ORGANIZATION &

MANAGEMENT
First Semester – First Quarter
Week - 3

Disclaimer: This Learning Activity Sheet (LAS) is based from the Learner’s Materials, Textbooks and Teaching Guides released by DepEd Central Office.
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LEARNING COMPETENCY
 Identify the various forces/elements of the firm’s environment.
(ABM_AOM11-Ic-d-4)

OBJECTIVES:
1. Identify the various forces/elements of the firm’s environment.
2. Summarize these forces using the PEST and SWOT analysis.
3. Understand how the various forces/elements influence the environment of the
firms.

Various Forces/Elements Influencing Local and International

Business Environment Using PEST/SWOT Strategies

LESSON OVERVIEW
Blocking the Barriers
Inflation-is a period when the general price level
of the products and services in an economy
increases.
Interest rates- is the percentage of the principal
charged for the use of money by the lender
Exchange rates- is the price of the nation’s
currency in comparison to foreign currency. This
is used as a basis for changing one currency into
another.
Economic growth- an increase in the amount
and value of goods and services produced by an
economy for a certain period of time.
People’s spending habits- consumer’s changing
ways of spending their money on goods and
services.
In today’s dynamic business environment,
where most companies are operating, it is very
crucial for a manager to understand and to cope with
the various conditions and changes in the business
environment of the firms or the company. Managers
must take into consideration the different aspects of
the business environment and that is both the
internal and external before planning anything. It is a
must for the manager to become cautious in dealing
with varying environmental forces because it might
bring possible threats or can potentially affects the
business operation of the company. Moreover, being
aware and knowledgeable about these forces will
enable the manager to respond strategically to
achieve positive results and to ensure the company’s
favorable position in the future.

The ability of the business firm to deal

with these various environmental forces will allow the
organization to determine its Strengths,

Weaknesses and analyze the possible

Opportunities that they can take advantage on as

well as the Threats that can affect their operation. In
addition, the firm can also identify the various
external forces that it needs to deal with in order to
mitigate the impacts that these Political, Economic,
Social and Technological factors may

impose to the company. Using of SWOT and PEST analysis will help and guide the
managers to effectively and efficiently handles various factors and elements and will enable
them to formulate strategies that will be useful in overcoming the impacts that these forces
might cause on the business at present as well as in the near future.

THE FIRM AND ITS ENVIRONMENT

The environment of the firm or business is a significant factor that a

manager must take into consideration in the performance of his functions. The
Business environment pertains to the conditions and factors that affects the

business operations and defines its success. It is divided into two types, these are the
internal and external business environment.

EXTERNAL
ENVIRONMENT

THE FIRM

MICROENVIRONMENT MICROENVIRONMENT
INTERNAL
ENVIRONMENT
 Customers  General
  Employees
Suppliers environment
  Physical
Competitors of the firm
 Regulatory
resources
 Managers
agencies

Figure 1.0. The Firm’s Environment

INTERNAL BUSINESS ENVIRONMENT

- It consists of factors or elements within the organization that have a

direct impact, either positively or negatively, on the business operations. The element
in this business environment can directly controlled and easily adjusted by the firm.
For example, employees, managers, organizational culture and machineries

EXTERNAL BUSINESS ENVIRONMENT

 - It consists of factors or elements outside the organization that have
indirect but significant influence, either positively or negatively, on its operation. The
firms have no control over these factors. There are two types of external business
environment:

1. Microenvironment- is also refers to the operating environment. It consists of customers,

suppliers, competitors and regulatory agencies. These factors have a direct significance to
the business operation but uncontrollable to a certain extent.

Customers- this factor has the most significant impact

on the business because a business cannot operate for
a profit without attracting customers that will support
and patronize the business products and services and
knowing the target market will enable the business to
formulate sound marketing strategies that will help
them in developing their customer base and in
generating profits in the long run.

Suppliers- can influence the business in terms of

the availability of the raw materials to be used in the
business and this factor could affect the business
depending whether the supplier is the largest one or the
only sources of the business inputs and these conditions
could influence as the determining factors of price increase
or decrease.

Competitors- this can affect the business in terms of

its number, the more competitors a business have the more
it can bring huge impacts on the business operation
especially in terms of shared customers.

Regulatory agencies- could influence the business

in terms of the restrictions that these agencies may impose
on the business that is why it is very important for the
managers to be informed with these factors in order to
align their strategies, decisions and actions. Like for
example, pressure from the Food and Drugs
Administration (FDA) on some department stores that
cause them to stop selling toys containing lead and to stop
ordering those products from the suppliers.
ACTIVITY 1
Direction: Complete the table by providing a lists of internal or external factors that
can affect the business operation.

INTERNAL EXTERNAL
ENVIRONMENT ENVIRONMENT

ACTIVITY 2

Direction: Put a check (√) if the following given elements is under Strengths,
Weaknesses, Opportunities and Threats.

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

1. New market

2. Poor
location

3. High
inflation rates

4. Good credit
standing

5. New users
or customers
FORMATIVE TEST

Modified True or False. Write True, if the statement is correct and if it is

incorrect replace the underline word(s) or phrase with the word(s) or phrase
that will make the statement correct.

1. Benchmarking is the constant monitoring and analyzing of the

information from the internal and external environment of the firm.

2. Threats are characteristics of a company that needs to be improved or changed.

3. Suppliers can affect the business operation in terms of availability of

raw materials and can be a determining factors of price increase and
decrease.

4. The external business environment have a direct impact, either

positively or negatively, on the business operation and the elements in this
environment can be directly controlled or easily adjusted by the firm itself.

5. Inflation is a period when the general price level of the products and
services increases.

ANSWER KEY

ACTIVITY 1 ACTIVITY 2

INTERNAL 1. Opportunities
2. Weaknesses
Employees 3. Threats
Managers 4. Strengths
Board of Directors 5. Opportunities
Organizational Culture
Machineries

EXTERNAL
Customers
Suppliers
Competitors
Regulatory
Agencies