Republic of the Philippines

Department of Education
National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center Arroceros Forest Park
Antonio J. Villegas St. Ermita, Manila

Organization and Management

Quarter 1 Week 2 Module 2

Learning Competency:
Analyze various forces/elements
influencing local and international
business environment using PEST
and SWOT strategies
 HOW TO USE THIS MODULE?

Before starting the module, I want you to set aside other tasks that will disturb
you while enjoying the lessons. Read the simple instructions below to
successfully enjoy the objectives of this kit. Have fun!

1. Follow carefully all the contents and instructions indicated in every

page of this module.

2. Write on your notebook the concepts about the lessons. Writing

enhances learning, that is important to develop and keep in mind.

3. Perform all the provided activities in the module.

4. Let your facilitator/guardian assess your answers using the answer

key card.

5. Analyze conceptually the posttest and apply what you have learned.

6. Enjoy studying!

PARTS OF THE MODULE

 Expectations - These are what you will be able to know after
completing the lessons in the module.

 Pre-test - This will measure your prior knowledge and the concepts
to be mastered throughout the lesson.

 Looking Back to your Lesson - This section will measure what
learnings and skills did you understand from the previous lesson. 

 Brief Introduction- This section will give you an overview of the
 lesson.
 Activities - This is a set of activities you will perform with a partner.

 Remember - This section summarizes the concepts and
applications of the lessons.

 Check your Understanding - It will verify how you learned from the
lesson.

 Post-test - This will measure how much you have learned from the
entire modul

1
 LESSON Environmental Forces and
3
Environmental Scanning

EXPECTATIONS

As we study and immerse ourselves in “Organization and Management” in the

process, it is necessary to identify various forces/elements of the firm’s environment using
the PEST and SWOT analyses. The module is subjected to discuss Module 2 –
Environmental Forces and Environmental Scanning.

After going through the module, you are expected to:

1. Anaylze various forces/elements influencing local and international business

environment using PEST and SWOT strategies.

Let us start your journey in learning

thru a Pre-test.
PRETEST Good luck!

Matching-Type
Directions: Choose the appropriate WORD in the box and write the CORRECT answer
in the space provided before the number.

External Business SWOT Porter’s Five Forces

Internal Business Organizer Chart PESTEL

__________________ 1. refers to the factors/elements outside the organization which may

affect, either positively or negatively, the performance of the organization.
__________________ 2. refers to the factors/elements within the organization which may
affect, either positively or negatively, the performance of the organization.
__________________ 3. is a technique used to determine and define your STRENGTHS,
WEAKNESSES, OPPORTUNITIES and THREATS.
__________________ 4. is a framework that helps analysing the level of competition within a
certain industry.
__________________ 5. is a framework or tool used to analyze and monitor the macro
environmental factors that may have a profound impact on an organization’s
performance.

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 LOOKING BACK TO YOUR LESSON

TRUE or FALSE
Directions: Before each statement, write TRUE if the statement is CORRECT and FALSE if
the statement is INCORRECT. Write your answer in the space provided.
___________ 1.The process of measuring or comparing one’s own products, services, and
practices with those of the recognized industry leaders in order to identify
areas for improvement is called Benchmarking.
___________ 2. SWOT analysis is a technique used to determine and define your skills,
weaknesses, opportunities and threats.
___________ 3. PESTEL analysis is a framework or tool used to analyze and monitor the
macro-environmental factors that may have a profound impact on an
organization’s performance.
___________ 4. A good indicator of competitive rivalry is the concentration ratio of an industry.

___________ 5. The final element of SWOT is Strength.

Enjoy reading…..

BRIEF INTRODUCTION

Environmental Forces and Environmental Scanning

The environment in which a business operates is a major consideration in determining

an organization’s design structure. Considerations such as uncertainty, procurement, and
competition are linked with the external environment. A company’s strategy and approach to
operations must also be aligned with the limitations of its external environment.

Definition of Terms

1. Environmental scanning means seeking for and sorting through data about the
environment
2. External business environment refers to the factors/elements outside the
organization which may affect, either positively or negatively, the performance of the
organization.
3. Internal business environment refers to the factors/elements within the
organization which may affect, either positively or negatively, the performance of the
organization

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Source:https://www.managementstudyhq.com/functions-of-management.html

The various components of business environment are External environment

consists of those factors that affect a business enterprise from outside. External
environment includes shareholders, competitors, customers, society, government laws
and regulations, policies and technology.

4. Micro-environment includes those players whose decisions and actions have a

direct impact on the company. Production and selling of commodities are the two
important aspects of modern business. Accordingly, the micro-environment of
business can be divided.
5. Macro-environment is the condition that exist in the economy as a whole, rather
than in a particular sector or region. In general, the macro environment includes
trends in the gross domestic product (GDP, inflation, employment, spending, and
monetary and fiscal policy.

The various constituents of micro-environment are as under:

1. Suppliers of inputs: An important factor in the external micro-environment of a
firm is the supplier of its inputs such as raw materials and components.
Normally, most firms do not depend on a single supplier of inputs. To reduce risk
and uncertainty business firms prefer to keep multiple suppliers of inputs.
2. Customers: The people who buy and use a firm’s product and services are an
important part of external micro-environment. Since sales of a product or service
is critical for a firm's survival and growth, it is necessary to keep the customers
satisfied. A concern for customers’ satisfaction is essential for the success of a
business firms. Besides, a business firm has to compete with rival firms to attract
customers and thereby increase the demand and market for its product.
3. Marketing intermediaries: In the firm's external micro-environment, marketing
intermediaries play an essential role of selling and distributing its products to the

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final customers. Marketing provides an important link between a business firm
and its ultimate customers.
4. Competitors: Different firms in an industry compete for sale of their products.
This competition may be based on pricing of their products and non- price
competition through competitive advertising such as sponsoring some events to
promote the sale of different varieties and models of their products. Because of
liberalization and globalization of the Indian economy since the adoption of
economic reforms there has been a significant increase in the competitive
environment of business firms. Now, Indian firms must compete not only with
each other but also with foreign firms whose products can be imported. In
America, American firms faced a lot of competition from the Japanese firms
producing electronic goods and automobiles.
5. Publics: Finally, publics are an important force in external microenvironment.
Environmentalists, media groups, women’s associations, consumer protection
groups, local groups, Citizens Association are some important examples of
publics which have an important bearing on the business decisions of the firm.
The existence of various types of publics influences the working of business firms
and compels them to be socially responsible.

External Macro Environment

Apart from micro-environment, business firms face large external environmental forces.
An important fact about external macro environmental forces is that they are
uncontrollable by the management. Because of the uncontrollable nature of macro
forces a firm must adjust or adapt it to these external forces. These factors are:
1. Economic Environment: Economic environment includes all those forces
which have an economic impact on business. Accordingly, total economic
environment consists of agriculture, industrial production, infrastructure, and
planning, basic economic philosophy, stages of economic development, trade
cycles, national income, per capita income, savings, money supply, price level
and population.
2. Political-legal Environment: Business firms are closely related to the
government. The political- legal environment includes the activities of three
political institutions, namely, legislature, executive and judiciary which
usually play a useful role in shaping, directing, developing and controlling
business activities.
3. Technological Environment: Technological environment is exercising
considerable influence on business. Technology implies systematic application of
scientific or other organized knowledge to practical tasks or activities. Business
makes it possible for technology to reach the people in proper format.
4. Global or International Environment: Global environment plays an important
role in shaping business activity. With the liberalization and globalization of the
economy, business environment of an economy has become totally different
wherein it has to bear all shocks and benefits arising out of global environment.
5. Socio-cultural Environment: Social and cultural environment also
influences the business environment indirectly. These include people’s
attitude to work and wealth, ethical issues, role of family, marriage, religion
and education and also social responsiveness of business.

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 Learning Module for Organization and Management
6. Demographic Environment: The demographic environment includes the size
and growth of population, life expectancy of the people, rural-urban
distribution of population, the technological skills and educational levels of
labor force. All these demographic features have an important bearing on the
functioning of business firms.
7. Natural Environment: Natural environment influences business in diverse
ways. Business in modern times is dictated by nature. The natural
environment is the ultimate source of many inputs such as raw materials and
energy, which firms use in their productive activity. The natural environment
which includes geographical and ecological factors such as minerals and oil
reserves, water and forest resources, weather and climatic conditions are all
highly significant for various business activities.
8. Ecological Environment: Due to the efforts of environmentalists and
international organizations such as the World Bank the people have now
become conscious of the adverse effects of depletion of exhaustible natural
resources and pollution of environment by business activity. Accordingly, laws
have been passed for conservation of natural resources and prevention of
environment pollution. These laws have imposed additional responsibilities
and costs for business firms.

Internal Environment

The factors in internal environment of business are to a certain extent controllable

because the firm can change or modify these factors to improve its efficiency.
However, the firm may not be able to change all the factors. The various internal
factors are:
1. Value system: The value system of an organization means the ethical beliefs
that guide the organization in achieving its mission and objectives. It is a
widely acknowledged fact that the extent to which the value system is shared
by all in the organization is an important factor contributing to its success.
2. Mission and objectives: The business domain of the company, direction of
development, business philosophy, business policy etc. are guided by the
mission and objectives of the company. The objective of all firms is assumed
to be maximization of profit. Mission is defined as the overall purpose or
reason for its existence which guides and influences its business decision and
economic activities.
3. Organization structure: The organizational structure, the composition of the
board of directors, the professionalism of management etc. are important
factors influencing business decisions. The nature of the organizational
structure has a significant influence over the decision-making process in an
organization. An efficient working of a business organization requires that the
organization structure should be conducive for quick decision-making.
4. Corporate culture: Corporate culture is an important factor for determining the
internal environment of any company. In a closed and threatening type of
corporate culture the business decisions are taken by top level managers while
the middle level and lower level managers have no say in business decision-
making. This leads to lack of trust and confidence among subordinate officials of
the company and secrecy pervades throughout the organization.
5. Quality of human resources: Quality of employees that is of human resources of
a firm is an important factor of internal environment of a firm. The
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characteristics of the human resources like skill, quality, capability, attitude
and commitment of its employees etc. could contribute to the strength and
weaknesses of an organization.
6. Labor unions: Labor unions collectively bargains with the managers for better
wages and better working conditions of the different categories of workers. For
the smooth working of a business firm good relations between management
and labor unions is required.
7. Physical resources and technological capabilities: Physical resources such
as, plant and equipment and technological capabilities of a firm determine its
competitive strength which is an important factor for determining its efficiency
and unit cost of production. Research and development capabilities of a
company determine its ability to introduce innovations which enhances
productivity of workers.

Specific Components of the External Business Environment

Stakeholders, Customers, Suppliers, Pressure groups, Organization’s investors or owners
and Employees.

Component of the Internal Business Environment

1. Resources – financial, physical, mechanical, technological, and human resources
must be subjected to internal analysis (SWOT)

What Is a SWOT Analysis?

A SWOT analysis is a technique used to determine and define your Strengths,

Weaknesses, Opportunities, and Threats (SWOT). SWOT analyses can be applied to an
entire company or organization, or individual projects within a single department. Most
commonly, SWOT analyses are used at the organizational level to determine how closely a
business is aligned with its growth trajectories and success benchmarks, but they can also
be used to ascertain how well a particular project – such as an online advertising campaign
– is performing according to initial projections.

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 Learning Module for Organization and Management

Porter’s Five Forces

Porter’s Five Forces analysis is a framework that helps analysing the level of
competition within a certain industry. It is especially useful when starting a new business
or when entering a new industry sector. According to this framework, competitiveness does
not only come from competitors. Rather, the state of competition in an industry depends on
five basic forces: threat of new entrants, bargaining power of suppliers, bargaining power of
buyers, threat of substitute products or services, and existing industry rivalry

Source: https://www.business-to-you.com/porters-five-forces/

PESTEL Analysis. A PESTEL analysis or PESTLE analysis (formerly known as PEST

analysis) is a framework or tool used to analyses and monitor the macro-environmental
factors that may have a profound impact on an organization’s performance. This tool is
especially useful when starting a new business or entering a foreign market. It is often used
in collaboration with other analytical business tools such as the SWOT analysis and
Porter’s Five Forces to give a clear understanding of a situation and related internal and
external factors. PESTEL is an acronym that stands for Political, Economic, Social,
Technological, Environmental and Legal factors.

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Source: https://www.wordstream.com/blog/ws/2017/12/20/pestel-analysis

Components of Environmental Scanning

1. Developing a competitive mindset – by seeking and sorting through data about

environment, you may be able to understand and predict the various changes,
opportunities and threats that may affect organizations in the future.

2. Considering future business scenarios – by realistic consideration of both worse-

case scenario or unfavorable future conditions, as well as middle ground possible
conditions, you will have an idea or what to do in the future

3. Business prediction (also known as business forecasting) – is a method of

predicting how variables in the environment will alter the future of business. It
could be used in making decisions regarding offshoring, branching out locally,
and expanding or downsizing the company. However, the accuracy of such
business predictions cannot always be assured.

Benchmarking – the process of measuring or comparing one’s own products, services, and
practices with those of the recognized industry leaders in order to identify areas for
improvement.

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 Learning Module for Organization and Management

ACTIVITIES

Activity 1: Independent Activity

Directions: Here’s a SWOT analysis template that you can fill in with your own strengths,
weaknesses, opportunities, and threats.
List down in the table at least 5 SWOT analysis about yourself.
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

Activity 2: Independent Activity

Rubrics: Content = 30%, Understanding/Application = 25%, Original Thinking = 25%,
Structure = 10% and Grammar = 10%.

Directions: Answer the following questions and be able to write your answers on the space
provided for after each question.

1. Why is SWOT analysis important? Explain in 3- 5 sentences.

__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
_________________________________________________________________________________________

2. When do you use SWOT and how do you create a SWOT analysis? Explain your
answer in 3 – 5 sentences.

__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
_________________________________________________________________________________________

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REMEMBER


The environment in which a business operates in a major consideration in determining
 an organization’s design structure. Consideration such as  uncertainty, procurement,
and competition are linked with the external environment.

 Micro-environment consists of factors
performance of the company.
 in the company’s immediate environment that affects the

 Macro-environment includes larger factors 
political, natural and cultural factors.
such as economic, demographic, technological,

The various internal factors are value system, mission and objectives, organization
 structure, corporate culture, quality ofhuman resources, labor unions, physical
resources and technological capabilities.

 SWOT analysis is a technique
opportunities and threats.
 used to determine and define your strengths, weaknesses,

Porter’s five forces analysis is a framework that helps analyzing the level of
 completion within a certain industry. It is especially
 useful when starting a new
business or when entering a new industry sector.

PESTEL analysis (formerly known as PEST analysis) is a framework or tool used to
 analyses and monitor the macro-environmental
 factors that may have a profound
impact on an organization’s performance.

Benchmarking is the process of measuring or comparing one’s own products, services
and practices with
those of the recognized industry leaders in order to identify areas
for improvement.

CHECK YOUR UNDERSTANDING

IDENTIFICATION
Directions: Identify the following statements below. Write your answer in the space
provided before the number.
_________________1. consists of those factors that affect a business enterprise from outside.
It includes shareholders, competitors, customers, society, government
laws and regulations, policies and technology.
_________________ 2. has various internal factors such as value system, mission and
objectives, organization structure, corporate culture, quality of human
resources, labour unions and physical resources and technological
capabilities.
_________________ 3. the parties likely to be affected by the activities of the organization.
_________________ 4. patronize the organization’s products and services.
_________________ 5.ensure the organization’s continuous flow of needed and reasonably
priced inputs or materials required for producing their goods and
rendering their services or materials required for producing their good
and rendering their services.

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POST-TEST

MULTIPLE CHOICE: Choose the letter of the best answer. Write your answer in the space
provided.

____1. Environment consists of those factors that affect a business enterprise from
outside. External environment includes shareholders, competitors, customers,
society, government laws and regulations, policies and technology.
a. Internal Environment
b. Micro Environment
c. Macro Environment
d. External Environment
____2. The process of measuring or comparing one’s own products, services, and practices
with those of the recognized industry leaders in order to identify areas for
improvement.
a. SWOT Analysis
b. PESTEL Analysis
c. Benchmarking
d. Porter’s Analysis
____3. It is a form of business organization established for the purpose of purchasing and
marketing the products of its members, i.e., shareholders, and/or procuring
supplies for resale to the members, whose profits are distributed to the
members (in the form of patronage dividends), not on the basis of the
members' equity.
a. Partnership
b. Sole Corporation
c. Corporation
d. Cooperative
____4. When the preconditions for take-off are met, a society can take off. Educated
individuals start inventing new processes and tools, and access to capital
through financial markets and banks make it possible to produce goods and
services on a larger scale.
a. Traditional Society
b. Preconditions for Take-Off
c. Take-Off
d. Drive to Maturity
____5. It boosts economic revenue on a smaller scale, but one that’s of vital importance,
directly and positively affecting the health, quality of life and purchasing
power of residents in the local community.
a. Small Business
b. Corporation
c. Contracting
d. Franchising
____6. Is the ultimate source of many inputs such as raw materials and energy, which
firms use in their productive activity? includes geographical and ecological
factors such as minerals and oil reserves, water and forest resources, weather
and climatic conditions are all highly significant for various business activities.
a. Economic Environment
b. Demographic Environment
c. Natural Environment
d. Ecological Environment
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 Learning Module for Organization and Management

____7. Form of business which has unlimited liability. Creditors may proceed not only
against the assets and property of the business, but also after the personal
properties of the owner. In other words, the law basically treats the business
and the owner as one and the same.
a. Partnership
b. Sole proprietorship
c. Sole Corporation
d. Corporation
____8. Is a framework or tool used to analyses and monitor the macro-environmental
factors that may have a profound impact on an organization’s performance.
a. SWOT Analysis
b. Porter’s Analysis
c. PESTEL Analysis
d. Benchmarking
____9. Are to a certain extent controllable because the firm can change or modify these
factors to improve its efficiency. However, the firm may not be able to change
all the factors.
a. Micro Environment
b. Macro Environment
c. Internal Environment
d. External Environment
____10. Analysis is a framework that helps analyzing the level of competition within a
certain industry. It is especially useful when starting a new business or when
entering a new industry sector. According to this framework, competitiveness
does not only come from competitors. Rather, the state of competition in an
industry depends on five basic forces.
a. Benchmarking
b. PESTEL Analysis
c. Porter’s Analysis
d. SWOT Analysis

REFLECTIVE LEARNING SHEETS

Reflective Question: Now that we are experiencing the COVID-19 pandemic, can you use
SWOT analysis in today’s situation? Kindly write at least three (3) information in each box.

STRENGHTS WEAKNESSES OPPORTUNITIES THREATS

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 Learning Module for Organization and Management

ANSWER KEY

PRETEST
Matching-type
1. External Business
2. Internal Business
3. SWOT
4. Porter’s Five Forces
5. PESTEL

Activities
Activity 1: Independent Activity

Note: All possible answers about his/herself

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

Confident Insecure Happy to work with Lose enthusiasm in

project
Creative Self-criticism Create exciting Rush and put time
concept for final over quality
Organized Get bored quickly Plan ahead Not complete by end
line
Problem-solving Indecisive Decide on an idea I Too much complaint
am
Team-oriented Impatient Show off the skills I No focus and lack of
have learned determination
throughout the
course

Activity 2: Independent Activity

Rubrics for checking: Content = 30%, Understanding/Application = 25%, Original
Thinking = 25%, Structure = 10% and Grammar = 10%.
Check your Understanding
Identification

1. External environment
2. Internal environment
3. Stakeholders.
4. Customers
5. Suppliers

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REFERENCES

Books
Darr, Kurt, Chapter 2, Introduction to Management and Leadership Concepts, Principles and Practices, Jones and Bartlett
Learning, https://www.google.com.et, Accessed on October 1, 2013.
Mintzberg, Henry (1989) MINTZBERG ON MANAGEMENT by Henry Mintzberg. Reprinted by permission of Free Press, a
division of Simon & Schuster, Inc.
Robbins, Stephen, Robbins, Stephen P. and Coulter, Mary — 11th ed. (2012) Management, Pearson,
www.pearsonhighered.com
Smyth, Danielle (2019), The Roles of Business Organizations in Economic Development, https://bizfluent.com/info-7745795-
roles-business-organizations-economic-development.html

Websites
https://www.managementstudyhq.com/functions-of-management.html
https://www.slideshare.net/LalaineCazar/nature-and-concept-of-
management?from_action=save
https://www.wisdomjobs.com/e-university/principles-of-management-and-organisational-behaviour-tutorial-366/evolution-
of-management-thought-12679.html
https://www.mindtools.com/pages/article/management-roles.htm
https://study.com/academy/lesson/five-stages-of-economic-development.html https://pnl-law.com/blog/forms-of-
business-sole-proprietorship-partnership-corporation/
https://www.cda.gov.ph/resources/issuances/philippine-cooperative-code-of-2008/republic-act-9520
https://bizfluent.com/info-7745795-roles-business-organizations-economic-development.html
https://www.freepik.com/free-vector/team-leader-managing-
project_5562411.htm#page=1&query=manager in business management position=4
https://www.freepik.com/free-vector/urban-buildings-with-cityscape-
scenery_4794860.htm#page=1&query= BUSINESS ENVIRONMENT position=33
https://www.freepik.com/premium-vector/business-people-communicating-office-
banner_5523082.htm#page=1&query= BUSINESS ENVIRONMENT position=22
https://www.freepik.com/free-vector/scrum-team-discussing-
tasks_4950291.htm#page=1&query=ROLE OF BUSINESS position=6
https://www.freepik.com/free-vector/professional-group-working-
project_4950283.htm#page=1&query=ROLE OF BUSINESS position