ORGANIZATION & SENIOR

HIGH
MANAGEMENT SCHOOL

Self-
The Local and International Learning
Business Environment of the Firm Module
7

Quarter 1

Organization & Management – Grade 11

Quarter 1– Self-Learning Module 7: The Local and International Business
Environment of the Firm
First Edition, 2020

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 Organization & SENIOR
HIGH
Management SCHOOL

Self-
Learning
Module 7

Quarter 1
The Local and International Business
Environment of the Firm

3
Introductory Message

For the facilitator:

Welcome to the Organization & Management for Grad 11 Self-Learning

Module on The Local and International Business Environment of the Firm

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and

independent learning activities at their own pace and time. Further, this also aims
to help learners acquire the needed 21st century skills especially the 5 Cs, namely:
Communication, Collaboration, Creativity, Critical Thinking, and Character while
taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them
to manage their own learning. Moreover, you are expected to encourage and assist
the learners as they do the tasks included in the module.

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For the learner:

Welcome to the Organization & Management Self-Learning Module on The

Local and International Business Environment of the Firm

This Self-Learning Module was designed to provide you with fun and
meaningful opportunities for guided and independent learning at your own pace
and time. You will be enabled to process the contents of the learning material while
being an active learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from

the entire module.

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MODULE THE LOCAL AND INTERNATIONAL
7
BUSINESS ENVIRONMENT OF THE FIRM

EXPECTATIONS
At the end of this module, you are expected to:

1. identify what is the meaning of business environment;

2. enumerate the local and international business environment of the firm;
3. identify and enumerate the benefits and challenges of globalization; and
4. analyze how to own’s culture affects the local and international business
environment.

PRETEST
Directions: Identify whether the statement is correct or incorrect by
encircling the option that represents your answer.

T F 1. Cultural intelligence is an individual’s ability to favorably receive

and adjust to an unfamiliar way of doing things.

T F 2. Power Distance is the degree to which a society values assertiveness

and feelings of material success versus concern for relationships.

T F 3. Globalization refers to changes in the dimensions of external

environment that result in increased interdependence and integration
among people and organizations around the world

T F 4. Trade agreements are government-induced restrictions on

international trade.

T F 5. Globalization makes it difficult to access foreign culture, including

food, movies, music, and art.

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 RECAP

Let’s do the recap

We have taken the various elements or forces of the business environment.

These forces or elements are divided into two types: External and Internal
Environment. Before we proceed to our next lesson, let us review a few terms that
we have to understand completely the idea of the business environment.

Directions: Jumble the letters to find the correct word described in each item.

1. Through this process, the organization can decide how to respond to the various
issues and challenges brought about by these forces.

EVITONARNMENL SNNGCANI
2. It is also called a task environment or competitive environment.

TNEMNORIVNEORCIM

3. It is the statistical study of people and the human population.

PHICGRADEMO DITIONSCON

4. Those who patronize the organization’s products and services.

MERSCUSOT

5. It refers to the overall health of the economy.

CONOMICE SDITIONSCON

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 LESSON

Business environment means all of the internal and external factors that
affect how the company functions including employees, customers, management,
supply and demand, and business regulations. Understanding the local and
international business environment of the firm requires managers of organizations
to sharpen their cultural intelligence. Cultural intelligence is an individual’s
ability to favorably receive and adjust to an unfamiliar way of doing things. This
will enable them to develop their ability to accept and adapt to different cultures,
both local and international, that may affect the organization to which they belong.

A. Local Business Environment of the Firm

It is the business entity whose commercial activities are performed within a

nation. The producer and customers of the firm both reside in the country. In
domestic trade, the buyer and seller belong to the same country and so the trade
agreement is based on the practices, laws, and customs that are followed in the
country.

The business operates within a complex network of political, legal, and

institutional framework conditions - the "so-called" business climate. A conducive
local business climate reduces the costs of doing business, unleashes economic
potential, and attracts investment. In contrast, if the local business climate is
shaped by problematic governance patterns, political guidelines, laws, and
regulations, and ineffective administration, private and public sectors pay
enormous and unnecessary costs with a negative impact on economic growth
patterns.

In local businesses, communication is easier. Because it is a business entity

whose commercial activities are performed within a nation. The producer and
customers of the firm both reside in the country. In domestic trade, the buyer and
seller belong to the same country and so the trade agreement is based on the
practices, laws, and customs that are followed in the country.

Access to materials and labor may be limited in local businesses. There are
many privileges which a domestic business enjoys like low transaction cost, less

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period between production and sale of goods, low transportation cost, encourages
small-scale enterprises, etc.

In different countries, sometimes even within a country, there are

substantial differences in attitudes, beliefs. motivation morality, superstition, and
perception, and as well as other characteristics. In 1928. Geert Hofstede developed
a model in which worldwide differences in culture are categorized according to five
dimensions.

1. 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.

2. Uncertainty Avoidance – the degree to which society is uncomfortable with

risk, change, and situational uncertainty.

3. Individualism-Collectivism – the degree to which a society emphasizes

individual accomplishments versus collective accomplishments.

4. Masculinity-Femininity – the degree to which a society values assertiveness

and feelings of material success versus concern for relationships.

5. Time Orientation – the degree to which a society emphasizes short-term

thinking versus greater concern for the future or long-term thinking

B. The International Business of the Firm

International Business is one whose manufacturing and trade occur beyond

the borders of the home country. All the economic activities indulged in cross-
border transactions comes under international or external business. It includes all
the commercial activities like sales, investment, logistics, etc., in which two or more
countries are involved.

The internalization of management is an offshoot of the entire world become

global, with resources and technologies interacting harmoniously beyond national
and international boundaries. The economic and social benefits that come with
globalization are said to be among the positive outcomes. Globalization – refers to
changes in the dimensions of the external environment that result in increased
interdependence and integration among people and organizations around the
world. Globalization advocates, however, fail to realize the very serious challenges
faced by managers in adjusting to the cultural differences among different
countries where they intend to do business. The culture of different countries is
rooted in their history, religion, traditions, beliefs, and deep-seated values, and

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because of these, managing globally can be very complicated, obviously has a major
impact in the way business operates all over the world.

Some of the components or factors of the global business environment

include:

1. International Legal and Political System

The political system is the system of politics and government in a country. It

governs a complete set of rules, regulations, institutions, and attitudes. The main
differentiator of political systems is each system’s philosophy on the rights of the
individual and the group as well as the role of government. Each political system’s
philosophy impacts the policies that govern the local economy and business
environment.

2. Trade Agreements and Trade Barriers Between Countries

A trade agreement is a wide-ranging taxes, tariff, and trade treaty that

often includes investment guarantees. It exists when two or more countries agree
on terms that help them trade with each other.

Trade barriers are government-induced restrictions on international trade.

Economists generally agree that trade barriers are detrimental and decrease overall
economic efficiency; this can be explained by the theory of comparative advantage

3. Regional Economic Alliances

It is a treaty that is signed by two or more countries to encourage the free

movement of goods and services across the borders of its members. The agreement
comes with internal rules that member countries follow among themselves.

4. Global Outsourcing

Global outsourcing is enabling business without barriers in a borderless

world. As enterprises think global, their outsourcing models have changed to follow
suit.

Outsourcing is no longer just a short term quick-fix to achieve cost

reduction. Global outsourcing uses a blend of onsite, offshore, and nearshore

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outsourcing solutions to achieve strategic business objectives for the outsourcing
company.

Benefits of Globalization Faced by Business Environment

1. Access to New Cultures

Globalization makes it easier than ever to access foreign culture, including

food, movies, music, and art. This free flow of people, goods, art, and information is
the reason you can have Thai food delivered to your apartment as you listen to your
favorite UK-based artist or stream a Bollywood movie or even the K-Pop styles.

2. The Spread of Technology and Innovation

Many countries around the world remain constantly connected, so the

knowledge and technological advances travel quickly. Because knowledge also
transfers so fast, this means that scientific advances made in Asia can be at work
in the United States in a matter of days.

3. Lower Costs for Products

Globalization allows companies to find lower-cost ways to produce their

products. It also increases global competition, which drives prices down and
creates a larger variety of choices for consumers. Lowered costs help people in both
developing and already-developed countries live better on less money.

4. Higher Standards of Living Across the Globe

Developing nations experience an improved standard of living—thanks to

globalization. According to the World Bank, extreme poverty decreased by 35%
since 1990. Further, the target of the first Millennium Development Goal was to cut
the 1990 poverty rate in half by 2015. This was achieved five years ahead of
schedule, in 2010. Across the globe, nearly 1.1 billion people have moved out of
extreme poverty since that time.

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5. Access to New Markets

Businesses gain a great deal from globalization, including new customers

and diverse revenue streams. Companies interested in these benefits look for
flexible and innovative ways to grow their business overseas. International
Professional Employer Organizations (PEOs) make it easier than ever to employ
workers in other countries quickly and compliantly. This means that, for many
companies, there is no longer the need to establish a foreign entity to expand
overseas.

6. Access to New Talent

In addition to new markets, globalization allows companies to find new,

specialized talent that is not available in their current market. For example,
globalization allows companies to explore tech talent in booming markets such as
Berlin or Stockholm, rather than Silicon Valley. Again, International PEO allows
companies to compliantly employ workers overseas, without having to establish a
legal entity, making global hiring easier than ever.

Challenges of Globalization Faced by Business Environment

1. International Recruiting

Recruiting across borders creates unknowns for HR teams. First, companies

create a plan for how they will interview thoroughly the candidates to make sure
they are qualified when thousands of miles separate them from headquarters. To
ensure successful hires, HR teams must factor in challenges like time zones,
cultural differences, and language barriers to find a good fit for the company.

2. Managing Employee Immigration

Immigration challenges cause a lot of headaches internally. Immigration

laws change often, and in some countries, it is extremely difficult to secure visas for
employees that are foreign nationals.

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3. Incurring Tariffs and Export Fees

Another challenge both U.S and UK leaders said they face in the report is
incurring tariffs and export fees—29% agreed this is a challenge for their global
businesses. For companies looking to sell products abroad, getting those items
overseas can be expensive, depending on the market.

4. Payroll and Compliance Challenges

Another common global expansion obstacle is managing overseas payroll

and maintaining compliance with changing employment and tax laws. This
management task gets even more difficult if you’re trying to manage operations in
multiple markets.

5. Loss of Cultural Identity

While globalization has made foreign countries easier to access, it has also
begun to meld unique societies together. The success of certain cultures
throughout the world caused other countries to emulate them. But when cultures
begin to lose their distinctive features, we lose our global diversity.

6. Foreign Worker Exploitation

Lower costs do benefit many consumers, but it also creates tough

competition that leads some companies to search for cheap labor sources. Some
western companies ship their production overseas to countries like China and
Malaysia, where lax regulation makes it easier to exploit workers.

7. Global Expansion Difficulties

For businesses that want to go global and discover the benefits of

globalization, setting up a compliant overseas presence is difficult. If companies
take the traditional route of setting up an entity, they need substantial upfront
capital, sometimes up to $20,000, and costs of $200,000 annually to maintain the
business.

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 Additionally, global businesses must keep up with different and ever-
changing labor laws in new countries. When expanding into new countries,
companies must be aware of how to navigate new legal systems. Otherwise,
missteps lead to impediments and severe financial and legal consequences.

8. Immigration Challenges and Local Job Loss

The political climates in the United States and Europe show that there are
different viewpoints on the results of globalization. Many countries around the
globe are tightening their immigration rules, and it is harder for immigrants to find
jobs in new countries. This rise in nationalism is mainly due to anger from the
perception that foreigners fill domestic jobs or at companies moving their
operations abroad to save money on labor costs.

Both the benefits and challenges of globalization change how a business

operates in different ways. When companies decide to go global, they must be ready
and willing to change internal processes. This helps to accommodate new markets
and make their global workforce feel comfortable and accepted at work.

Companies see many aspects of their businesses change once they enter the
global marketplace. For example, globalization makes the workforce more diverse.
This diversity is an overall positive change, but it creates some challenges, such as
language barriers and differences in cultural expectations.

ACTIVITIES

Directions: In one whole sheet of paper, answer, and explain the following
questions:
1. Why do companies have to study their environment first before venturing
into new businesses?
2. How cultural intelligence important in terms of doing business globally?
3. How would you describe Philippine culture? Do you think it would be easy
for a foreign manager to manage his or her company in the Philippines?

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 WRAP UP

Let’s wrap up by answering the following:

1. Differentiate between the local and international business of the firm.

2. Enumerate the benefits and challenges of globalization.

VALUING

Point of Reflection

As an individual, how can be the effect of Globalization be seen in your daily

lives?
___________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

POSTTEST
Directions: Read the statement carefully and encircle the letter of the
best answer.

1. The degree to which a society emphasizes individual accomplishments versus

collective accomplishments.
A. Individual Collectivism B. Power Distance
C. Time Orientation D. Uncertainty Avoidance

2. One of the benefits of globalization were it easier than ever to access foreign
culture, including food, movies, music, and art.
A. Access to New Cultures B. Access to New Talents
C. The Spread of Technology and Innovation D. Higher Standards of Living
Across the Globe

3. It exists when two or more countries agree on terms that help them trade with
each other.
A. Trade Fair B. Trade Agreement
C. Trade Barriers D. Trade Mark

4. These are government-induced restrictions on international trade.

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 A. Trade Fair B. Trade Agreement
C. Trade Barriers D. Trade Mark

5. It is a treaty that is signed by two or more countries to encourage the free

movement of goods and services across the borders of its members.

A. Regional Economic Alliance B. Trade Agreement

C. Global Outsourcing D. Trade Barriers

KEY TO CORRECTION

A 5. Economic conditions 5. F 5.

C 4. Customers 4. F 4.

B 3. Demographic conditions 3. T 3.

B 2. Micro-environment 2. F 2.

A 1. Environmental conditions 1. T 1.

Postest Recap Pretest

R E F E R E N CE S
A. Books

Ng, Mark Francis G. “Organization and Management” Anvil Publishing, Inc,

2017; page 56
Cabrera, Helen Ma. F. ,Altarejos, Anthony DC. and Benjamin ,Riaz .
“Organization and Management Textbook for Senior High”, Vibal Publishing
Group Inc, 2016, page 16-17

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 B. Website

https://www.outsource2india.com/why_outsource/articles/global-outsourcing.asp

https://velocityglobal.com/blog/globalization-benefits-and-challenges/

https://en.wikipedia.org/wiki/Trade_agreement

https://opentextbc.ca/businessopenstax/chapter/barriers-to-trade/

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