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Organization &
Management
Quarter 1 – Module 3:
The Firm and It’s Environment:
Environmental Forces,
Environmental Scanning, Local
and International Business
Environment of the Firm
 The Firm and It’s Environment:
Lesson Environmental Forces,

1 Environmental Scanning, Local and

International Business Environment
of the Firm!

Have you ever wonder how major corporations face a problem and somehow they
goes through?
For example, Mitsubishi Cars and Company. This company is known for its high
quality cars. However, there were instances that the company’s reputation was
probed because of the performance of its Mitsubishi Montero.
What do you call this type of problem? Did the company foresee this problem? Were
they able to analyze their environment carefully? How important is your knowledge
about your environment and how can it help you prevent problems in the future?
Before you answer these questions, read and analyze the information below.

Business environment may be classified into two types (internal and

external) that affect a company’s operations. and include strengths, weaknesses,
internal power relationships, orientations of the organization, nature of economy
and economic conditions, social cultural factors, demographic trends, natural
factors, global trends and cross-border development, clients and suppliers,
technological developments, laws and government activities.
The general environment consists of factors such as legal, economic, political,
socio-cultural, technological and ethical which affects business organizations
operations and which emanate from local and international sources.

Business Environment

Internal External
Environment Environment

An organization’s internal environment consists of conditions and forces

within the organization which consists of the owners, board of directors, employees,
the organization’s culture, the physical work environment and the various

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departments that make up the organization.

Owners The owners of business are those who have legal property rights to
business. Owners can be a single individual who establishes ad runs
a small business, partners who jointly own the business, individual
investors who buy stock in a corporation, or other organizations.
These sets of people have a stake in the business and are mindful of
how the business is being managed.
Board of A corporate board of directors is elected by the stockholders and is
Directors charged with overseeing the general management of the firm to
ensure that it is being run in a way that best serves the stockholders
interest.
Employees/ An organization’s employees are also a major element of its internal
Managers environment. The employees are the workers who perform the day to
day operation of the organization and ensure that work is being
accomplished to achieve the organizations desired goal. These sets of
people are being supervised and managed by the managers of an
organization. Managers are responsible for combining and
coordinating the resources of an organization including the workers to
ensure that organizations achieve their goals.

Culture This may be refer as culture of the organization which is the collective
behaviour of humans that are part of an organization. The extent to
which the culture of the organization is shared by all, leads to an
important factor contributing to success.

The External Environment, which is also called the immediate operational

environment, has profound impact on the operations of a firm. It includes
suppliers, competitors, distributors, customers, labor markets, and financial
institutions.

Suppliers These are individuals and companies that provide an organizations

with the input resources (such as raw materials, component parts, or
employees) that it needs to produce goods and services. In return, the
supplier receives compensation for those goods and services.
Distributors Distributors are organizations that help other organizations sell their
goods or services to customers. The decisions that managers make
about how to distribute products to customers can have important
effects on organizational performance.
If distributors become so large and powerful that they can control
customers’ access to a particular organizations’ goods and services,
they can threaten the organization by demanding that it reduce the
price of its goods and services.
Customers They are individuals and groups that buy the goods and services of an
organization. A customer may be an individual, an institution such as
school, hospital and other organizations or government agency.
Competitors Organizations that produce similar goods and services to a
organization. In other words, competitors are organizations that
compete for the same competitors. In the Philippine communication
industry, Globe Telecom competes with other communication firms
such as Smart or PLDT.
A high level of rivalry often results in price competition, and fallen
prices reduces access to resources and lower profits.

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Activity 1 Sort Me!
Pick out the word/s that you think belongs to the internal and external environment
forces of the firm.
Instructions: Write your answer in the table. Provide a screenshot of your answer and upload it
to the album- MODULE 1 ACTIVITIES 1-3 DEADLINE SEPT 27, 2023 , The filename format is
(Surname- Activity 1 Module 3 ( Ex. Montales- Activity 1 Module 3) (10 points)

Competitors employees/managers suppliers

Owners Culture customers

Board of directors distributors

Internal Environment External Environment

Lesson 2. Indirect Environment Factors

These comprise the forces that affect a business as well as other business
organizations. They include:

1. Political Legal This environment is primarily concerned with complex

Environment laws, regulations and government agencies and their
actions which affect all kinds of enterprises in varying
degrees.

The government, in improving the standard of living of the

society, uses the resources within which the company is
endowed to play the three major roles of participants,
facilitators and regulators of business activities.

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2. Economic Environment The general pattern of the economy can be viewed from
three dimensions: the economic system, the general
business cycle and the economic policies.
The main economic effect is on business organizations
today are usually classified as fiscal and monetary policies.

Fiscal policies deal with the use of government spending

and taxation to improve the position of the economy.

Monetary policies refer to the use of monetary

instruments through the Central Bank of the Philippines,
to influence the money in circulation.
For example, the tight monetary control measures
implemented by the government as part of the national
economic development strategy have a considerable impact
of business.
[Link]-Cultural The way of life of the people. These are made up of
Environment attitudes desires, expectations, beliefs, degree of education
and customs of the people.

The attitude of the society to a business also depends on

whether the firms have been responsive to the needs ad
aspirations of the society.
4. Technological This comprises the innovations and improvements in
Environment methods, machines and materials. Technology can be
acquirement through indigenous technology or transfer
of technology.

Technology has considerable impact on business by

enhancing competitive provision of a variety of products,
efficiency of products ion, mechanization and automation
of the organizational system and improving the method of
planning, scheduling and controlling of the industrial
system.

PEST ANALYSIS

Political Economic Social Technological

1. Tax Policies 1. Inflation Rates 1. Age 1. Threats from

Demographics competing
technologies
2. Labor Policies 2. Iterest Rates 2. Lifestyle Choices 2. Research and
development
3. Environmental 3. Current 3. Population 3. Speed of data
Policies Economic Climate Growth Rate transfer

So how does PEST Analysis work?

PEST Analysis (political, economic, social and technological) is a management

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method whereby an organization can assess major external factors that influence
its operation in order to become more competitive in the market.

Are you familiar with the SWOT Analysis?

SWOT or TOWS Analysis (Strengths, Weaknesses, Opportunities, Threats)
These are factors found within the business environment in which the organization
operate. SWOT Analysis is a systematic identification of these factors and the
strategy that reflects the best combinations of these factors

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 Helpful Harmful
to achieving the objective to achieving the objective
Internal STRENGTHS WEAKNESSES
Origin (things your company does well)

1. Leading fast-food chains in the (Competitors in your area, emerging

Philippines needs of your product)
2. Food items are suitable to Filipino
taste 1. Adapting to the rise of healthy living
3. Cheaper food items compared to 2. branch expansion in other
other food chains. countries
External OPPORTUNITIES THREATS
Origin (Emerging competitors,changing
(things your company lacks) customers attitude,changing
regulatory environment)
1. Unhealthy food items
2. Food items appeal only to Filipinos 1. Rivalry with other fastfood chain
but not to other foreigners 2. The rise of healthy living/ veganism
3. Lack of presence in other countries 3. Wealthy people may find
fastfood chain unappealing

Why conduct Environmental Analysis/Scanning?

Environmental analysis is the scanning the environment to identify the
changes or trends that have the potential to generate opportunities ad threats to
the organization’s current or future intended strategies (Worthington and Britton,
2009). The way this environmental scanning may be put into operations depends
on the firm and can be undertaken informally or using quite sophisticated
analytical tools and techniques that require significant employment of an
organization’s resources.

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Activity 2 Assess yourself!

Instruction: Assess your strengths, weaknesses, opportunities and threats through

the us of SWOT analysis. Also, you may reflect and think of how the PEST (Political,
Economic, Socio-economic, and Technological affect you as a person).

Write your answer in a sheet of paper. Provide a screenshot of your answer and upload it to the
album- MODULE 1 ACTIVITIES 1-3 DEADLINE SEPT 27, 2023 , The filename format is (Surname-
Activity 2 Module 3 ( Ex. Montales- Activity 2 Module 3) (20 points)

SWOT Analysis

Learner’s Name
Strengths Opportunities

1. 1.
2. 2.

Weaknesses Threats

1. 1.
2. 2.

PEST Analysis

Learner’s Name
Political Economic Social Technological
1. 1. 1. 1.

2. 2. 2. 2.

Lesson 3. Stage of International Business

Outsourcing It is sometimes called global sourcing, means engaging in the

international division of labor so that manufacturing can be done
in countries with the cheapest sources of labor and supplies.

For example, Citibank taps low cost skilled labor in Philippines,

India, Hong Kong and Singapore to manage data and develop
products for global financial services.

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Importing and Importing and Exporting is usually the first type international
Exporting business in which a firm gets involved. Exporting is the making of
a product or service in the firm’s domestic marketplace and selling
it in another country.
Importing on the other hand is bringing a good, service, or capital
into the home country from abroad.
Licensing and A company may prefer to arrange for a foreign company to
Franchising manufacture or market its products under a licensing agreement.
Strategic Involves two or more firms jointly cooperate for mutual gain. It
Alliances involves partnership between an organization ad a foreign company
in which both share resources ad knowledge in developing new
products or building production activities.
For example, IBM of United States, Toshiba of Japan, and Siemens
of Germany formed a partnership to develop new generation of
computer chips.
Joint venture A specific type of strategic alliance I which partners agree to form a
separate, independent organization for some business purpose. It
occurs when two existing companies collaborate to form a third
company.
An example, of global joint ventures is Fuji-Xerox, which is a joint
venture between Fuji photo film of Japan and Xerox corporation
based in the United States, which makes copiers and automated
office systems.
Wholly Owned It is estimated that one third or multinational companies enter
Affiliates(Build or foreign markets through wholly owned affiliates.
buy) For example, Honda Motors of America in Maryville , Ohio, is 100
percent owned by Honda Motors of Japan.

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 Environmental Challenges of International Business

The International Economic Environment

The economic environment can be identified in three aspects which are
useful to managers operating internationally. These shall be discussed under the
economic system, natural resources and infrastructure.

Economic System Most countries all over the world today are among moving
toward market economy, the key element here is freedom of
choice. Consumers are free to decide on what products and
services they prefer to purchase.
Natural Resources It is another aspect of the economic environment. A broad
range of resources are available in different countries
which help promote economic activities. The United States
has a lot of natural resources such as crude oil, natural gas,
coal, iron ore, copper and other metals and materials
that are
important to the economic development of a modern
economy.
Infrastructure It is also an important aspect of the economic environment
that is of relevance to international business management.
Infrastructure consists of physical things such as roads,
railways, schools, hospitals, communication systems

The Political/Legal Environment

A second environmental challenge facing the international manager is the

political/ legal environmental which he or she will do business.

Government Stability Stability can be viewed in two ways-as the ability to be given
government to stay in power against other opposing factors
in the country and the permanence of government policies
toward business.
Incentives for Another facet of the political environment is incentives to
International Trade attract foreign business. Some of the most common include
reduced interest rates on loans, constructions subsidies and
tax incentives.

Controls on International Trade

A third element of political environment that managers need to consider is the

extent to which there are controls on international trade. In some instances, the
government of a country may decide that foreign competition is hurting domestic
trade. To protect domestic business, such governments may enact barriers to
international trade.

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 These barriers include tariffs, quotas, export restraint agreement, and “buy
national” laws.

Tariff It is a tax collected on goods shipped across national

boundaries. Some countries impose heavy tariffs to
discourage foreign goods from being imported into their
countries. Tariffs can be also imposed, usually by less
developed countries in order to raise money for the
government.
Quota It is a limit on the number or value of goods that can be
traded. Quota are the most common form of trade
restriction. The quota amount is typically designed to ensure
that domestic competition will be able to maintain certain
market share.
Export restrict These are agreements reached by governments in which
agreements countries voluntarily the volume or value of goods they
export and import from one another.
The Cultural Another global environmental challenge of international
Environment business is cultural environment

Activity 3 True or False

Instruction: Draw a  if the statement is correct. Draw a  if the statement is incorrect.
Draw your answer on the blank provided. Write your answer in the table. Provide a
screenshot of your answer and upload it to the album- MODULE 1 ACTIVITIES 1-3 DEADLINE
SEPT 27, 2023 , The filename format is (Surname- Activity 3 Module 3 ( Ex. Montales- Activity 3 Module
3) (10 points)

1. An organization’s external environment consists of conditions

and forces within the organization which consists of the
owners, board of directors, employees and the organization’s
culture.
2. The full meaning of SWOT is Strengths,
Weaknesses, Opportunities, and Timeliness.
3. The internal environment, which is also called the immediate
or operational environment has profound impact on the
operations of a firm. It includes suppliers, competitors,
distributors, and customers.
4. The board of directors are the workers who perform the day
to day operations of the organization and ensure that work
is
being accomplished to achieve the organization’s desired goals.
5. The owners of business are those who have legal
property rights to the business.
6. A corporate board of directors is elected by the managers and
is charged with overseeing the general management of the
firm.
7. Suppliers are organizations that produce similar goods and
services to an organization that compete for the same
customers.
[Link] are individuals and companies that provide an
organization with the input resources (such as raw materials,
component parts, or employees) that it needs to produce
goods and services.
9. Weaknesses are things your company does well.
12 with the use of government spending
10. Monetary policies deal
and taxation to improve the position of the economy.
References:

Book

Bueno, David C. (2016). Organization and Management for Senior High School. Books Atbp.
Publishing Corp.

Internet

htttps://[Link]/about-us