(a) Mention five types of business environment (b) Why do companies continue to advertise in spite of the criticisms levelled against it?

Answer Details

(a) Five types of business environment

1. Economic environment: The economic factors surrounding a business such as income levels, inflation, interest rates, taxation and the general state of the economy.
2. Social/cultural environment: The customs, beliefs, values, tastes, religion and way of life of the people among whom the business operates.
3. Political/legal environment: The system of government, laws, policies and regulations that affect how the business is run.
4. Technological environment: The state of technology, machinery, tools and methods of production available to the business.
5. Physical/geographical environment: The natural surroundings such as climate, location, land, and availability of raw materials that affect the business.

(Other valid types: competitive environment, and international/global environment.)

(b) Why companies continue to advertise in spite of criticisms

1. To inform the public: Advertising remains the most effective way of telling existing and potential customers about products, their features, uses and prices.
2. To increase and sustain sales: It creates and maintains demand for the product, and firms that stop advertising usually lose sales to competitors.
3. To meet competition: Rival firms advertise, so a company must also advertise to protect and expand its own share of the market.
4. To introduce new products: Advertising is needed to launch new goods and to educate consumers on how to use them.
5. To build and maintain goodwill: It creates a favourable image and reminds customers of the brand, thereby keeping the firm's name alive in their minds.
6. To boost large-scale production: By expanding the market, advertising enables mass production and its economies, which lower unit costs.

Thus, although advertising is criticised as costly and sometimes misleading, its benefits in creating awareness, sustaining sales and meeting competition make companies continue to use it.