Multiple Choice. Encircle the letter of the correct answer.

1. Characteristic of macro-environment
a. External c. internal
b. controllable d. uncontrollable

2. Another term for micro-environment,

a. external c. internal
b. macro d. uncontrollable

3. Environmental factors that are larger than the firm and which affect the firm's operations
a. external c. micro
b. internal d. controllable

4. The factor that consists of age, gender, nationality, religion, population, and income
a. cultural c. economic
b. demographic d. technological

5. The internal environment where a company gets its needed resources in order to produce goods
to sell
a. corporations c. competitors
b. suppliers d. customers

6. Help a company in promoting, selling, and distributing goods to potential customers

a. marketing c. intermediaries
b. middlemen d. advertising agencies

7. The following are considered as uncontrollable factors, EXCEPT

a. promotion c. economic
b. government d. technological

8. Marketing intermediaries that help in the promotion, sales, and distribution of goods to
customers
a. middlemen c. physical distribution team
b. marketing services agencies d. all of the above

9. Laws or government agencies that influence firms and individuals

a. political c. natural
b. public d. all of the above

10. Example of internal environment factor

a. price c. socio-cultural
b. demographic d. weather
MODULE 2: The Environment of Business

This module deals with the different environmental factors that affect the business
enterprise and the various reasons behind the failure of an enterprise.

Objectives:

At the end of this module, students are expected to:

1. identify the various internal business environments;

2. recognize the different external business environments; and
3. differentiate controllable and uncontrollable environmental factors

Key Terms:

controllable internal socio-cultural

demographic macro-environment technological
economic micro-environment uncontrollable
external political

INTRODUCTION:

Any kind of business organization works within an environment. How a company

deals with the environment determines its success or failure. Business environment consists of
factors that a company can control and those that are uncontrollable. Controllable business
factors are internal to the company. These include the marketing mix—product, price, place,
and promotion. Management decides what product to produce, how to increase the level of
production, how much will be the selling price of the product or services, how the products will
be distributed, what market to cover, and what medium of promotion to use to advertise
products. Management also has a big influence when it comes to establishing company policies.
It is responsible for the proper implementation of company's rules and regulations, and for
organizing and controlling its employees.

On the other hand, uncontrollable business factors are external to the company.
These include factors such as demographic, economic, socio-cultural, political or government,
technological, and climate or weather. Thus, for any business entity to survive and to have a
smooth and continuous operation, the environment needs to be closely monitored to be able to
anticipate its effect to the different marketing plans or programs of the company so that
necessary adjustments can be immediately made.

TYPES OF BUSINESS ENVIRONMENT

Internal Environment

These are forces that are close to the company and affect its interaction with its market.
Micro-environment is another term for this environment. It consists of the company,
distribution channels, competitors, the company's public, and suppliers.
1. Firm/Company – represents the business enterprise that creates product and sells or
provides services to identified market.

2. Distribution Channel – represents the organizations that assist a company to promote, sell,
or distribute products or services to actual and potential customers; examples of channels
are retailers, as well as wholesalers. It is also considered as marketing intermediaries.

3. Competitors – are business enterprises that offer the same products or alternative products
that other companies also offer; competitors provide the market with more choices.

4. Company's Public – are organizations or groups that have direct or indirect interest to a
company; financial institutions like banks, the media, the general public, the government,
and other citizen-organized groups are some of the organizations that have interest to a
company.

5. Suppliers - are firms that provide needed equipment, raw materials, office, and other
supplies to a company.

External Environment

The bigger environment or the macro-environment is uncontrollable or more difficult

for a company to control. Macro-environment is composed of the following:

1. Demographic Factor – includes environmental factors such as the consumers' profile—age,

gender, education, population, gender, nationality and religion. These factors are essential
for a company to consider because variables under demographic factors constitute the
characteristics of the market and these affect buying behavior; an example is the issue on
migration. The influx of people in an area means a greater consumption on basic necessities,
like food, and an increase in demand for clothing and housing. On the other hand, such
movement of people will mean decrease in demand for basic products in other areas

2. Political or Legal Factor – consists of existing laws, ordinances, or government restrictions

that affect or influence the operation of a business.

3. Economic Environment Factor – includes those that influence the spending pattern or
buying power of consumers. Examples of economic factors that are essential to marketers
are change in income level, change in spending pattern, and change in income distribution.
Other factors that may affect economic environment are family size, cost of products, and
lifestyle of the market.

4. Socio-Cultural Environment Factor – includes those that affect the values, behavior, or
belief of society.

5. Technological Environment Factor – deals with those factors that create or innovate
products due to technological advancement or modern machineries, gadget, or equipment.

6. Natural Environment Factor – affects marketing activities. Some issues in the natural
environment are increased pollution, shortage of raw materials, and non-biodegradable
packaging.
Gap-Fill. Choose the right answer from the words in the box. Write your answer on the line provided
before each number.

a. internal f. macro
b. technological g. socio-cultural
c. economic h. economic
d. demographic i. distribution channel
e. intermediaries j. competitors

________1. Environment where individuals have the power to control

________2. Consists of new machinery, equipment
________3. Refers to inflation, employment rate, prices
________4. Factor consisting of a person's gender, educational attainment, nationality, status
________5. Type of environment considered as uncontrollable
________6. Decision influenced by beliefs, superstitions, and way of living
________7. Factor that includes change in spending pattern, change in income distribution, a change
in income level
________8. Helps the company to promote and distribute products to actual and potential
customers
________9. Business enterprise that offers the same products or alternative products that a
company also offers
________10. Represents the firms that assist the company to promote, sell, or distribute products to
the market

Discussion Questions:

1. Cite specific examples on how the various internal and external environmental factors affect
business.
2. Can a company become successful without considering the environment? Justify your answer.
3. Explain why intermediaries are important in business.

Concept Application:

Mini Case

Provinces in the Visayas region have been greatly affected by typhoon Yolanda. There
was massive loss of lives and properties. Almost everything was washed-out.

1. In what way can the government assist businesses to start again?

2. What possible assistances can be extended to farmers, fishermen, and others?
3. What sources of income/livelihood have been affected?
4. Is migration of people in affected areas a wise decision? Why, or why not?