Organization and

Management
Quarter 1 – Module 3:
Business Environment
Organization and Management – Grade 11
Alternative Delivery Mode
Quarter 1 – Module 3: Business Environment
First Edition, 2020

Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the
Government of the Philippines. However, prior approval of the government agency or office
wherein the work is created shall be necessary for exploitation of such work for profit. Such
agency or office may, among other things, impose as a condition the payment of royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names,
trademarks, etc.) included in this module are owned by their respective copyright holders. Every
effort has been exerted to locate and seek permission to use these materials from their
respective copyright owners. The publisher and authors do not represent nor claim ownership
over them.

Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Development Team of the Module

Writer : Thelma F. Mina

Editor : Hazel Mae S. Barcial
Reviewer : Charina C. Dizon
Illustrator : Thelma F. Mina
Layout Artist : Thelma F. Mina
Cover Design : LRMDS- Bataan

Management Team:
Schools Division Superintendent : Romeo M. Alip, PhD, CESO V
OIC-Asst. Schools Division Superintendent : William Roderick R. Fallorin
Chief Education Supervisor, CID : Milagros M. Peñaflor, PhD
Education Program Supervisor, LRMDS : Edgar E. Garcia, MITE
Education Program Supervisor, AP/ADM : Romeo M. Layug
Education Program Supervisor, Mathematics: Danilo C. Caysido
District Supervisor, Mariveles : Francisco B. Bautista
Division Lead Book Designer : Rogelio M. Olegario
District LRMDS Coordinator, Mariveles : Annie Rhose C. Rosales
School LRMDS Coordinator : Annie Rhose C. Rosales
School Principal : Ludivina S. Omania
District Lead Layout Artist, Mathematics :
District Lead Illustrator, Mathematics :
District Lead Evaluator, Mathematics : Charina C. Dizon

Printed in the Philippines by Department of Education – Schools Division of Bataan

Office Address: Provincial Capitol Compound, Balanga City, Bataan
Telefax: (047) 237-2102
E-mail Address: bataan@deped.gov.ph
Organization and
Management
Quarter 1 – Module 3:
Business Enviroment
Introductory Message
For the facilitator:

Welcome to the Organization and Management – Grade 11 Alternative Delivery

Mode (ADM) Module on Business Environment!

This module was collaboratively designed, developed and reviewed by educators

both from public and private institutions to assist you, the teacher or facilitator in

helping the learners meet the standards set by the K to 12 Curriculum while overcoming

their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent

learning activities at their own pace and time. Furthermore, this also aims to help

learners acquire the needed 21st century skills 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. Furthermore, you are expected to encourage and assist the learners as

they do the tasks included in the module.

For the learner:

Welcome to the Organization and Management – Grade 11 Alternative Delivery

Mode (ADM) Module on Business Environment!

The hand is one of the most symbolized part of the human body. It is often used
to depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a learner is
capable and empowered to successfully achieve the relevant competencies and skills at
your own pace and time. Your academic success lies in your own hands!

This 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 resource while being an active learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.

What I Know This part includes an activity that aims to

check what you already know about the lesson
to take. If you get all the answers correct
(100%), you may decide to skip this module.

What’s In This is a brief drill or review to help you link the

current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the

lesson. This aims to help you discover and
understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the answers
to the exercises using the Answer Key at the
end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process
what you learned from the lesson.

What I Can Do This section provides an activity which will help

you transfer your new knowledge or skill into
real life situations or concerns.

Assessment This is a task which aims to evaluate your level

of mastery in achieving the learning
competency.
 Additional Activities In this portion, another activity will be given to
you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.

If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are not
alone.

We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!
 What I Need to Know

This module is designed to give you a better understanding about the Various

Forces/Elements Influencing Local and International Business Environment Using

PEST and SWOT Strategies that will help and guide you in dealing with real life

situations.

At the end of this module, the learner will be able to:

1. identify the various forces/elements of the firm’s environment.

(ABM_AOM11-Ic-d-4)

2. summarize these forces using the PEST and SWOT analysis.

(ABM_AOM11-Ic-d-5); and

3. understand how the various forces/elements influence the environment of the

firms.

A. Identify whether the following elements is INTERNAL or EXTERNAL. Write

your answer on the space provided.

1. Inflation

2. Machinery

3. Government laws

4. Custom

5. Managers
B. Choose the term that best describes each given statement. Write ONLY the
letter of your choice.

A. Strengths H. Environmental scanning

B. Business environment I. Internal environment
C. Micro-environment J. Macro-environment
D. Economic factors K. Opportunities
E. Opportunities L. Social factors
F. Weaknesses M. Political factors
G. Threats N. External environment

1. It consists of elements within the organization that have a direct impact,

either positively or negatively, on the business operations.
2. This pertains to the company’s characteristics that gives a competitive
advantage over other companies.
3. It is the factor or elements that can bring positive impact to the company
when it is addressed properly.
4. It also known as the general environment, it includes the economic,
political, social and technological environment of the business firm and the factor in
this environment are beyond the control of the firm.
5. This includes national, local and international laws, regulations and
restrictions that may intervene and influence the company’s business operation such
as labor laws.
6. It pertains to the condition and factors that affects the business operation
and define its success.
7. These are external factors that may negatively affect the company.
8. It includes factors or elements outside the organization that have indirect
but significant influence, either positively or negatively, on its operation.
9. This refers to the constant monitoring and evaluation of the information
from the internal and external environment of the business firm.
10. This can directly affect the capability of the company to generate profits
and may also influence its management decisions, this includes inflation, interest
rates, exchange rates and economic growth.
 Various Forces/Elements
Lesson Influencing Local and
1 International Business
Environment Using
PEST/SWOT Strategies
In today’s dynamic business environment,
where most companies are operating, it is very
Blocking the Barriers crucial for a manager to understand and to cope

Inflation-is a period when with the various conditions and changes in the
the general price level of business environment of the firms or the company.
the products and services
Managers must take into consideration the
in an economy increases.
different aspects of the business environment and
Interest rates- is the
that is both the internal and external before
percentage of the
principal charged for the planning anything. It is a must for the manager to
use of money by the become cautious in dealing with varying
lender environmental forces because it might bring
Exchange rates- is the possible threats or can potentially affects the
price of the nation’s business operation of the company. Moreover,
currency in comparison to
being aware and knowledgeable about these forces
foreign currency. This is
used as a basis for will enable the manager to respond strategically to
changing one currency achieve positive results and to ensure the
into another.
company’s favorable position in the future.
Economic growth- an The ability of the business firm to
increase in the amount
deal with these various environmental forces will
and value of goods and
services produced by an allow the organization to determine its Strengths,
economy for a certain Weaknesses and analyze the possible
period of time.
Opportunities that they can take advantage on as
People’s spending habits- well as the Threats that can affect their operation.
consumer’s changing
In addition, the firm can also identify the various
ways of spending their
money on goods and external forces that it needs to deal with in order to
services. 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.

What’s In

The success of every business lies in the hands of a manager and after
learning their functions, roles and skills that is needed for the manager to perform
and to possess, it is also important for the manager to take into consideration the
environment where he is working and must be aware of what is happening in the
environment where the business is operating. It is needless to say that manager
must be knowledgeable about the various forces or elements within and outside the
business environment in order to ensure the success of the business operation.

Complete the table by providing a lists of internal or external factors that can
affect the business operation.

INTERNAL EXTERNAL
ENVIRONMENT ENVIRONMENT
 Notes to the Teacher
The business environment of the firm is a reflection of not just how
business are conducted but on how business resiliently adapts with
the change that is brought about by varying political factor and
varying cultural differences.

What’s New

GUESS THE PIC!

Identify the following photos whether it is INTERNAL or EXTERNAL business

environment.

1.
EMPLOYEES

2.

CULTURE
3.

SUPPLIER

MANAGER
4.

5.

What is It

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

MICROENVIRONMEN MICROENVIRONMEN
T INTERNAL T
ENVIRONMENT
 Customers  General
 Suppliers  Employees environment
 Competitors  Physical 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.
2. Macroenvironment- is also known as the general environment, it includes
the economic, political, social and technological environment of the business firm
and the factors in this environment are beyond the control of the firm.

Political factors- include laws, it may be national, local or even

international, rules and regulations and restrictions that may affect or
interfere with the firm’s business operations. Some political factors
include labor laws, tax policies, environmental laws, tariffs and trade
restrictions. For example, in terms of labor laws, employer cannot fire
employees without due process also in following the Minimum Wage Law
in determining the wages of the employees. It is very important for the
businesses to comply with the rules and regulations imposed by the
government and managers must need to make decisions accordingly.

Economic factors- this factor can directly affect the ability of the
business to earn profit as well as the management practices in the
organizations. This includes inflation, interest rates, exchange rates,
people’s spending habits and economic growth. It can affect the business
for example if the interest rate for a bank loan is high, companies may
suspend its plan for expansion.

Social factors- include demographic aspects such as age, civil

status, group affiliation, religion, customs, economic status of consumers
and the customer’s changing values and preferences could also affect the
management practices and decisions. For example, people nowadays are
always on the go that is why many companies sells instant foods in order
to meet the changing demand of the customers. This factor is very
important for the firm to know for it can be used as a basis in producing
goods and service according to their target market and will enable the
company to make necessary adjustments and improvement on the
products they will offer.

Technological factors- involves the use of varied types of

electronic gadgets and advanced technology such as computer and
robotics, automation, research and development activities, licensing,
patenting, technological shifts and outsourcing decisions. This factor has
rapidly changed the way business is conducted nowadays. For example,
the use of Internet at present is an important factor which has greatly
improved the way business activities are done especially with the use of
social media that serves as a medium for advertising and marketing of
products and services.
 In order for the business to become successful, it should have a better

understanding of the changes in the external environment in order to benefit from

the various opportunities that these changes may bring. Many companies gather

information about the external environment through conducting environmental

scanning and strategic analysis such as the SWOT (Strengths, Weaknesses,

Opportunities and Threats) and PEST (Political, Economic, Social and Technological).

Environmental Scanning- is the constant monitoring and evaluation of

information from the external and internal environment of a business firm.
The information acquired is given to the key people to guide the company in
its business decisions and operations also in conducting a search for a new
target market. There are three modes of environmental scanning:

1. Ad hoc environmental scanning- is not often done and

is usually applicable only during a crisis situation. This is
being done in order to determine whether the problem is
external or internal.

2. Regular environmental scanning- is usually done at

least once a year or at a regular interval.

3. Continuous environmental scanning- refers to the

continuous collection of data on a broad range of
environmental factors.
 COMPONENTS OF ENVIRONMENTAL SCANNING

Business Forecasting- is a method of predicting how variables

in the environment will alter the future of business. It could be used

in making business decisions like branching out, expanding or

downsizing the company. This prediction may not always be assured.

Benchmarking- it 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 .

In order to adequately deal with the forces and element of external

environment, managers employ certain techniques in generating and analyzing data

that can be used in conducting strategic planning. The use of strategic planning

techniques such as SWOT and PEST analysis take into account the elements of both

the firm’s internal and external environment in developing business plans and

decisions. SWOT anlysis is used primarily to analyze the microenvironment, while

the PEST is performed to address the macroenvironment.

SWOT ANALYSIS

is a technique that identifies the Strengths and Weaknesses of a company, as

well as the Opportunities and Threats it faces. In conducting this analysis, it is

necessary to say that strenghts and weaknesses are part of the firm’s internal

environment while opportunities and threats are part of its external environment.
 STRENGTHS
(What does your company do better
that others?)
- pertains to the company’s
characteristics that gives a
competitive advantage over other
companies.
Examples of Strengths:
1. Good credit standing
2. Competent and highly skilled staff
3. Excellent distribution channels
4. Outstanding communication and
network systems
5. Good numbers of patents
OPPORTUNITIES
(What trends/conditions can
positively impact your company?)
- are factors or events that can
give a positive impact to the company
if properly addressed.
Examples of Opportunities:
1. New Markets
2. Potential profits
3. Additional sources of raw materials
4. Increased purchasing of consumers
5. Better location
6. New users or customers
WEAKNESSES
(What aspect s of your company need
to be improved?)
- are the characteristics of a
company that needs to be improved or
changed.
Examples of Weaknesses:
1. Lack of access to technology
2. Limited distribution channels
3. Poor location
4. Lack of facilities and equipment
5. Poor transportation system
THREATS
(What trends/conditions can
negatively impact your company?)
- are external factors which
may negatively impact the company.
Examples of Threats:
1. Increase in the price of resources
2. Entry of new competitors
3. High inflation rates
PEST ANALYSIS
is a method used in analyzing the Political, Economic, Social and
Technological factors affecting the company. This technique focuses on the factors
tha define the macroenvironment of the business.

POLITICAL FACTORS ECONOMIC FACTORS

 Government laws (National,  Inflation

Local and International)  Interest rates
 Labor law  Exchange rates
 Minimum wage law  People’s spending habits
 Environmental law  Economic growth
 Government stability
 Rules and regulations
 Trade Restrictions
 Tariffs
 Tax policies

SOCIAL FACTORS TECHNOLOGICAL FACTORS

 Demographic aspects such as  Research and Development

age, gender, civil status, activities
educational background,  Use of electronic gadgets and
income advanced technology like
 Group affiliation computers and robotics
 Religion  Automation
 Customs  Technological shifts
 Economic status of consumers  Licensing
 Customer’s changing values
and preferences

The use of both techniques could help the manager in analyzing various
business situations, in conducting a SWOT analysis it provides an easy and versatile
tools that can be applied in different levels of the company. It is more effective if
managers will be more objective in analyzing clear and accurate data. This also help
managers to understand the business better specifically on how the firm’s internal
environment aligns with its external environment. In addition to that, it helps the
firm’s to realize its advantage within the industry . However, this technique is not
applicable in dealing with more complicated factors that cannot be assigned to a
single category. For instance factors that can be both a strength and weakness of the
company. On the other hand, the use of PEST technique can guide the managers to
recognize the reasons why their business is succesful or not within a certain
environment. It also helps the company discover new paths for growth and
expansion. However, the limitation of this technique is that it does not take into
consideration the internal elements of the firm.

What’s More

A. 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

B. Put a check (√) if the following given elements is under Political, Economic.
Social and Technological factors.

POLITICAL ECONOMIC SOCIAL TECHNOLOGICAL

1. Interest
rates

2. Labor law

3. Research
and
Development

4. Custom

5. Inflation
 What I Have Learned

A. Complete each analogy by choosing your answer from the box.

A. External business environment E. Once a year

B. Economic growth F. Entry of New Competitors

C. Operating environment G. Lack of access to technology

D. Continuous H. PEST

1. Microenvironment: ; Macroenvironment: general environment

2. Ad hoc scanning: during crisis; Regular scanning:

3. Opportunities: Better location; Threats:

4. Macroenvironment: ; Microenvironment: SWOT

5. Internal business environment; direct impact; ; indirect impact

B. 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.
 What I Can Do

A. Complete the Table. Identify each condition whether it is INTERNAL or

EXTERNAL and in which factor in SWOT analysis it belongs.

CONDITIONS ENVIRONMENT SWOT (Strengths, Weaknesses,

(Internal or Opportunities and Threats)
External)

1. Lack sources of raw

materials

2. Good customer services

3. Availability of strategic
location

4. Lack of modern facilities

and equipment

5. High interest rates

B. Complete the Table. Identify each elements using the PEST analysis.

PEST
FORCES/ELEMENTS (Political.Economic,Social and
Technological)

1. Adequate access of technology

2. Educational background

3. Trade restrictions

4. Environmental laws

5. Spending habits of the people

 Assessment

A. Identify the terms describe in each given statement. Choose your answer
from the box. Write only the letter of the correct answer.

A. Macroenvironment E. Ad hoc scanning I. Opportunities

B. Regular scanning F. SWOT analysis J. Microenvironment

C. Business forecasting G. Benchmarking

D. PEST analysis H. Strengths

1. The technique used to analyze the macroenvironment of the firm.

2. This environmental scanning is conducted only during a crisis situation
3. It also refers to general environment which includes the economic, political,
social and technological factors which are beyond the control of the firm.
4. These are the factors or events that can give a positive impact to the company
if properly addressed.
5. The process of measuring and comparing one’s own products, services and
practices with those of the recognized industry leaders in order to identify areas for
improvement.

B. Classify the following conditions according to the types of business

environments and Identify each conditions using the SWOT and PEST analysis.

Environment SWOT ANALYSIS PEST ANALYSIS

(INTERNAL or (STRENGTHS, (POLITICAL,
CONDITIONS EXTERNAL) WEAKNESSES, ECONOMIC,
OPPORTUNITIES SOCIAL AND
AND THREATS) TECHNOLOGICAL)
1. Automation in the
production process
2. Increase in the
exchange rates of
dollars
3. Shifts on organic
products
4. Customers preference
on savings over
spending
5. Company compliance
to labor laws
C. Match the terms with the correct description in each box. Write the letter
of the correct answer on the space provided.

1. Threats

2. Environmental scanning

3. Social factors

4. Business forecasting

5. SWOT analysis

A. B.
The technique used to A method of predicting
analyze the how variables in the
microenvironment of the environment will alter
business the future of business

C. D.
The constant monitoring
The characteristics of the
and evaluation of the
company that needs to be
information from
improved and changed
internal and external
environment of the

E. F.
It consists of
These are external factors
demographical aspects
which may negatively
such as age, gender,
impact the company
civil status and religion
 Additional Activities

A. Classify the following factors using the SWOT analysis. Write the
answer in the appropriate boxes

1. Entry of new competitors 4. Competent and skilled employees

2. Additional sources of raw materials 5. Limited distribution channels

3. Good number of patents

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

B. Classify each given condition whether it is under Political, Economic,

Social and Technological factors.

1. Changing customer’s preference to cholesterol free products.

2. Increase in the general price level of products and services.
3. Accessibility to the use of internet
4. Compliance with environmental laws
5. Non-selling of pork products in Muslim countries
Answer Key
References
https://sadcnews.org/wp-content/uploads/2019/07/increase-in-interest-rates-1.jpg

http://blog.tiching.com/wp-content/uploads/2019/02/ciudadania-consciente.jpg

https://review.chinabrands.com/chinabrands/seo/image/20180717/20180717020128858150-1.png

https://images.all-free-
download.com/images/graphicthumb/manager_work_background_colleagues_meeting_icons_car
toon_characters_6836720.jpg

https://st3.depositphotos.com/16959514/19536/v/1600/depositphotos_195362858-stock-illustration-
office-teamwork-or-business-meeting.jpg
For inquiries or feedback, please write or call:

Department of Education – Region III,

Schools Division of Bataan - Curriculum Implementation Division
Learning Resources Management and Development Section (LRMDS)

Provincial Capitol Compound, Balanga City, Bataan

Telefax: (047) 237-2102

Email Address: bataan@deped.gov.ph