THE FIRM AND ITS

ENVIRONMENT
Presented by: Group 3
Nathaniel P. Truzo, Karen Kaye Iwag, Justine C. Bordon, Kriza Fe
Bansiloy, Lawrence Abbe Oso, Winnie Estancia
 OBJECTIVES

 As you read and study this chapter, concentrate on the

following objectives, and at the end of the chapter, be able to:
 Identify the various forces/elements of firm’s environment and
summarize the forces using the SWOT analysis;
 Describe the local and international business environment of a
firm; and
 Explain the role of the business in relation to the economy,
discuss different phases of economic development, and
differentiate the various forms of business organizations
LESSON 1: ENVIRONMENTAL
FORCES AND
ENVIRONMENTAL SCANNING
Business Environment
refers to the factors or
elements affecting business
organization. It divided into
the External and Internal
Business Environment.
 EXTERNAL BUSINESS
ENVIRONMENT

Includes the factors and

elements outside the
organization which may
affect its performance, either
positively or negatively.
 INTERNAL BUSINESS
ENVIRONMENT

Refers to the factors or

elements within the
organization which may also
affect its performance, either
positively or negatively.
Consideration such as
Uncertainty, Procurement,
and Competition are linked
with the external
environment.
COMPONENT OF THE EXTERNAL
BUSINESS ENVIRONMENT:
GENERAL AND SPECIFIC
Systematic Monitoring of
the major external forces
influencing organizations is
necessary to improve the
management of companies.
 The GENERAL BUSINESS ENVIRONMENT includes the
 Economic
 Sociocultural
 Politico-legal
 Demographic
 Technological
 World and Ecological Situations

All these must be considered as managers Plan,

Organize, Staff, Lead, and Control their respective
organizations.
 ECONOMIC SITUATIONS
Economic Situations
 may affect management practices in
organizations.

Ex.
Companies may Postpone
expansion plans if bank loan
interests are too high.
 SOCIOCULTURAL SITUATIONS

 Sociocultural Situations include the

costumers’ changing values and
preferences; customs could also affect
management practices in companies.
Ex.
Filipino costumers are now conscious about the
importance of avoiding fatty foods.
 Politico-legal Situations refer to
 National or Local Laws,
 International laws
 Rules and regulations
That influences organizational management.

Ex.
Labor Laws related to preventing employers from
firing their employees without due process require the
former to allow the latter to exercise their right to present
their position during disciplinary action before their
employment can be terminated.
 DEMOGRAPHIC SITUATIONS

 Demographic Situations
 such as Gender, Age, Education Level,
Income, Number of Family Members,
Geographic Origin, etc., may also influence
some managerial decisions in Organizations.
 Ex.
 Decisions Regarding Hiring of Human Resources
maybe affected by an organization’s management
policy.
 TECHNOLOGICAL SITUATIONS

Technological Situations Involve the

use of varied types of electronic
gadgets and advanced technology such
as Computers, Robotics,
Microprocessors, and others that have
revolutionized business management;
e-commerce, teleconferencing, and
sophisticated information system.
 WORLD AND ECOLOGICAL
SITUATIONS

 World and Ecological Situations

 are related to the increasing number of global
competitors and markets, as well as the nature and
conditions of the changing natural environment.
 It must cater to the changing needs of people in the
global community, while, at the same time, considering
their impact on the natural Environment
Ex.
Car manufacturing managers must give
the go signal for the development of
vehicles that are environmental friendly.
 Business Environment focuses on
STAKEHOLDERS, COSTUMERS,
PRESSURE GROUPS, and
INVESTORS or OWNERS and their
EMPLOYEES.
 STAKEHOLDERS

Stakeholders are
parties likely to be
affected by the
activities of the
organization.
 COSTUMERS
 Costumers are those who patronized the
organization’s product and services.
Increasing costumer specification makes it
necessary for managers of organizations to
make crucial decisions regarding the
development of products with higher value
and improvement of their services to meet
their patrons’ increasing demands.
 SUPPLIERS
Suppliers are those who ensure the
organizations continuous flow of
needed and reasonably priced input
or materials required for producing
their goods and rendering their
services.
 PRESSURE GROUPS

Pressure Groups interest

groups that try to exert
influence on the organization’s
decisions or Actions.
 INVESTORS or OWNERS

Investors or Owners provide

the company with the financial
support needs. The company, of
course, cannot exist without
them; thus, they greatly
influence organizational
management.
 EMPLOYEES

Employees are comprised to do

those who work for another or for
an employer in exchange of
salaries/wages or other
considerations. Employees execute
the company’s strategies and are
important for the maintenance of
the company’s stability.
COMPONENTS OF THE
INTERNAL BUSINESS
ENVIRONMENT
Business Environment
 An Organizational Internal Business Environment
is composed of its resources, research and
development, production, procurement of supplies,
and the products and services it offers.
 The Organizational Internal Environment must be
Also subjected to internal analysis, Internal
strengths and weaknesses, opportunities and
threats (SWOT) with regards to its resources
(Financial, Physical, Mechanical, Technological,
and Human Resources)
COMPONENTS OF
ENVIRONMENTAL SCANNING
Business Environment
COMPETITIVE MINDSET
Adapting to environmental
uncertainties must star with
developing a Competitive mindset.
By seeking and sorting through data
about the environment, you’re able
to understand and predict the
vatious changes, opportunities, and
threats that may affect organizations
in the future.
 CONSIDERING FUTURE
BUSINESS SCENARIOS

By realistic consideration of both

worth case scenario or unfavorable
future conditions and best-case
scenario or favorable future
conditions, as well as middle-
ground possible conditions, you
will have an idea of what to do in
the future.
 BUSINESS PREDICTION
Business Prediction, also known
as business forecasting, it is a
method of predicting how variables
in the environment will alter the
future of business.
 BENCHMARKING

Benchmarking is defined as the

process of measuring or comparing
one’s own products, services, and
practices of those of the recognized
industry leaders in order to identify
areas for improvement.
LESSON 2: THE LOCAL AND
INTERNATIONAL BUSINESS
ENVIRONMENT OF THE FIRM
Business Environment
Understanding the local and
international business
environment of the firm
requires managers of
organizations to sharpen their
cultural intelligence.
 CULTURAL INTELLIGENCE

Cultural Intelligence is an
Individual’s ability to
favorably receive and
adjust to an unfamiliar
way of doing things.
Anthropologist EDWARD T.
HALL, as cited by
SCHERMERHORN (2008),
the way people approach and
deal with the time varies across
cultures.
 MONOCHRONIC CULTURES

MONOCHRONIC CULTURES refer

to cultures wherein people tend to do
one thing at a time; also, these cultures
emphasize punctuality and sticking to
set rules.
POLYCHRONIC CULTURES

POLYCHRONIC CULTURES
are more flexible as regards
time; accomplishing many
different things at once is also
common for these cultures.
Geert Hofstede, cited by
SCHERMERHORN (2008),
showed how selected countries
ranked on the five cultural
dimensions he studied
 POWER DISTANCE
The degree to which a society accepts or
rejects the unequal distribution of power
among people in organizations and the
institutions of society.
UNCERTAINTY AVOIDANCE
The degree to which society is
uncomfortable with risk, change, and
situational uncertainty.
INDIVIDUALISM-COLLECTIVISM

The degree to which a society

emphasize individual accomplishments
versus collective accomplishments
MASCULINITY-FEMININITY
The degree to which a society values
assertiveness and feelings of material
success versus concern for relationship.
 TIME ORIENTATION
The degree to which a society
emphasizes short-term thinking versus
greater concern for the future or long-
term thinking.
Managing and Disciplining workers
who practices this habit would be easier
for managers if they are able to identify
the worker who adhere to such negative
work habit and prevent them from doing
it.
MANAGING IN A WORLDWIDE
ENVIRONMENT
The economic and social benefits that
come with globalization are said to be
among the positive outcomes. The
culture of different countries are rooted
in their history, religion, traditions,
beliefs, and deep-seated values and
because of these, managing globally can
be very complicated.
Cultural environment, the
Politico-legal, and Economic
environments must also be
considered. The Politico-Legal
environment refers to the laws
and political climate of different
countries.
LESSON 3: PHASES OF
ECONOMIC DEVELOPMENT
Sustainable economic development
ensures that the present needs of a
particular generation are fully met
without endangering the ability of future
generations to also fully meet their own
needs.
Business managers must be conscious of
their decisions to avoid the abuse
ecological elements-air, water, and soil-
as this will threaten sustainable
economic development
Common environmental and Ecological
problems that have to be dealt with by
business managers include destruction
of natural habitats, depletion of clean
water resources, urban, industrial, and
agricultural pollution, and many more.
September 2000, world leaders gathered
for the Millennium Summit, they had
committed their nations to a global
partnership toward reduction of extreme
poverty and the pursuit of the
Millennium development Goals (MDG)
MDG’s are “the world’s time-bound and
quantified for addressing extreme
poverty in its many dimensions—
income poverty, hunger, disease, lack of
adequate shelter, and exclusion—while
promoting gender equality, education,
and environmental stability”
 MDG’s
• Eradicate Extreme Hunger and Poverty
• Achieve universal primary education
• Promote Gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, Malaria
ACTIVITY
Define the Following
Environmental Scanning
External Business Environment
Internal Business Environment
Inflation
Interest Rates
Changing Options
People’s Spending Habits
Economic Situations
Inflate Rate
Gross National Product
Gross Domestic Product
Currency Exchange Product
Worldwide Environment
Globalization