The Physical

Environment
 Creation Identification
Opening of
of
of entrepreneurial
entrepreneurial
entrepreneu opportunities venture
-rial ideas

F.1 The entrepreneurial Process of Creating a New Venture

 Creation Identification
of of
Entrepreneurial Opening of
character traits,
entrepreneurial entrepreneuria skills, and
entrepreneurial
ideas l opportunities competencies Venture

F.2 Entrepreneurial Character Traits, Skills, and Competencies

influencing the Opening of Business
 Entrepreneurial
Character traits,
skills, and
Competencies
Creation of
entrepreneurial Opening of
Identification of
idea entrepreneurial
entrepreneurial
opportunities venture

Entrepreneurial
environment

F.3 Entrepreneurial Environment as Another Factor Influencing the Opening of Business

 Remember that the business does not
operate in a test tube or cylinder but in an
environment that consist of the three layers;

1. Physical Environment
2.Societal Environment
3.Industrial Environment
PHYSICAL ENVIRONMENT

The first layer of the environment is the physical or natural

environment. It is composed of the natural elements that are
inherent in the Earth. It is divided into climate, physical resources,
and wildlife. These three natural elements of the physical
environment have significant contributions and effects to the
business venture. Prospective entrepreneurs should critically evaluate
them before opening their businesses.
 The Physical
Environment

Physical New
business
Climate
Resources

Wildlife

F.4 The Physical or Natural Environment

 The Societal
Environment
Changes in the physical environment have a direct impact on the
societal environment and the effect can be felt later in the industry
environment. According to Wheelen and Hunger (10), the changes in
the physical environment have an impact on the societal environment
First in terms of resource availability and costs, and later, on the
industry environment in terms of growth or decline of particular
industries. However it is perceived that all the changes that happen
in the different layers of the environment surrounding the enterprise
directly affect the business.
 Physical Industry
Changes Societal Changes Environment
Environment
Environment

Business

Relationship between the Environment and the Business

This is where you section ends. Duplicate this set of slides as many times you need to go over all your sections.
SOCIETAL ENVIRONMENT

The societal environment is generally composed of social,

political, cultural, e legal, and technological forces. Studies reveal
that there is a positive relationship between the evaluation of the
societal environmental and the favorable operating performance o
the entrepreneurial venture. That is why, it is highly advised that
the entrepreneur should critically evaluate the effects of changes in
all the forces of the societal environment. The critical evaluation
and thorough study of the environment where the business operates
is technically called environmental scanning.
 The Societal
Environment
Technological forces Social forces

New Business

Legal forces Political forces

Economic forces Cultural forces

The Societal Environment Surrounding the Business

Social Forces
Social forces are elements in society resulting from human
interactions that can influence the thoughts, behavior, attitude, actions, and
even the beliefs and customs of the people.
Social forces include the following:

1. Values 5. Time Orientation

2. Traditions 6. Lifestyle Patters
3. Literacy level 7. Professional career roles
4. Consumer psychology
Political Forces

Political forces are the various elements usually comprising of the

political parties, political systems, and other related political groups that
substantially influence the political stability of a country. In the Philippines,
the political forces of the macro-environment have major and essential
influence on business. Even foreign investors are very watchful of the political
atmosphere in the country and the moves of the Philippine government.

Political forces include the following:

1. Trade regulations
2 Taxation
3. Government stability
4. Unemployment
5. Workers' benefits
6 Election practices
Cultural Forces

Culture basically refers to the integrated

characteristics of a group of people or ethnic group in a
particular society.

Cultural forces include the following:

1. Religion
2. Language
3. Beliefs
4. Customs
5. Education
Economic Forces
Economic forces are factors which are primarily caused by changes or
movements in the Philippine economy that have direct or indirect effects
on the entrepreneurial venture.

Economic forces or factors include the following:

1. Interest rates
2. Inflation rates
3. Fiscal policies
4. Monetary policies
5. Income
6. Exchange rates
7. Employment
Legal Forces
Legal forces are the elements and bodies that are directly
involved in the legislation and representation of laws and
ordinances directly affecting the business.

Legal forces include legislations on the following;

1. Product control, pricing, and labeling

2 Health and safety of the workers
3 Administration of election process
4 Advertising and promotion
5 Exercise of profession
6 Education administration and fees
Technological Forces
Technological forces basically refer to the trends and developments in
computer an information technology that have impact on business. These occur
almost every day.

Technological forces may include the following:

1. Internet 4. Technological advancement
2. Social media 5. Technological infrastructure
3. E-commerce
 ENVIRONMENTAL SCANNING: DEFINITION
AND SIGNIFICANCE
Environmental scanning refers to the gathering, critical evaluation, and utilization of information
on events and activities and their relationships with the physical, societal, and industry
environments. This includes the different forces existing in every environmental layer that have
direct and indirect effects on the entrepreneurial venture.

Environmental scanning is very important for the following reasons:

1. It clearly portrays the trends, activities, and developments happening in every environmental
layer including the interrelated relationships between the various forces in the environment.
2. It identifies the expected threats and opportunities existing in the environment.
3. It points out the possible factors that will determine the success of the entrepreneurial
venture.
4. It helps define the future path of the business.
5. It assists in the formulation of the most appropriate entrepreneurial strategies.
Societal Environment Scanning Approach

1. PESTEL analysis

2. Environmental forces matrix

 Template of PESTEL Analysis
Political Economic forces Sociocultural Technological Ecological Legal
forces forces forces forces forces

Instability of the High interest rates Low level of Readily available Abundant raw Frequently-
Philippine given by education among internet and social materials. change tax
government. commercial banks. public school media. laws.
graduates.
 Template of Environmental Forces Matrix

Level of Effect on Entrepreneurial Venture

High Moderate Low

Frequency of
Occurrence
High Environmental High Environmental Moderate
High force force Environmental force

Moderate High Environmental Moderate Low Environmental

force Environmental force force

Moderate Low Environmental

Low Low Environmental
Environmental force force force
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