BUSINESS

ECONOMICS
Applied Economics

QUARTER 4
 EXPECTATIONS
After going through this lesson, you are expected to:

1. define environmental scanning;

2. differentiate internal and external environment; and
3. discuss the micro and macro environment factors.
 BUSINESS ENVIRONMENT
It includes all internal and external factors that affect the
company’s performance and functions. It includes employees,
customers, management, supply and demand, business
regulations, and competition.
Every business organization has an internal and external
environment. For the organization to be successful, it is
important to study its environment regularly. This is to assess
any developments and understand factors that can contribute
to its success.
Environmental scanning is a process used by organizations to
monitor their external and internal environments. The purpose
of the scan is to identify the opportunities and threats affecting
the business.

Environmental analysis is a strategic tool in assessing the

level of threats or opportunities that might affect the
business. This eventually helps the management team to
make better decisions.
INTERNAL ENVIRONMENT

The internal environment of the organization consists of factors that are

controllable by the management. These elements lie within the organization
and any changes to them can affect the overall success of the business.

EXTERNAL ENVIRONMENT

There are two elements in the external environment: micro and macro, are
beyond the control of the business but they still minimize the impact if the
business has an effective strategic plan.

BUSINESS ENVIRONMENT
 EXTERNAL ENVIRONMENT
MICRO ENVIRONMENT FACTORS
1. Suppliers
Suppliers can control the success of the business when they hold
power. The supplier holds the power when they are the only or the
largest supplier of the goods in the market.
2. Resellers
Market intermediaries, middleman, or resellers have a great
contribution to the delivery of products to the ultimate consumers.
For example, if the reseller has a reputable name then this reputation
can be leveraged in marketing the product.
 EXTERNAL ENVIRONMENT
3. Customers
A customer is an individual or business that purchases goods or
services. Customers are important because they drive revenues.
Without them, businesses have nothing to offer.

4. Competition
Those who sell the same or similar products and services as your
organization is called competitors. The presence of one or more
competitors can reduce the prices of goods and services as the
companies attempt to gain a larger market share.
Micro Environment Factor
 EXTERNAL ENVIRONMENT
MACRO ENVIRONMENT FACTORS
1. Political factors
These are about how and to what degree a government intervenes in the economy. It
includes government policy, political stability or instability in overseas markets,
foreign trade policy, tax policy, labor law, environmental law, and trade restrictions.

2. Economic factors
Economic factors have a significant impact on how an organization does business
and also how it is profitable. These factors include economic growth, interest rates,
exchange rates, inflation, disposable income of consumers and businesses.
 EXTERNAL ENVIRONMENT
3. Social Factors
These include the shared belief and attitudes of the population.
These factors are population growth, age distribution, health
consciousness, career, attitudes and so on.
4. Technological Factors
Technological factors affect the management and marketing in
three ways: new ways of producing goods and services, new ways
of distributing goods and services, and new ways of
communicating with target markets.

Macro Environment Factor

 EXTERNAL ENVIRONMENT
5. Environmental Factors
These factors have become important due to the increasing
scarcity of raw materials, pollution targets, doing business as an
ethical and sustainable company.
6. Legal Factors
It includes health and safety, equal opportunities, advertising
standards, consumer rights and laws, product labeling, and
product safety. It is clear that companies need to know what is and
what is not legal in order to trade successfully.

Macro Environment Factor

Quiz Time
Time to test your knowledge!
Directions: Read each statement carefully. Write T if the statement is
correct, otherwise write F.
________1. Economic factors include economic growth, interest rates, exchange
rates, inflation, disposable income of consumers and businesses.
________2. The presence of one or more competitors can reduce the prices of
goods and services as the companies attempt to gain a larger market share.
________3. Environmental analysis is a process used by organizations to monitor
their external and internal environments.
________ 4. A customer is an individual or business that purchases products.
_________5. Environmental scanning is a strategic tool in assessing the level of
threat or opportunity the factors might affect the business.