Business Environment CCP Revised Notes





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



A candidate who passes this paper 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



  1. Introduction to business environment

1.1 Definition of a business operating environment

1.2 Outline of Kenyan economy

1.3 Structure of Kenyan financial system

1.4 Types of Industries: Primary, Secondary and Tertiary sectors of industry.

1.5 Economic effects of changes in size, geographical distribution, gender, ethnicity and age composition of the population.

1.6 The link between business environment and Credit Management


  1. Business Structure and Business Growth

2.1 Forms of business organisation

2.2 Organisational objectives

2.3 Business Shareholders & Stakeholders objectives

2.4 Overview of Business growth and business growth strategy

2.5 Types of business growth strategies

2.6 Analysis of business growth strategies

  1. Introduction to Company Analysis and Industry Analysis

3.1 Overview of company analysis and Industry analysis

3.2 Elements of company analysis when conducting credit analysis

3.3 Elements of industry analysis when conducting credit analysis

3.4 The relation of industry analysis to company analysis

3.5 Characteristics of representative industries from the various economic sectors

3.6 Product and industry life cycle Models

3.7 PESTEL & Stakeholders Analysis

3.8 Business life cycle and Industry trends

3.9 Classification of industry as to life cycle phases (embryonic, growth, shakeout, maturity and decline)

3.10 Limitations of the life-cycle concept in forecasting industry & company performance;

3.11 Competitive forces; effect of competitive forces on prices and costs (Porters 5 forces)

3.12 Macroeconomic, technological, demographic, governmental, and social influences on industry growth, profitability and risk


  1. Market Environment

4.1 The marketing concept and the importance of marketing within the business environment

4.2 The principles of marketing and Marketing management

4.3 Market segmentation – Methods and Advantages

4.4 Elements of marketing – Marketing Mix

4.5 The Concept of product life cycle

4.6 Product Pricing strategies

4.7 The Connection between Marketing strategy and Credit strategy

4.8 Role of marketing department in credit cycle management

4.9 Marketing and credit department approaches in credit decision making

4.10 Effects of marketing strategy on credit decision marketing

4.11 Striking a balance between marketing objectives and credit management goals


  1. Market Structures and Competitive environment

5.1 Definition of a market

5.2 Necessary and sufficient conditions for profit maximization

5.3 Mathematical approach to profit maximization

5.4 Output, prices and efficiency of: Perfect and Imperfect competition.

5.5 Costs and economies of scale

5.6 Supply, demand and pricing

5.7 Elasticity of demand and supply

5.8 Determination of exchange rates


  1. Inflation

6.1 Definition and types of inflation

6.2 Causes of inflation: cost push and demand pull

6.3 Effects of inflation

6.4 Measures to control inflation

6.5 Effects of inflation on businesses and credit decision making


  1. The macro-economic influences on the organization

7.1 Circular flow of Economic Activity – Real Flows and Money Flows

7.2 The business cycle and the multiplier

7.3 Economic growth and business growth

7.4 Government economic policies and their impact on business

7.5 Conflict of between business objectives and government policy objectives

7.6 Effects of government intervention and regulation

7.7 Impact of fiscal and monetary policies on businesses


  1. Introduction to International Trade

8.1 Overview of International trade

8.2 International trade theories

8.3 Theory of absolute advantage

8.4 Comparative advantage theory

8.5 Terms of trade; balance of trade; balance of payments; causes and methods of correcting deficits in balance of payments.

8.6 Protection in international trade; Regional integration organisations and Commodity agreements

8.7 International institutions and their and concerns of developing countries:

International Monetary Fund; World Bank; World Trade Organisation


  1. International Business Environment

9.1 Introduction to International Trade

9.2 Overview of international business environment

9.3 Difference between – international business environment and international business

9.4 The modern global economy – the pros and cons of international expansion

9.5 The multinational enterprises (MNE)

9.6 Entry modes for international businesses (includes global concentration, global synergies, and other strategic global motivations)

9.7 Forms of international business environment

9.8 Advantages of international business environment

9.9 Tools of International business environment analysis

9.10 Dealing with Multi-dimensional aspects & complexity of international operating environments:

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

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

9.10.3 Technological environment – Definition of Technological environment; Factors to consider when analysing the Technological environment in an international environment

9.10.4 Socio-Cultural environment – Definition of Cultural environment; Factors to consider when analysing the cultural environment in an international environment

9.10.5 Competitive environment – Definition of competitive environment; Factors to consider when analysing the competitive environment in an international environment




Complete copy of CCP Business Environment Notes is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) 

Phone: 0728 776 317







Definition of a business operating environment

The Operating Environment, also called the competitive or task environment, comprises factors in the competitive situation that affect a firm’s success in acquiring needed resources or in profitably marketing its goods services.

The business operating environment refers to the external factors and conditions that affect the way a business operates. These can include economic, political, social, technological, legal, and regulatory factors. Understanding the operating environment is important for businesses because it can help them identify opportunities and challenges, and develop strategies to respond to them. Some examples of the business operating environment include:

  • Economic conditions, such as inflation, unemployment, and GDP growth
  • Political conditions, such as government stability, policies, and regulations
  • Social conditions, such as demographic trends, cultural values, and consumer attitudes
  • Technological conditions, such as the level of technological development and adoption
  • Legal and regulatory conditions, such as laws and regulations governing business operations


By staying aware of changes in the operating environment, businesses can make informed decisions about how to best operate and succeed in their market.


Outline of Kenyan economy

The Kenyan economy is the largest in East Africa. After independence, Kenya promoted rapid economic growth through public investment, encouraged smallholder agricultural production and provided incentives for private (often foreign) industrial investment. Additionally, Kenya is a regional transportation and financial hub.

Kenya has experienced continued growth in GDP over the last few years, supported by ongoing public infrastructure projects, strong public and private sector investment and appropriate economic and fiscal policies, reflecting the broad-based and diversified nature of the Kenyan economy.

Kenya’s financial sector is vibrant, well developed and diversified in the region and has highest financial inclusion in the region and globally. Banking sector is well capitalized, profitable with capital adequacy and liquidity ratios above the recommended thresholds.

Macroeconomic stability has been preserved over the last few years with inflation, interest rates and exchange rates remaining largely stable, thanks to the prudent monetary and fiscal policies.


Vision 2030

Vision 2030 is Kenya’s current blueprint for the future of economic growth. Its goal is to create a prosperous, and globally competitive nation with a high quality of life by the year 2030. To do this, it aims to transform Kenyan industry while creating a clean and secure environment. The vision is separated into three pillars: economic, social, and political.

The Economic Pillar

The economic pillar seeks to consistently achieve economic growth averaging more than 10% for 23 years beginning in the year 2007. The economic areas targeted are tourism, agriculture, wholesale/retail trade, manufacturing, IT-enabled services, and financial services.


The Social Pillar

The social pillar has the objective of improving the quality of life for all Kenyans. It aims to do this by targeting human and social welfare programs, specifically education and training, health, environment, housing and urbanisation, children and social development, and youth and sports. In 2018 President Uhuru Kenyatta established the Big Four Agenda, focusing on universal healthcare, manufacturing, affordable housing and food security, to drive this pillar.

The Political Pillar

The political pillar envisions a democratic system that is issue-based, transparent, people-centered, results-oriented and is accountable to the public. It targets five main areas: the rule of law under the Constitution of Kenya; electoral and political processes; democracy and public service delivery; transparency and accountability; and security, peacebuilding and conflict management.

The New Constitution Of Kenya 2010 was inaugurated on 27 August 2010 to drive this pillar.

In 2007, the Government of Kenya pronounced “Vision 2030” as its long‑term plan for attaining middle income status as a nation by 2030. To ensure implementation of the Vision 2030, the government prepares successive medium-term plans (“MTPs“) that outline the policies, programmes and projects that the government intends to implement over a five-year period.


The Medium Term Plans

The first MTP covered the period from 2008 to 2012. A number of projects aimed at national healing and reconciliation following the post-election violence were implemented. Repair of damaged infrastructure, assistance to affected small scale businesses and resettlement of internally displaced persons were all undertaken in order to raise GDP growth (which fell to 1.5 per cent. in 2008) and to promote national reconciliation.

The second MTP of Vision 2030 was unveiled in October 2013 covering 2013 to 2017. The second MTP gave priority to devolution as specified in the Constitution. It aimed at transforming the economy focused on rapid economic growth on a stable macro‑economic environment. The second MTP intended to achieve modernisation of infrastructure, diversification and commercialisation of agriculture, food security, a higher contribution of manufacturing to GDP, wider access to African and global markets, wider access for Kenyans to better quality education and health care, job creation targeting unemployed youth, provision of better housing and provision of improved water sources and sanitation to Kenyan households.

The third MTP unveiled in March 2017 carried forward completion of the programmes and projects initiated during the second MTP. The MTP aims to achieve high inclusive, broad based economic growth, increasing the share of manufacturing and industrial sectors and increasing the share of exports to GDP, especially manufactured exports, as a means to generate employment and higher economic growth and to ensure a sustainable balance of payments position.

The “Big Four” Agenda

In line with the strategies outlined in the third MTP and building on the progress made so far under Vision 2030, the Government has been implementing the “Big Four” Agenda over the past three years. The Agenda is designed to help achieve the social and economic pillars of our Vision 2030 and the development aspirations espoused in the Kenyan Constitution. Actualization of policies and programmes under each pillar is expected to accelerate and sustain inclusive growth, create opportunities for decent jobs, reduce poverty and income inequality and ensure that we create a healthy and food secure society in which Kenyans have access to affordable and decent housing.


Structure of Kenyan financial system


The structure of the Kenyan financial system is made up of various financial institutions and markets that work together to facilitate the flow of funds within the economy. These include:

  • Central Bank: The central bank of Kenya is the Central Bank of Kenya (CBK), which is responsible for implementing monetary policy, regulating the financial system, and issuing currency.
  • Commercial Banks: Commercial banks are financial institutions that offer a range of banking services to individuals and businesses, including deposits, loans, and payment services. The major commercial banks in Kenya include Barclays Bank, Standard Chartered Bank, and KCB Group.
  • Microfinance Institutions: Microfinance institutions are financial institutions that provide small loans and other financial services to low-income individuals and small businesses. In Kenya, microfinance institutions include the Kenya Women’s Finance Trust and the Kenya Rural Enterprise Programme.
  • Non-Bank Financial Institutions: Non-bank financial institutions include insurance companies, investment banks, and other financial intermediaries that provide specialized financial services. In Kenya, non-bank financial institutions include the Kenyan branch of the International Finance Corporation and the Kenyan branch of the African Development Bank.
  • Capital Markets: Capital markets in Kenya include the Nairobi Securities Exchange, which is the main stock exchange, and the Nairobi Bond Market, which allows companies and governments to issue bonds to raise capital.
  • Money Markets: The money market in Kenya is made up of financial institutions that provide short-term lending and borrowing services, such as commercial banks and the central bank.


Overall, the Kenyan financial system plays a crucial role in facilitating the flow of funds within the economy and supporting economic growth.

Functions of central bank of Kenya

  1. Monetary policy: CBK formulates and implements monetary policy to maintain price stability and promote a sound financial system.
  2. Regulation and supervision: CBK supervises and regulates commercial banks and other financial institutions to ensure stability and integrity of the financial system.
  3. Currency issue: CBK is responsible for issuing and managing the country’s currency.
  4. Lender of last resort: CBK provides financial support to commercial banks in times of need, acting as a lender of last resort.
  5. Foreign exchange management: CBK manages Kenya’s foreign exchange reserves and promotes the orderly development of the foreign exchange market.
  6. Promoting financial inclusion: CBK works to promote financial inclusion and accessibility of financial services to all Kenyans, including those in rural areas.
  7. Providing payment and settlement systems: CBK provides and manages payment and settlement systems to facilitate efficient and secure transfer of funds.


 Types of Industries: Primary, Secondary and Tertiary sectors of industry.

Primary Industries

Primary industries comprise those industries wherein the business processes require minimal value addition. It primarily contains operations in which raw materials are extracted from their primal state and processed for secondary industries. The scale of operations in these industries is generally moderate to large since removing raw materials from their core state requires large working capital. These primary industries can also be further classified into sub-categories based on their core functionalities.


Primary Industry Classification

  • Extractive industries: – Extractive industries are those enterprises that engage in activities concerned with extracting and removing raw materials from their rudimentary state. This includes operations such as removing minerals from their ores, mining coal, petroleum, etc. The presence of such industries is largely visible in underdeveloped and developing countries.
  • Genetic industries: – This category of industries is involved in operations that focus on processing raw materials to generate some form of enhancement. The raw materials go through various levels of manufacturing, which require a huge amount of scientific and technical research. Livestock, agriculture and fishing industries are some major examples of genetic industries.

Secondary Industries 

Secondary industries engage in slightly high-level operations when compared to their primary counterpart. These industries direct their resources towards converting the products produced by primary industries into usable consumer or producer goods through manufacturing and processing. The production of capital products is generally done in this industrial type. Since secondary industries encompass such a wide range of business processes, it helps to understand their totality by dividing them into further categories.

Secondary Industries Classification

  • Manufacturing industries: – In manufacturing industries, the primary function performed is that of converting raw materials into finished finish-consumer or producer goods through multiple rounds of processing and value addition. These enterprises generally function at a large-scale level.
  • Construction industries: – Construction industries are concerned with all the operations relating to the construction, building, and development of the infrastructural framework. The business processes utilize raw materials and combine them with other resources in order to develop roads, buildings, structures, and much more.
  • Light industries: – Light industries comprise those business enterprises that follow a relatively low scale of production. They generally produce durable-use consumer goods. Light industries require lesser working capital, cause low pollution levels and even have a lower electricity consumption rate.
  • Heavy industries: – Heavy industries are categorized based on the large volume of operations that are conducted. They generally produce capital and producer goods, which weigh a lot and require high levels of manufacturing. Contrary to light industries, these enterprises require a higher degree of power and cause a higher level of pollution.


Tertiary Industries 

Tertiary industries are quite different from their counterparts since it does not deal with manufacturing or procuring goods in any form. Rather, this industry focuses on intangible services which generate gains and income. Services like consulting, health, professional services, franchises, and more constitute this type of industry. Service industries play a pivotal role in the economy since they offer employment to a huge portion of the population in our country.

Since tertiary industries encompass a wide variety of services, give below are some of the major industrial groups that come under its purview.

Tertiary Industries Classification

  • Financial services 

The financial services industry constitutes a broad range of services concerned with regulating, distributing, and circulating finances in the economy. Banks, financial institutions, and all forms of payment platforms come under the segment of financial services. Some examples include lending loans by banks, mortgaging homes by borrowers, purchasing mutual funds and other forms of financial assets, etc. With increasing digitization, financial services are becoming increasingly competitive, shifting to online platforms.

  • Entertainment 

In this growing digital age, most of us are familiar with the many gains that the entertainment industry is making these days. This industry comprises all the activities that earn an income by garnering an audience and piquing their interest through music, dance, theatre, etc. Television channels, OTT platforms, production labels, news agencies, and more all fall under the umbrella term that blankets entertainment-related enterprises.

  • Software industries 

The software industry encompasses all the activities related to programming, network security, coding, and development of the digital infrastructure that supports most operations. The expanding IT industry in India is a direct result of the rise in outsourcing prospects within this country. These industries provide the backbone to various other sectors of the economy by working the backend and frontend operations through the development, maintenance, and distribution of business software.

  • Health care 

The health care industry focuses on the improvement and maintenance of the health of the citizens. The enterprises in this industry are entrusted with the chief task of offering patients a reprieve from their maladies and restoring them to good health. Both private and public hospitals form an integral part of the medical industry. With increasing innovation, the level of technology used during the services offered to patients is also becoming more complex, thus setting higher medical standards in the country.

  • Education

The educational services industry is concerned with imparting knowledge to the students through building schools, coaching centers, and even online learning platforms. Today, the field of academic services has grown tenfold, with the digital boom pushing remote learning and online learning facilities. Not-for-profit and commercial educational service enterprises come under the purview of this industry, and they generally include schools, universities, tutors, research facilities, and much more. 

  • Marketing services 

In the age of digital retail and e-commerce, the industry of marketing services is gaining quite a bit of traction. It consists of services relating to the spread of awareness and information regarding products and startups. This process can be quite extensive, given the number of competitors and type of product. Advertising forms a major chunk of the marketing services industry, along with other media-based services that allow business owners to spread the word about their services. Social media advertising and targeted ads have become quite a popular marketing service with the growth in digital platforms.

  • Hospitality 

The hospitality industry combines all those activities directed towards ensuring that tourists and visitors in any place receive all the facilities required for a good stay. Services such as lodging, tourism management, event planning and more come under the purview of the hospitality industry. Various hotel chains and travel management agencies form the hospitality industry’s backbone, contributing to a large part of the economic progress in most scenic states and countries.

  • Law 

The legal services industry is responsible for upholding the country’s legal integrity by following the judicial system’s standards and ensuring that those deviating from the same receive the right recourse. Numerous enterprises, such as legal houses, consultants, etc., come under the legal industry, and it contributes to a good portion of the business transactions in the country.

Here is a brief differentiation of the three main types of industries for a better understanding of the same:

Basis Primary industries Secondary industries Tertiary industries
Definition Primary industries focus on converting and extracting raw materials. Secondary industries perform the function of converting and processing raw materials into usable goods. Tertiary industries provide services that are intangible in nature.
Technique The techniques used in these industries are generally traditional. The techniques used in secondary industries are extremely advanced. Modern logistics and supply chain techniques are used.
Scale of operations These generally have medium to large-scale operations. These industries generally operate on a large scale. Tertiary industries can be run at pretty much any scale of operations.
Examples Mining, forestry, agriculture, etc. Bearing, manufacturing, etc. Consulting, financial services, delivery services, etc.


Economic effects of changes in size, geographical distribution, gender, ethnicity and age composition of the population.


The economic effects of changes in the size, composition, and geographical distribution of a population can be significant. For example:

  • An increase in population size can lead to an increase in the demand for goods and services, which can stimulate economic growth. However, it can also put pressure on natural resources and the environment, and may require the construction of additional infrastructure such as schools, hospitals, and transportation systems.
  • Changes in the age composition of the population can have significant economic consequences. For example, an aging population may lead to increased demand for healthcare and social services, while a younger population may be more productive and contribute more to economic growth.
  • Changes in the gender or ethnic composition of the population can also have economic impacts. For example, increasing gender diversity in the workforce may lead to increased productivity and economic growth, while increasing ethnic diversity may lead to increased cultural and economic exchange.
  • Changes in the geographical distribution of the population can also have economic effects. For example, a shift in population from rural to urban areas can lead to the development of new economic opportunities in cities, but it can also put strain on infrastructure and resources in those areas.


The link between business environment and Credit Management

The business environment can have a significant impact on credit management, as it can influence a company’s ability to pay its debts and obligations. A stable and favorable business environment can make it easier for a company to access credit and manage its financial obligations, while a challenging business environment can make it more difficult.

Some of the factors in the business environment that can affect credit management include:

  • Economic conditions: A strong economy can provide companies with the financial resources and stability they need to manage their debts, while a weak economy can make it more difficult to access credit and meet financial obligations.
  • Industry conditions: The conditions in a company’s industry can also affect its credit management. For example, a company in a declining industry may have more difficulty accessing credit and managing its debts than a company in a growing industry.
  • Competition: The level of competition in an industry can also affect a company’s credit management. In a highly competitive industry, companies may be more likely to incur debt in order to invest in growth or maintain market share.
  • Government regulations: Government regulations can also impact a company’s credit management. For example, regulations that increase the cost of doing business may make it more difficult for a company to access credit or manage its debts.
  • Market trends: Market trends, such as changes in consumer demand or the availability of financing, can also affect a company’s credit management. For example, a shift in consumer demand towards a company’s products may make it easier for the company to access credit and manage its debts, while a change in the availability of financing may make it more difficult.


Complete copy of CCP Business Environment Notes is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) 

Phone: 0728 776 317


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