HKUGA College

S3 Business Studies (2024-2025)

Module 1 - Introduction to Business Management
Part C - Factors Affecting Business Decisions
Part D - Social Responsibilities and Business Ethics

Name: Class: ( )

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Learning Objectives
Students are expected to
(i) analyse the strengths, weaknesses, opportunities and threats of a business;
(ii) evaluate how economic, technological, cultural, physical, social, political and legal factors affect
business decisions;
(iii) explain why and how a business should be ethically responsible to various stakeholders; and
(iv) describe how business ethics and social responsibilities affect business decisions.

1. SWOT Analysis

To accomplish its objectives, it is important for an organisation to perform an environmental

analysis in which both internal factors and external factors affecting the organisation are clearly
reviewed.

In the SWOT analysis, the internal strengths and weaknesses as well as the external opportunities
and threats are reviewed.

STRENGTHS WEAKNESSES

internal (i.e. within the organisation) attributes internal (i.e. within the organisation) attributes
which are helpful to accomplish its objectives which are harmful to accomplish its objectives

OPPORTUNITIES THREATS

external (i.e. beyond the organisation) attributes external (i.e. within the organisation) attributes
which are helpful to accomplish its objectives which are harmful to accomplish its objectives

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Case Study 1
Conduct the SWOT analysis for HKUGA College.

STRENGTHS WEAKNESSES

. .

OPPORTUNITIES THREATS

. .

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2. PEST Analysis

The business environment is influenced by many factors, and they all have an impact on business
decisions of a firm. Firms should consider these external factors when making decisions such as
entering a new market or setting up a new branch.

Definition
- factors related to the natural environment, geographical location and the
infrastructure of a country or a region

Examples
- climate
· affects the sales of products such as ice-cream and heavy coats
· increases the cost of business operations that require a certain
temperature level
· increases the health risk for employees
- air quality
· poor air quality increases the health risk for employees
physical
- natural resources
factors
· regions with abundant natural resources are suitable for primary
production
- geographical location
· seaside location facilitates the shipping of raw materials, products and
equipment for firms
- infrastructure
· well-developed transportation networks and facilities facilitates trade
· well-developed telecommunications network allows firms to
communicate effectively and efficiently with their branch offices,
suppliers and customers
· stable energy and water supply ensure the smooth operation of
businesses

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 Definition
- factors related to the political system and government of a country or a
region

Examples
- political stability
· firms in politically unstable regions have higher business risks and their
operations may be disrupted
political · consumers and investors may have less confidence in firms operating
factors in politically unstable regions
- international relations
· affect the amount of trade and travel between countries
· affect the business of firms that operate in multiple countries or deal
with foreign customers
- government intervention and policies
· government that often intervenes in the market and fails to play the
role of a market facilitator may hinder economic and market
developments

Definition
- factors related to the laws and regulations of a country or a region

legal Examples
factors - labour legislation
- laws and regulations related to licensing and the setting up of business
- laws and regulations related to taxation
- laws and regulations related to trademarks and intellectual property

Definition
- factors related to the economic environment of a country or a region,
affecting a firm’s revenue and costs

Examples
- general economic conditions
· consumption and investment increase when the economy performs
well
- price level (物價水平) / inflation rate (通脹率)
· increase in price level / inflation rate will increase firms’ operating
costs such as electricity costs, rents and advertising costs
- income/wage level
· affects firms’ labour costs
· influences how much people can spend on goods and services
- unemployment rate
economic
· increase in unemployment rate will reduce consumers’ spending on
factors
goods and services
- tax rate
· salaries tax rate affects how much people can spend
· profits tax rate affects the profits firms can earn after deducting taxes
· imposing a sales tax on goods and services will affect the pricing
decisions of firms
- interest rate
· affects firms’ borrowing costs
· people tend to spend less and save more money when the interest rate
is high
- exchange rate
· for local firms that trade with foreign firms, changes in the exchange
rate will affect their costs
· for firms that trade with firms from other countries or regions, changes
in the exchange rate will affect their costs

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 Definition
- factors related to the social environment of a country or a region, affecting
market size, consumer demand, labour supply and labour productivity

Examples
social - population size and structure
factors - birth rate
- education level
- language used and language ability
- religion
- ethnicity
- family size

Definition
- factors related to a set of beliefs, values, and customs shared by most
people within a particular society, country or region

Examples
cultural - cultural backgrounds of consumers
factors · affect their tastes and preferences, which in turn affect their demand
for goods and services
- work habits and business practices
· firms should respect other regions’ work habits and business practices
when they do business with foreign firms or hire people from foreign
regions

Definition
- factors related to technological innovations and developments that may
affect business operations in a country or a region

Examples
- network security
· system attacks by hackers may result in the leakage of firms’ internal
or customer information
- reliability of telecommunications system
· allows firms to communicate with other parties and conduct online
technological
transactions smoothly
factors
- internet or mobile network coverage and speed
· firms cannot reach customers located in regions with no Internet or
mobile network coverage
· speed and stability of an Internet or mobile network affects the
connectivity of customers to firms’ websites
- online or mobile payment channels
· allow firms to collect electronic payments for online transactions
- people’s IT knowledge and usage
· for firms that target customers with a low Internet usage rate (e.g., the
elderly), online businesses may not be suitable

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3. Social Responsibilities

Definition
- people or groups that affect and can be affected by a firm’s decisions and
behaviour

Note
- major stakeholders of a firm includes parties that have legitimate interests
(合法權益) in the firm and/or have expectations about the firm’s performance

stakeholder Examples
(持份者) - owners or shareholders
- employees
- customers
- suppliers
- distributors (分銷商)
- creditors (債權人)
- the government
- the community
- competitors

Definition
- a firm’s responsibilities to take actions that benefit society, including
social
various stakeholders
responsibilities
(企業社會責任)
Note
- actions should go beyond any legal requirements

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How to Be Socially Responsible to Stakeholders

- safeguard owners’ returns by considering the long-term interest of the

owners or business
shareholders - disclose relevant information that may affect owners’ decision-making in a
timely manner

- provide fair and reasonable monetary rewards

- provide employee benefits that can enhance employees’ well-being or
security
employees
- provide a pleasant working environment
- support employees’ personal and career development
- ensure that employees are treated fairly and equitably

- ensure that the goods and services are reasonably priced and are of good
quality
- provide goods and services that meet customers’ requirements
customers
- provide necessary and accurate product information to customers
- provide good after-sales service
- offer support to customers with special needs

- offer reasonable prices and terms

suppliers - pay suppliers on time
- treat all suppliers fairly

- ensure that the products supplied to distributors are of good quality

distributors - provide assistance to distributors to help them sell or promote the firm’s
products

- repay debt on time

creditors
- provide accurate financial information for assessing risk

- cooperate with government officials and law enforcers

- pay a fair amount of tax
the government
- adopt ethical business practices advocated (提倡) by the government but not
regulated by laws

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How to Be Socially Responsible to Stakeholders (cont’d)

- minimise the damage from the firm’s operations on the environment

the community - minimise disturbances from the firm’s operations on the local community
- organise and support charitable and community activities

- treat and compete with them fairly, honestly and with respect
competitors
- avoid damaging the industry’s image

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4. Business Ethics

Definition
- set of guiding moral principles, values and beliefs which govern a firm’s
behaviour, decisions or actions
- ethical standards that society uses to analyse business practices and to
decide whether they are appropriate or not
business ethics
(商業道德)
Notes
- not clearly defined
- common ethical values include responsibility, integrity, respect, fairness
and transparency
- illegal actions are mostly unethical, but legal actions may not be ethical

(a) enhancing reputation and raising customers’ confidence

importance of (b) gaining credibility and hence the trust and support of owners, suppliers,
business ethics distributors and creditors

(c) raising employees’ morale and loyalty

(a) emphasising the importance of business ethics during recruitment

(b) compiling a code of ethics (專業操守) for all staff to follow

ways of
enhancing (c) providing educational and training courses on business ethics rewarding
awareness ethical practices and punishing unethical practices
about business
ethics (d) senior management demonstrating a commitment to ethical practices

(e) adopting preventive education services provided by the Hong Kong

Business Ethics Development Centre (HKBEDC) under the ICAC

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