute products; supplier will have great or increased power when there are less or
no substitutes such that consumers will not have any option but to purchase such goods and
services.
ii. High switching costs; when switching costs are high consumer don’t shift or switch any how
hence giving suppliers more power over consumers and this could be as a result of high
technology that has been invested in some products, like some apple phones it’s difficult to
switch or change a phone because a screen is broken. Equally if some technical requirements are
high to make one change this will discourage consumers to switch.
iii. Composition size and number of suppliers; when suppliers are a few they become more
powerful unlike when they are a lot as they may continue using the economies of scale to enjoy
profits a good example is that of Lusaka water and Sewerage Company.
Power of Customers
The ability that customers have to drive prices lower or their level of power is one of the five
forces. It is affected by how many buyers or customers a company has, how significant each
customer is, and how much it would cost a company to find new customers or markets for its
output. A smaller and more powerful client base means that each customer has more power to
negotiate for lower prices and better deals. A company that has many, smaller, independent
customers will have an easier time charging higher prices to increase profitability.
Factors that can reinforce its existence or its strength:
i. Threat of backward integration; buyers are more powerful when the industry is offering goods
and services that buyers can equally produce if they are to chose to do so, therefore this gives
buyers power to bargain as they may take over the backward responsibility, such examples may
apply well in milling companies and maize business were millers can chose to start producing
maize unlike buying from farmers.
ii. Buyer purchases in high volumes; when the buyers buy in large volumes they can negotiate
discounts, influence product quality, influence production and enjoy the economies of scale that
comes with bulk purchases all these strengthen buyer power.
A good example is that of the Zambian breweries when buying barley in large volumes, the
buyer (Zambian breweries) has power than other buyers.

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iii. Availability of substitute ; the buyer will have more power when substitutes are available as
the choice of goods and services will be strong, substitutes like generated power with solar
power similarly billed water supply and bore hole water supply all these puts the buyer at an
advantaged side.
Threat of Substitutes
The last of the five forces focuses on substitutes. Substitute goods or services that can be used in
place of a company's products or services pose a threat. Companies that produce goods or
services for which there are no close substitutes will have more power to increase prices and lock
in favorable terms. When close substitutes are available, customers will have the option to forgo
buying a company's product, and a company's power can be weakened.
Factors that can reinforce its existence or its strength:
i. Low switching costs; consumers will easily switch to other goods and services hence raising
the threat or chances of substituting due to the low switching costs involved one classical
example is on network providers were you just need to buy a sim card to switch from one
network to another.
ii. Availability of substitute products; more substitutes allow consumers to have a wide range of
choice were a lot of consumers may be seen substituting quite often on goods and services an
example of such may be generated power and solar power consumers may choose which one is
convenient as at that time.
iii. The firm may resort to promotions in order for there product to find market share, and for
consumer to be attracted to the product. This may be done through road shows and advertising.

Bibliography
Michael E. Porter, "How Competitive Forces Shape Strategy," May 1979 (Vol. 57, No. 2), pp.
137-145.
Porter, M.E. (March–April 1979) How Competitive Forces Shape Strategy, Harvard Business
Review

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QUESTION 4 (A)
• Traditional corporate social responsibility; under this theory firms operate traditionally were
there production and operations are firm and profit oriented, they pay less concern to the
environment, what they produce is not putting environmental healthy as priority or a concern.
• Stakeholder corporate social responsibility; this theory looks at distributive way of interest
benefits unlike just considering shareholders, this involves benefits of a firm that stretches from
employees, suppliers, and all stake holders, were value distribution as a firm operates will be
centered on all stake holders.
• Affirmative social responsibility; the theory looks at the most vulnerable or exploited
individuals were it seeks to uplift their value or looks into their interest and mostly such could be
individuals of special need and stereotyped groupings were the firm seeks to promote and uphold
values by allowing the firms value distribution towards such interests.
QUESTION 4 (B)
Ethics is defined as moral or code of morals practiced by a person or group of people; it is also
known as the public accepted code of conduct that dictates the behavior of a grouping and this
can be in written form or enshrined, ethics start from individuals of an organization to the
organization itself.
The two dimensions of ethical behavior are normative business ethics; under this approach career
profession and corporate practice is upheld while descriptive business ethics; this is based on
academic methods applied to try and understand the business environment
Explanation on approaches:
• Utilitarianism approach; this approach is derived from utility it compares behavior outcome
from one to another as which one of the two behavior produces better than the other based on
morality this helps managers make decisions that will satisfy the majority based.
• Moral rights approach; the approach is concerned with respect of the most basic human rights
of an individual those they are entitled such as the right to freedom of conscience, due process,
privacy, speech, free consent, life and many more of great importance.
That is to say as individuals work in a given environment such ethics need to be respected and
observed as the opposite amounts to violation.
• Individualism approach; this looks at individual satisfaction in working environment unlike to
the groups interest, under these acts are moral when they promote the individual’s best long term
interest as such motivates and contribute to the groups interests.
• Justice Approach; This approach holds that moral decision must be based on standards of
equity, fairness and impartiality. The following are forms of approach thus; Distributive justice
requires that different treatment of people is not based on arbitrary characteristics. Individuals
who are similar in respect to what they do a decision should be treated similarly.

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Bibliography
Sheehy, Benedict (2015-10-01). "Defining CSR: Problems and Solutions". Journal of Business
Ethics. 131 (3): 625–648.
McWilliams, Abagail; Siegel, Donald (2001). "Corporate social responsibility: A theory of the
firm perspective". Academy of Management Review.

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