LESSON 1

environmental Forces
and Environmental Scanning
usiness Environment refers to the factor!I or elcm c,,t , ff .
B •

Internal Business
• • • • • '> ,I CC: t111g
;i business orgamzatwn . It may be d1 v1ded 11110 the Extern al and
Environments. The .Externa l Bu ·!, ifl e!>s
Definition of Terms
. · · 1:,11v1·ronn1ent Environmental scanning - S('PkincJ
includes the tacto rs anf ~lements _o_uts1de the organi za t inn whi ch may for ancJ ~Orting through ddtil ahout
affect its performance, either pos1t1 vely or nega ti vely while th e Inter the environment

n.11 Business Environm ent refers to th e factor1, or clement ., within the External business environment _
organization which may also affect it s perform ance, either po.,iti vcly refer$ to the factors/elements
ou tside th(! org;:in 1zation which
or negatively. The environm ent in which a business operates i'> a may affect, either pos1 t1vely or
major consideration in determining an organization's des ign or '>lruc. negatively, the performan ce of thi-
ture. Considerations such a~ uncertaint y, procureme nt , and competi - organ1zat1on

tion are linked with the external environm ent. A company\ !>lrategy Internal business environment
- refers to the fa ctors/elements
dnd approach to operations must also be aligned with the li mitation..
within the organization which
of its external environment as well as its interna l environment. may effect, either positively or
Components of the External Business negatively, the performance of the
Environment: General and Specific organ1zat1on

Inflation - a period of above

S~·stematic monitoring of the major external fo rces influencing organi - normal general price increases,
as reflected in the consumer and
zations is necessary to improve the management of companie<, . l·ailure NholesalP price indexes
to consider a company's general and specifi c business envi ronm en l\ ma y
Interest ra tes - the total amount
aftect the strategies that management will make and use. that a borrower must pay annually
The general business environ ment includes the economic, sociornl to the lender and above the total
tural, politico-legal, demographic, technological, and world and ecologirnl amount borrowed

situations. All these must be considered as managers plan, organize, sta ff, Changing options - th e
lead, and control their respective organizations. consumers change 1n preference of
goods and servJCes offered
Inflation, rates of interest, changing options in stock markets, and
People's spending habits -
people's spending ha bits are some examples of facto rs/elements of eco -
consumers' changing ways of
nomic situations. Economic situation s may affec t management practices spending their money on goods
in organ izations. For example, companies may postpone expansion plans and services
if bank loan interests are too high. economic situations - includes
Sociocultural situations include the customers' changing values and inflat ion ra tes of interest, people's
preferences; customs could also affect management practices in com - spending habits, changing options.
etc.
panies. For example, Filipino customers are now conscio us abo ut the
11nportance of avoiding fa tty food s, so many food com panies now make
sure that the products they offer are cholesterol-free or are low in cho-
lesterol. Jn doi ng so, they avoid losing their customers.
Politico-legal situations refer to national or loca l laws, inte rnational
laws, and rules and regulations that infl ue nce organ izational management.
For example, labor laws related to preventing employers from firi ng thei r
employees without due process require the for mer to allow the latter lo
exercise thei r right to present their position during disciplinary ac tion
before their employmen t can be terminated.

13
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ro o , -101rnaCt'- et1. ,
anagement: e-d.: ·dl . -h 11u?.ed the " -,,ys th.\l \, us11w,, t, ' \) l),\ll\
m have rapt ~ l. • , •
tion systems .
in the 21'' century. . l ··tu ltimz~ arl' rd . 1tc'd to tlw \th r1..',\"-llhl 'Hin
d ecologrca s1 c , ,
Worl d 1111 . . d markds. ,1s ,,.l'll ,,s the n,llllt l' ,md .tllhl 1
I -ornpet1tors an . . . -I • , l l
of globa 1.. · I environment. Prnduds pt l'h.t\lu.:u ) \ uH\\i'.t
ng natura .
of the chang1 t the -h ,noinl:! n~t'lh ,1t pt.'t)pk 111 tlw ~lub.1
_ must cater o 1.. • ~ .... • • • '
of 1..ourse, . h, me time, Ct)nStlkrmg thc:11 1mp.11.:l on thr 11
·t while at t c:: sa
mu~i y, 'For example. car manuf,1Lturing m,m,\~n s 1'Hht ~
environment. . . h .
. c h d vclopment ot vehKks t .,t .ir1.· 1..·n,·1ro11111ent.ll li1t 1
g. o signal 1or t e e .
d f ly being focused on the prndud s sp~·nl. l ud r1. un,1 11 1\ 11
. ·
in~tea o on
design. .
Meanwhile, the specific husmess t'nv1rP11t1H: 11t hH. u,l'.., un ,t.ikt
holders, customers, pressure groups. and 111wstur . . 0t Pw 1w1 , ,111d ht 1
employees. ..
Stakeholders are parties li kely to he ,1tiedt'd by tlw , l l t1 v1l 1l' ,,11'
organization, wh ile customers are those who patron11.l· th v org,11111,111qn
products and services. lncr~asing cu~tornt.: r "oph1st tL,1lion rn,,kl·, 11111,
essary fo r managers of organizations tti make 1..n 11. 1,d dl'L ,...,1011 .., 1q!_,11 d1 l"
the development of products with higher value and t hr i mp1 ovl.· rncnt 1,I
their services to meet their patrons' increasing Jernand '> . 1\ l'io, th1. h,
prompted companies to solicit feedback from their custnmL'r" \ti ,1'.111J
dissatisfaction that may lead them to patronize another company olkrn1~
similar products and services instead.
Suppliers are those who ensu re the organization's cont inuom f1ov. 111
needed and reasonably priced inputs or materials required for producmg
their goods and rendering their services. Inputs mentioned alSt) i111.. luJt
fi nancial and labor supply. Managers decide what, where\ and whl.'. n 11
buy their supplies and which supplier to favor with their organ1ntion,
supply orders.
Pressure groups are special-interest groups that try to exe rt influenc,·
1111
on the organization's decisions or actions. I~or instance, pressurL'ln
th e Food and Drug Administration on some department stores -1nd dru~
stores led them to stop selling beauty products contain ing k,,d "nd ll'
st0 P ordering or importing such products from their suppliers.
 The organization's investors or owner-- FfO\l.de th.,.
fi nancial support it needs. The company of _0 • ' • 0 n:p,u,, w,:h ...
. ., L Urse. canno· , ,t
them; th us, they grea tly influence organizational t exist Witht' ,
manage -·
middle-level, and lower-level managerial decision- ar' ~;ent "fop.)-'ie.
·
one way or another, by th e mvestors or 0 ...,11ers 0 , :) e <1l1 tntl-uen.:-t'\i ~
. . l orgamz.anon, Rr ...
out, offerrng new products and servrces, and ap h . · · .1n, ~ i:;
. . p , ing lor need--" .
are all affected b)' t he investors or owners' way of th· 1,, "'-' h1n,
.. d . tnA.Jng
Employees are comprise of those who worl, t· ~
• • I\ or another .
employer m exchange of salanes/wages or other COil .d . 0 r tt'r .in
s1 eratmns. Em I
ees execute the company's strategies and are imoon - P o, ·
, .. , ant torrhe m .
nance of the co_mpaoys stability. For example, mana ·a1 d _._. amte-
' k gen n:.1~1ons u-
inOuenced by the company s nowledge workers. ·' e

Components of the Internal Business

Environment
An organization's internal business environment is con1 ,.,.i .
PO:icu ot its
resources, research and development,
. . production , procurem en I ot· sup-
plies, and the products and servJCes 1t offers.
The organization's internal environment must also b.,'- ~•ub·lt'1..•1ru
, J !O
internal analyses. Internal strengt hs and weaknesses. opportun ities. and
threats (SWOT) \\~th regards to its resources (financial. phvsical. me(han
ical, tech nological, and human resources), research and deYdopmem
endeavors, production of goods, procurement of supplies (matenc1b.
inputs, and fi nance), and products and services must aU be con 5idert·d
prior to organizational planning.

Components of Environmental Scanning:

Developing a Competitive Mindset, Considering
Future Business Scenarios, Business Prediction,
SWOT Analysis, and Benchmarking
Adapting to environm ental uncertainties must start with de\'elop-
ing a competitive mindset. Ignorance of present-day realities may cause
individuals or organizations to do certain things that they may reg rer in
the future; hence, environmentaJ scanning is necessary. By seeking for
and sorting through data about the environment, you may be able to
understand and predict the various changes, opportunities, and threats
that may affect organizations in the future. Knowing the present-da~·
competitors, the possible number of barriers to entering your chosen
business ind ustry, the existence or nonexistence of substitutes to rour
pla nned product or service, and possible dependence on powerful sup-
pliers and customers will be helpful in developing a competitive mindset
You must also consider fu ture business scenarios. By realistic consid-
era tion of both wors t-case scenario or unfavorable future conditions and
best-case scenario or favorable fu ture conditions, as weU as middJe-ground
possible conditions, you will have an idea of what to do in the future.