11

Organization and
Management
Quarter 1 – Module 3:
Business Environment

Maria Celina Mazo

Module Writer

Department of Education Republic of the Philippines

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Content Standards:
The learners have an understanding of the role of business in the environment,
and how the environment affects the firm

Performance Standards:
The learners shall be able to analyze the various environmental forces affecting
the firm and summarize these using Political Economic Social and Technological
Analysis PEST) and Strengths, Weaknesses, Opportunities and Threats (SWOT)
Analysis frameworks

Learning Competency:
The learners shall be able to analyze various forces/elements influencing local
and international business environment using PEST and SWOT strategies

Learning Objectives:
At the end of this module the students will be able to :

 Analyze various forces/elements of the business’ environment

 Describe the local and international business environment of the firm
 Discuss the various forces of the business’ environment using the PEST and
SWOT analysis

What I need to Know

This module contains information that you will need to understand managing
in diverse milieus. It will help you to have vital understanding about the business
environment and its local and international settings.

In addition, you will get to know PEST, an acronym of Political, Economic,

Social, and Technological together with SWOT, an acronym of Strengths, Weakness,
Opportunities, and Threats has something to do in analyzing business environmental
factors for the long-term performance of the organization.

In order for you to be successfully benefited with this material, I would like you
to ponder the following:

1. Take time to read and understand all the contents in every page
2. Follow direction and/or instruction in each page of this module thoroughly
3. Accomplish all given activities in this module
4. Apply all the knowledge you are going to learn in this module in answering
the provided Post test
5. Enjoy learning!

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 What I know

A. Read and understand each statement and choose the letter of the correct
answer.

TRUE or FALSE: Write TRUE if the statement is correct and FALSE if it is wrong

________1. Internal environment is the stage of organization’s external environment

that affects the firm in the long run
________ 2. General environment is the level of organization’s external environment
that has an immediate impact on the firm
________ 3. Operating environment are the factors that you will see within the
organization
________ 4. Political or legal element are the factors to be considered in general
environment of a firm
________ 5. Economic element are related business cycles globally
________ 6. A stakeholder is an element who are directly affected by the decisions
made by the organization
________ 7. SWOT is an acronym of Strength, Weakness, Objectives, and Threats
________ 8. PEST analysis is used only in internal environment factors of a business
________ 9. Customer element are those individuals who buys goods and services from
a firm.
_______ 10. Corporate culture consists values and beliefs of the members of the
organizations

What’s In

Directions: Expound your ideas by defining the below terminologies. Write your
thoughts in your notebook and read it later after you do so

1. Analysis

2. Environment

3. Customer

4. Economy

5. Legal

ORGMGMT | Q1 W3
 What’s New

Environmental factors have always something to do with the performance of

each organization. Assessment of the level of opportunities and threats helps the
organization in decision making to align their
strategies.

A fast-paced industry, which is

uncontrollable, may develop a scenario that can
change the condition of business just in no time.
Businesses are greatly influenced by the
environment. Internal and external factors impact
firms. Therefore, managers must analyze the trade
market and the environment to foresee where the
organization will be in future.
https://www.google.com/search?q=business+environment&source=lnms&tbm=isch&sa=X&ved=2ah
UKEwi1--eh27zqAhXDZt4KHce7DYsQ_AUoAXoECBMQAw&biw=1366&bih=625

Three Stages of Business Environment

The business environment involves all of the internal and external factors that
affect the company as a whole including employees, customers, management, supply
and demand and business regulations. It can be classified into three stages namely:
general environment, operating environment, and the internal environment

1. General Environment (external)

General environment is a phase of organization’s external factors that affect the

organization eventually. It includes the following elements:

Political/Legal has something to do with government policies, passage of laws

and politics, and regulatory body and processes.

Economic has something to do with taxation issues, exchange rates, inflations,

stock market and other phases of economy

Social has something to do with demographic, war of talent, generation of

learners, interest and values of public

Technological has something to do with development and maturity of

technology through new ideas, concept and approach

2. Operating environment (external)

Operating environment is a phase of organization’s external factors that

directly affect the business. It has a rapid effect on the organization. It includes the
following elements:

Customer has something to do with person or group who purchase products or

service from a company

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 Supplier has something to do with individuals or business who provides goods,
raw materials or services to an entity needed for their production

Competitor has something to do with individuals or entity who responds the

rivals against another in the same industry

Pressure Groups has something to do with environmental issue that affects the
business through their project, demands, course, campaigns etc.

3. Internal Environment

Internal environment is composed of factors within the organization which

impacts on success and approach of a firm. Structure, current employees,
management, and especially corporate culture which defines behavior of employees.
Some of the elements of internal environment affects the organization as a whole,
others affect only the managers.

Company mission describe what the organization stands for and why it exists.
Policies are principles that govern how situations should be addressed. Structure is
the hierarchical arrangement of people and their responsibilities. Resources are the
people, facilities, infrastructure at an organization’s clearance. Corporate culture is
the organization’s personality. It consists values, beliefs, attitudes and standard that
define employee’s success

Among these elements, corporate culture is essential to employees as they are

more motivated to work if their values and beliefs are in line with their leaders and in
the organization as well. Firms with a positive company culture are more likely to
succeed and have a higher retention rate because they invest in their employees. As a
result, organization with driven employees tends to be more productive and
successful.

Local and International Environment

One of the reasons why businessmen expand their businesses are to increase
their profit and to reach the growth of their firm in a period of time. Some of the local
firms who are seeking to expand internationally find challenges in extending the
following factors: (1) Political and legal differences- national environment will always
be different from the other
countries and it should be noted
that adjustment will occur. (2)
Cultural differences is one of the
difficult aspect especially if your
firm is not diversified (3)
Economic differences such as
exchange rates that varies
country from country to country
(4) Religions, genders and other
restrictions and etc. https://www.google.com/search?q=globalization+icon&tbm=isch&hl=en&chips=q:globalizati
on+icon,g_1:business:plm62tuXTAw%3D&hl=en&ved=2ahUKEwjf9-ea-
9rqAhVtyIsBHT_jBqgQ4lYoAnoECAEQDw&biw=1263&bih=610

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 What is it

Before entering into new ventures, manager needs to analyze the positive and
negative side of environment so he can assess what are the necessary steps to be
taken. PEST and SWOT are closely related approaches to business analysis.

PEST, an acronym of Political, Economic, Social, and Technological, is an

analysis that helps leaders determine the impact of environmental factors on the
business. PEST focuses on external aspects that
affects the firm. It explores political and legal scenery
by looking political issues and regulations that
influence the business. Economic factors fall on
economic environment and business cycle globally.
Social has something to do with social mobility and
consumer demographics and trends. Technological,
on the other hand, focuses on the research and
development issues as well as the emerging
https://creately.com/blog/diagrams/swot- technologies
analysis-vs-pest-analysis/

SWOT is an acronym of Strength, Weakness, Opportunities, Threats. SWOT

analysis focuses on both internal and external
environment aspects of organization and best
done after PEST scrutiny. It captures the external
factors in the opportunities and threats segments.
Prospects in developmental performance of the
company will be opportunity and threats if the
factors will slow down the performance of the
company. In analyzing internal aspects, resources
advantage will be the strength and its deficiency

will fall on weakness.

https://creately.com/blog/diagrams/swot
-analysis-vs-pest-analysis/

What’s More

Activity 1: Examine each element and identify what kind of business environment
they belong. Write G if it is related to general environment, O if it is
related to operating environment and I if it belongs to internal
environment

______ 1. SEC business license compliance

______ 2. New application portal to be used in employees’ attendance
______ 3. New supplier from China for raw materials
______ 4. Annual gift giving and donations of company to its employees
______ 5. Newly established firm that offers the same goods and services

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 What I have learned

Activity 2: Expanding business internationally is profitable yet risky. What are the
things you must consider first before going through? Write 5 advantages
and 5 disadvantages that you might think in setting business abroad.

Advantages Disadvantages

Activity 3: SWOT: Analyze the following features and use SWOT tool in classifying
them. Write the letter of your answer on the space provided

A. Great company culture F. newly established competitor

B. business not adaptive to change G. high quality products
C. customer prospects abroad H. customer loyalties
D. Price fluctuation I. Limited resources
E. Rising cost of raw materials J. Lack of funding

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Critical Thinking:

Using Venn diagram, write all possible relationship and differences of SWOT and
PEST analysis

Assessment

A. Read and understand each statement and choose the letter of the correct
answer.

1. It is the stage of the organization’s environment that may affect the firm in the long
run
A. Internal environment C. General environment
B. Operating environment D. International environment

2. What organization’s environment directly affect and impact the business?

A. Internal environment C. General environment
B. Operating environment D. International environment

3. It is the level of environment that is within the organization.

A. Internal environment C. General environment
B. Operating environment D. International environment

4. It is an element related to entity who provide goods or services needed by the

organization to produce their products
A. customer B. competitor C. supplier D. consumer

5. What element of internal environment where you can see values and beliefs of
members of the organization?
A. structure B. culture C. mission D. resources

6. It is an analysis tool that measure political, economy, social and technological

aspects of the organization
A. PEST B. SWOT C. SWAT D. VENN

7. What is the meaning of an acronym SWOT?

A. Strength, Weakness, Objective, Threats
B. Strength, Weakness, Objective, Theories
C. Strength, Weakness, Opportunities, Threats
D. Strength, Weakness, Opportunities, Theories

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8. PEST element assessment will be seen in what organization’s environment?
A. Internal environment C. General environment
B. Operating environment D. International environment

9. What is the meaning of PEST acronym?

A. Political, Economic, Society, Technological
B. Political, Environment, Social, Technology
C. Political, Economic, Social, Technological
D. Political, Environment, Society, Technological

10. A tool that is usually used to analyze the external aspects of the organizations is
called __
A. SWOT B. SWOT C. PEST D. VENN

Additional Activity

Directions: At this stage, you already know your capabilities and flaws. As a senior
high school student, write down your strength, weakness, opportunities and threats.

S W O T

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