Chapter 2

Organizations: Their Political,

Structural and Economic
Environment
Understanding the Organizational
Environment
– To understand the internal and external organizational environment, it is
important to cover first organizational theory, organizational structure,
centralization and decentralization, levels of the organization, Mintzberg’s nine
design parameters, and formal relationships
Organizational Theory

– Is especially useful for people who manage organizations. Or who aspire to do

so in the future. But whether or not you are a manager, for example, if you
work in public health, you will be working with organizations (like hospitals,
charities, local and national government etc.) so you need to understand them.
Organizational Structure
– Is the pattern of relationships among positions in the organization and among members of the
organization.

Types of Organizational Structure

– Functional
– Product/Service
– Geographical
– Divisional
– Matrix
Functional
– Grouping of major functions. Eg. Contracting, information etc.

Product / Service
– Grouping by service / product. Eg. In a hospital, surgical, nursing

Geographical
– A nationalized service develops regions, areas or district authorities
Divisional
– Grouping of services and / or geography and functionality (but with functions such as finance,
personnel, planning retained at headquarters).
Matrix
– Grouping of projects and functions
Centralization and Decentralization
– Centralization when all the power for decision making rest at a single point in the organization
ultimately in the hands of one person or group, the structure is centralize.
Levels of the Organization
– The technical level
– The managerial Level
– The community Level
Organizational Relationships
– Work Design
– Work can be combined in various forms.
– The need for coordination
– The identification of clearly defined divisions of work
– Economy

– Formal
– Line
– Functional
– Staff

– Span of Control
– Nature of organization, complexity of work, range of responsibilities
Regulation
– Is the administrative process of writing and passing laws that, to a certain extent, restrain some
fundamental rights of business.

AREAS OF GOVERNMENT REGULATION OF BUSINESS

Relevant to the existence of Business
The State ill Take Charge of Economic Activity
– A centrally planed economy is one where all major economic decisions are under the control of
the government.
Advantages of Planned Economy
a. Driven for Collective Business
b. Economies of Scale
c. Inherently Protected
d. Stability

Disadvantages of Planned Economy

e. Inefficient Use of Resources
f. Restraint of Democracy in Trade
Imposition of Legal Administrative Barriers
a. Disproportionate Licensing and Regulatory Requirements,
b. Excessive, Complex, and Arbitrary Taxation
c. Inadequate Banking System and Poor Banking Practices
d. Lack of Government’s Commitment to Reduce Administrative Barriers.

Regulations Relevant to the Conduct of Business

– Advertising
– Laws pertaining to marketing and advertising set in motion by the regulatory authority exist to protect
consumers and keep companies honest about their products
– Employment and Labor
– Among the ever-changing regulations in business are employment laws.

– Environmental
– The carbon footprint of business on the environment is regulated by the Department of Environmental
and Natural Resources (DENR).

– Privacy
– Sensitive information is usually collected form employees and customers during hiring and business
transactions, and privacy laws prevent business from disclosing this information freely.

– Safety and Health

– The safety and health laws ensure that employers provide safe and sanitary work environments through
frequent inspections
Contemporary Social Issues
– Corporations deal with various social issues and problems, both directly related to their operation and
not.

– Environmental Issues
– Corporation have long been criticized and even lambasted by some pressure groups for their negative effect on
the natural environment in terms of wasting natural resources and contributing to environmental problems such
as pollution and global warming.

– Global Issues
– Corporations increasingly operate in a global environment. The globalization of business appears to be an
irreversible trend, but there are many opponents to it.
– Technological Issues
– Another contemporary social issue relates to technology and its effect on society. For example, the internet has opened up many new
avenues for marketing goods and services, but has also opened up the possibility of abuse by corporations.

Ethical Behavior in the Enterprise

– Paying attention to ethics makes good business sense.
Character
– Character drives what we do when no one is looking
Ethics
– Ethics refers to a set of rules that describes what is acceptable in society
Integrity
– To have integrity is to be honest and sincere
Laws
– The law is a series of ruled and regulations designed to express the needs of the people
Morals
– Morals are a set of rules or mode of conduct on which society is based
Values
– Values are defined as the acts, customs, and institutions that a group of people regard in a favorable way
ROLE OF THE STATE AND ITS IMPACT ON BUSINESS ORGANIZATIONS

Role of Government in Business

Consumer Protection
– The government’s role in business includes protecting the consumer or costumer.
Contract Enforcement
– Business dead with other Business
Employee Protection
– Many agencies work to protect the rights of employees
Environmental Protection
– When a marketing transaction impacts a third party besides the marketer and purchaser the effect is
called an “externality”.
Investor Protection
– Government mandates that companies make financial information public, thereby protecting the rights of
investors and facilitating further investment.
Taxation
– Governments at all levels tax businesses, and the resulting revenue collected is an important part of
government budgets.
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Role of Government Policy
– Government policies can also promote business. For example, tax holidays for those foreign companies in
the Economic Zone under the administration by the Philippine Economic Zone Authority.
PRESSURE GROUPS
– A pressure group is an organized group that seeks to influence not only government policy but also
private enterprises’ operating policy.

Economic Pressure Groups

Giant Private Corporations ( the Giant Connection )
– These corporation need to ensure that their interest are protected since large government contract are
often at stake.
Professional Organizations
– This is a powerful group bound by the common interest of its members.
Trade Associations
– Association of businesses with common interest to protect to is the simplest description of a trade
association.
Trade Unions
– One of things that greatly influence the corporate governance principles and government policies in the
Philippine setting is in the area of labor and management
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Public Pressure Groups
– These are groups that represent a cluster of the public on certain issues
Sector Pressure Groups
– Sectoral pressure group refers to groups which work to protect and advance the interest of specific
social groups in a certain society.
Religious / Attitude Pressure Groups
– These are the fast growing group in the Philippines with regards to putting pressure on the government
Government Unites Pressure Group
INCOME AND WEALTH DISTRIBUTION
– Income distribution is defined in economics descriptively as how a nation’s total economy is dispersed
amongst its population.

Major Causes of Economic Inequality

Culture and Religion
– Culture and religion also catches some notion that this two play a role in creating inequality by either
encouraging or discouraging wealth-acquiring behavior.
Development
– As a country develops, it acquires more capital, which leads to the owners of this capital having more
wealth and income introducing inequality.
Diversity of Choices
– When confronted with the choice between working harder to earn more money or enjoying ore leisure time, equally
capable individuals with identical earning potential often have different choices.
Education
– Education, especially in an area where there is a high demand for workers, creates high wages for those with education.
Globalization
– Globalization is a progression by which the worlds are unified into a single society and function.
Inflation
– Some economist have theorized that high inflation, caused by a country’s monetary policy, can contribute to economic
inequality.
Labor Market
– One of the major causes of economic inequality in modern market economies of the determination of wages by the
market.
Wealth Condensation
– Wealth condensation in a theoretical process by which, under certain conditions, newly-created wealth concentrates in
the possession of already-wealthy individuals or entities.