Paper 6

BUSINESS ENVIRONMENT

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to understand the environment under which businesses operate for purposes of designing and implementing credit management policies and approaches

On completion, a candidate should be able to

Demonstrate understanding of the structure of the economy
Evaluate the impact of supply and demand on business organisations in line with managing credit transactions
Align lending proposals to structures and operations of different forms of business organisations
Apply PESTEL analysis (and other tools) to evaluate the impact of internal and external factors on the business organisation
Gauge the business cycle impacts on business decision making
Analyse the conflict of macro-economic objectives of Governments and business objectives in credit decision making

Content

1
Introduction to business environment
1. 1.1
  Definition of a business operating environment
2. 1.2
  Outline of Kenyan economy
3. 1.3
  Structure of Kenyan financial system
4. 1.4
  Types of Industries: Primary, Secondary and Tertiary sectors of industry.
5. 1.5
  Economic effects of changes in size, geographical distribution, gender, ethnicity and age composition of the population.
6. 1.6
  The link between business environment and Credit Management
2
Business Structure and Business Growth
1. 2.1
  Forms of business organisation
2. 2.2
  Organisational objectives
3. 2.3
  Business Shareholders & Stakeholders objectives
4. 2.4
  Overview of Business growth and business growth strategy
5. 2.5
  Types of business growth strategies
6. 2.6
  Analysis of business growth strategies
3
Introduction to Company Analysis and Industry Analysis
1. 3.1
  Overview of company analysis and Industry analysis
2. 3.2
  Elements of company analysis when conducting credit analysis
3. 3.3
  Elements of industry analysis when conducting credit analysis
4. 3.4
  The relation of industry analysis to company analysis
5. 3.5
  Characteristics of representative industries from the various economic sectors
6. 3.6
  Product and industry life cycle Models
7. 6.7
  PESTEL & Stakeholders Analysis
8. 6.8
  Business life cycle and Industry trends
9. 6.9
  Classification of industry as to life cycle phases (embryonic, growth, shakeout, maturity and decline)
10. 6.10
  Limitations of the life-cycle concept in forecasting industry & company performance
11. 6.11
  Competitive forces; effect of competitive forces on prices and costs (Porters 5 forces)
12. 6.12
  Macroeconomic, technological, demographic, governmental, and social influences on industry growth, profitability and risk
4
Market Environment
1. 4.1
  The marketing concept and the importance of marketing within the business environment
2. 4.2
  The principles of marketing and Marketing management
3. 4.3
  Market segmentation - Methods and Advantages
4. 4.4
  Elements of marketing - Marketing Mix
5. 4.5
  The Concept of product life cycle
6. 4.6
  Product Pricing strategies
7. 4.7
  The Connection between Marketing strategy and Credit strategy
8. 4.8
  Role of marketing department in credit cycle management
9. 4.9
  Marketing and credit department approaches in credit decision making
10. 4.10
  Effects of marketing strategy on credit decision marketing
11. 4.11
  Striking a balance between marketing objectives and credit management goals
5
Market Structures and Competitive environment
1. 5.1
  Definition of a market
2. 5.2
  Necessary and sufficient conditions for profit maximization
3. 5.3
  Mathematical approach to profit maximization
4. 5.4
  Output, prices and efficiency of: Perfect and Imperfect competition.
5. 5.5
  Costs and economies of scale
6. 5.6
  Supply, demand and pricing
7. 5.7
  Elasticity of demand and supply
8. 5.8
  Determination of exchange rates
6
Inflation
1. 6.1
  Definition and types of inflation
2. 6.2
  Causes of inflation: cost push and demand pull
3. 6.3
  Effects of inflation
4. 6.4
  Measures to control inflation
5. 6.5
  Effects of inflation on businesses and credit decision making
7
The macro-economic influences on the organization
1. 7.1
  Circular flow of Economic Activity - Real Flows and Money Flows
2. 7.2
  The business cycle and the multiplier
3. 7.3
  Economic growth and business growth
4. 7.4
  Government economic policies and their impact on business
5. 7.5
  Conflict of between business objectives and government policy objectives
6. 7.6
  Effects of government intervention and regulation
7. 7.7
  Impact of fiscal and monetary policies on businesses
8
Introduction to International Trade
1. 8.1
  Overview of International trade
2. 8.2
  International trade theories
3. 8.3
  Theory of absolute advantage
4. 8.4
  Comparative advantage theory
5. 8.5
  Terms of trade; balance of trade; balance of payments; causes and methods of correcting deficits in balance of payments.
6. 8.6
  Protection in international trade; Regional integration organisations and Commodity agreements
7. 8.7
  International institutions and their and concerns of developing countries: International Monetary Fund; World Bank; World Trade Organisation
9
International Business Environment
1. 9.1
  Introduction to International Trade
2. 9.2
  Overview of international business environment
3. 9.3
  Difference between - international business environment and international business
4. 9.4
  The modern global economy - the pros and cons of international expansion
5. 9.5
  The multinational enterprises (MNE)
6. 9.6
  Entry modes for international businesses (includes global concentration, global synergies, and other strategic global motivations)
7. 9.7
  Forms of international business environment
8. 9.8
  Advantages of international business environment
9. 9.9
  Tools of International business environment analysis
10. 9.10
  Dealing with Multi-dimensional aspects & complexity of international operating environments:
  1. 9.10.1
    Political environment - Definition of political environment; Political systems; international political risks; Factors to consider when analyzing the political-legal environment in an international environment
  2. 9.10.2
    Economic environment - Definition of economic environment; types of economies (the more developed or industrialised, the less developed or third world, and the newly industrialising or emerging economies); Factors to consider when analysing the economic environment in an international environment
  3. 9.10.3
    Technological environment - Definition of Technological environment; Factors to consider when analysing the Technological environment in an international environment
  4. 9.10.4
    Socio-Cultural environment - Definition of Cultural environment; Factors to consider when analysing the cultural environment in an international environment
  5. 9.10.5
    Competitive environment - Definition of competitive environment; Factors to consider when analysing the competitive environment in an international environment