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CHAPTER 2

The Firm and Its Environment

ALL MANAGERS, without exception, must consider their organizations’ external and internal
environments before planning anything. Responding to the various forces/elements of the firm’s
external and internal business environments is a must because failure to do so may bring about
negative effects. However, managers must make sure that they respond based on the proper
identification and evaluation of these forces/elements in their surrounding environments.

As you read and study this chapter, concentrate on the following objectives, and at
the end of the chapter, be able to:
1. identify the various forces/elements of the firm’s environment and summarize these
forces using the SWOT analysis;
2. describe the local and international business environment of a firm; and
3. explain the role of business in relation to the economy, discuss the different phases of
economic development, and differentiate the various forms of business organizations.

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LESSON 1
Environmental Forces
and Environmental Scanning

B usiness Environment refers to the factors or elements affecting

a business organization. It may be divided into the External and
Internal Business Environments. The External Business Environment
Definition of Terms
Environmental scanning – seeking
for and sorting through data about
includes the factors anf elements outside the organization which may the environment
affect its performance, either positively or negatively while the Inter- External business environment –
nal Business Environment refers to the factors or elements within the refers to the factors/elements
organization which may also affect its performance, either positively outside the organization which
or negatively. The environment in which a business operates is a may affect, either positively or
negatively, the performance of the
major consideration in determining an organization’s design or struc- organization
ture. Considerations such as uncertainty, procurement, and competi-
Internal business environment
tion are linked with the external environment. A company’s strategy – refers to the factors/elements
and approach to operations must also be aligned with the limitations within the organization which
of its external environment as well as its internal environment. may effect, either positively or
Components of the External Business negatively, the performance of the
organization
Environment: General and Specific
Inflation – a period of above
normal general price increases,
Systematic monitoring of the major external forces influencing organi- as reflected in the consumer and
zations is necessary to improve the management of companies. Failure wholesale price indexes
to consider a company’s general and specific business environments may Interest rates – the total amount
affect the strategies that management will make and use. that a borrower must pay annually
The general business environment includes the economic, sociocul- to the lender and above the total
tural, politico-legal, demographic, technological, and world and ecological amount borrowed
situations. All these must be considered as managers plan, organize, staff, Changing options – the
lead, and control their respective organizations. consumers change in preference of
goods and services offered
Inflation, rates of interest, changing options in stock markets, and
People’s spending habits –
people’s spending habits are some examples of factors/elements of eco-
consumers’ changing ways of
nomic situations. Economic situations may affect management practices spending their money on goods
in organizations. For example, companies may postpone expansion plans and services
if bank loan interests are too high. economic situations – includes
Sociocultural situations include the customers’ changing values and inflation rates of interest, people’s
preferences; customs could also affect management practices in com- spending habits, changing options,
etc.
panies. For example, Filipino customers are now conscious about the
importance of avoiding fatty foods, so many food companies now make
sure that the products they offer are cholesterol-free or are low in cho-
lesterol. In doing so, they avoid losing their customers.
Politico-legal situations refer to national or local laws, international
laws, and rules and regulations that influence organizational management.
For example, labor laws related to preventing employers from firing their
employees without due process require the former to allow the latter to
exercise their right to present their position during disciplinary action
before their employment can be terminated.

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Demographic situations such as gender, age, education level, income,

number of family members, geographic origin, etc., may also influence
some managerial decisions in organizations. For example, decisions
regarding hiring of human resources may be affected by an organization’s
management policy that shows prejudice to the hiring of married females
who are in the child-bearing age because they would like to minimize
payment of maternity leave benefits.
The technological situations of companies involve the use of varied
types of electronic gadgets and advanced technology such as computers,
robotics, microprocessors, and others that have revolutionized business
management; e-commerce, teleconferencing, and sophisticated informa-
tion systems have rapidly changed the ways that business is conducted
in the 21st century.
World and ecological situations are related to the increasing number
of global competitors and markets, as well as the nature and conditions
of the changing natural environment. Products produced by companies,
of course, must cater to the changing needs of people in the global com-
munity, while, at the same time, considering their impact on the natural
environment. For example, car manufacturing managers must give the
go signal for the development of vehicles that are environmental friendly
instead of only being focused on the product’s speed, fuel economy, and
design.
Meanwhile, the specific business environment focuses on stake-
holders, customers, pressure groups, and investors or owners and their
employees.
Stakeholders are parties likely to be affected by the activities of the
organization, while customers are those who patronize the organization’s
products and services. Increasing customer sophistication makes it nec-
essary for managers of organizations to make crucial decisions regarding
the development of products with higher value and the improvement of
their services to meet their patrons’ increasing demands. Also, this has
prompted companies to solicit feedback from their customers to avoid
dissatisfaction that may lead them to patronize another company offering
similar products and services instead.
Suppliers are those who ensure the organization’s continuous flow of
needed and reasonably priced inputs or materials required for producing
their goods and rendering their services. Inputs mentioned also include
financial and labor supply. Managers decide what, where, and when to
buy their supplies and which supplier to favor with their organization’s
supply orders.
Pressure groups are special-interest groups that try to exert influence
on the organization’s decisions or actions. For instance, pressure from
the Food and Drug Administration on some department stores and drug
stores led them to stop selling beauty products containing lead and to
stop ordering or importing such products from their suppliers.

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The organization’s investors or owners provide the company with the

financial support it needs. The company, of course, cannot exist without
them; thus, they greatly influence organizational management. Top-level,
middle-level, and lower-level managerial decisions are all influenced, in
one way or another, by the investors or owners of organizations. Branching
out, offering new products and services, and applying for needed loans
are all affected by the investors’ or owners’ way of thinking.
Employees are comprised of those who work for another or for an
employer in exchange of salaries/wages or other considerations. Employ-
ees execute the company’s strategies and are important for the mainte-
nance of the company’s stability. For example, managerial decisions are
influenced by the company’s knowledge workers.

Components of the Internal Business

Environment
An organization’s internal business environment is composed of its
resources, research and development, production, procurement of sup-
plies, and the products and services it offers.
The organization’s internal environment must also be subjected to
internal analyses. Internal strengths and weaknesses, opportunities, and
threats (SWOT) with regards to its resources (financial, physical, mechan-
ical, technological, and human resources), research and development
endeavors, production of goods, procurement of supplies (materials,
inputs, and finance), and products and services must all be considered
prior to organizational planning.

Components of Environmental Scanning:

Developing a Competitive Mindset, Considering
Future Business Scenarios, Business Prediction,
SWOT Analysis, and Benchmarking
Adapting to environmental uncertainties must start with develop-
ing a competitive mindset. Ignorance of present-day realities may cause
individuals or organizations to do certain things that they may regret in
the future; hence, environmental scanning is necessary. By seeking for
and sorting through data about the environment, you may be able to
understand and predict the various changes, opportunities, and threats
that may affect organizations in the future. Knowing the present-day
competitors, the possible number of barriers to entering your chosen
business industry, the existence or nonexistence of substitutes to your
planned product or service, and possible dependence on powerful sup-
pliers and customers will be helpful in developing a competitive mindset.
You must also consider future business scenarios. By realistic consid-
eration of both worst-case scenario or unfavorable future conditions and
best-case scenario or favorable future conditions, as well as middle-ground
possible conditions, you will have an idea of what to do in the future.

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Meanwhile, business prediction, also known as business forecasting,

is a method of predicting how variables in the environment will alter
the future of business. It could be used in making decisions regarding
offshoring, branching out locally, and expanding or downsizing the
company. However, the accuracy of such business predictions may not
always be assured.
Benchmarking is defined as 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. Best prac-
tices of said industry leaders are observed so that understanding their
competitive advantage would be easier. This is followed by gathering
information about the company’s own operations and those of the other
company in order to identify gaps; this in, turn, could be used to find
out the underlying reasons for performance differences. From these said
reasons, a set of best practices in one’s own company will be listed down
and that, ultimately, leads to the company’s improved performance.

Fast Learning Review

1. What is the difference between the terms “external business environment” and “internal business environment”?
Which of the two has greater influence on business organizations? Explain your answer.

2. How does customer satisfaction affect the competitive mindset of business organization?

3. Why is customer satisfaction important in all types of businesses?

4. Give your own example of a sociocultural environmental influence on a business organization.

5. Why should business professionals consider future business scenarios? Will you make use of these as a business
professional in the future? Explain your answer.

Exercise
1. Who are the stakeholders of your school? Give specific examples and state why they are important for the
maintenance of your school’s stability as a business organization.
2. Practice benchmarking by comparing your school’s practices with the best practices of a leading school in
the Philippines. Are there performance gaps? What are the underlying reasons for the identified performance
differences? List down your suggested best practices to improve the performance of your school.

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LESSON 2
The Local and International
Business Environment of the Firm
Definition of Terms

U nderstanding the local and international business environment of the

firm requires managers of organizations to sharpen their cultural
intelligence. Cultural intelligence is an individual’s ability to favorably
Inflation rate – rate reflected
during a period of above normal
general price increases
receive and adjust to an unfamiliar way of doing things. This will enable Gross national product (GNP) –
them to develop their ability to accept and adapt to different cultures, total domestic and foreign output
both local and international, that may affect the organization to which claimed by the residents of a
they belong. country
Anthropologist Edward T. Hall, as cited by Schermerhorn (2008), Gross domestic product (GDP)
– total final output of goods and
noted that the way people approach and deal with time varies across
services produced by the country’s
cultures. Monochronic cultures refer to cultures wherein people tend to economy, within the country’s
do one thing at a time; also, these cultures emphasize punctuality and territory
sticking to set rules. Polychronic cultures, on the other hand, are more Currency exchange product – the
flexible as regards time; accomplishing many different things at once is rate at which central banks will
also common for these cultures. It may be very frustrating for one who exchange the country’s currency for
another
is influenced by a monochronic culture to be dealing with one who is
influenced by a polychronic culture if he or she does not possess cultural
intelligence. Helpful
to achieving the objectives
Harmful
to achieving the objectives

Geert Hofstede, also cited by Schermerhorn (2008), showed how

attributes of the organization
selected countries ranked on the five cultural dimensions he studied:
Internal origin

Power Distance – the degree to which a society accepts or rejects the Strengths Weaknesses
unequal distribution of power among people in organizations and the
institutions of society.
to achieving the environment

For example: India and the Philippines have high power distance,
External origin

while the US and Australia have low power distance. The use of the Opportunities Threats
terms “Sir” and “Madam” to refer to the boss/superior by subordinate
employees in the Philippines shows respect for authority figures, or high
power distance. In the US, subordinates just use the name or nickname FIGURE 2.1 The SWOT analysis or matrix
of the boss when addressing him or her, indicating low power distance. is one of the most structured and used
Hofstede Five Dimensions: planning method to evaluate a business
venture.

FIGURE 2.2 This bar graph shows the

United States

United States

United States

United States

United States
Philippines

Philippines

Philippines

Philippines

Philippines

comparative scores of a few countries

Kingdom

Kingdom

Kingdom

Kingdom

Kingdom
Australia

Australia

Australia

Australia

Australia
Zealand

Zealand

Zealand

Zealand

Zealand
Canada

Canada

Canada

Canada

Canada
United

United

United

United

United

based on Hofstede’s cultural dimensions

New

New

New

New

New

PDI IDV MAS UAI LTO theory.

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TABLE 2.1 Dimension scores differ in Uncertainty Avoidance – the degree to which society is uncomfortable
different countries. with risk, change, and situational uncertainty
Philippine Scores in the Different Managers in the US are risk takers. Filipinos are seguristas that are
Geert Hofstede Cultural Dimensions afraid of taking risks within business endeavors in the market.
Dimension Score Individualism-Collectivism – the degree to which a society emphasizes
individual accomplishments versus collective accomplishments
• Power Distance 94
Individualistic cultures like those of the US and Australia are char-
• Uncertainty Avoidance 44
acterized as “I” and “me” cultures where employees prefer to work alone
• Individualism-Collectivism 32
without help from others. Mexico, Thailand, and the Philippines exhibit
• Masculinity 64
collectivism or preference for group or team work.
• Time Orientation 19
Masculinity-Femininity – the degree to which a society values asser-
[Link] tiveness and feelings of material success versus concern for relationships
The Japanese and Mexicans do not hesitate to push or express what
they want, unmindful of hurting others’ feelings, thus showing masculin-
ity. Filipinos, Thais, and Swedes would rather keep quiet and accept defeat
if what they want is not acceptable to others, thus, exhibiting femininity.
Time Orientation – the degree to which a society emphasizes short-
term thinking versus greater concern for the future or long-term thinking
The Americans, who are risk-takers, prefer short-term thinking. On
the other hand, Filipinos and the Japanese, who are not risk-takers, are
long-term thinkers.
The local culture of a particular country also influences the manage-
ment practices of firms. An example is the mañana habit which is part
of local Filipino culture and practiced by some Filipino workers. It is
counter productive since it encourages the postponement of performing
tasks that can be done immediately to another day.
Managing and disciplining workers who practice this habit would be
easier for managers if they are able to identify the workers who adhere to
such negative work habit and prevent them from doing it. This, however,
is easier said than done because it is difficult to explain a country’s unique
cultural characteristics.

Managing in a Worldwide Environment: Cultural,

Politico-legal, and Economic Environments
The call for businesses to go global is hard to resist as this is the trend
prevailing in the 21st century. The economic and social benefits that come
with globalization are said to be among the positive outcomes. Globaliza-
tion advocates, however, fail to realize the very serious challenges faced by
managers in adjusting to the cultural differences among different coun-
tries where they intend to do business. The culture of different countries
are rooted in their history, religion, traditions, beliefs, and deep-seated
values, and because of these, managing globally can be very complicated.

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Besides the cultural environment, the politico-legal and economic Definition of Terms
environments must also be considered. The politico-legal environment Worldwide Environment –
refers to the laws and political climate of different countries. Some coun- refers to the external business
tries have stable laws and good political climate while others have the environment (i.e. sociocultural,
natural, politico-legal, and
opposite—unstable laws and risky political climate. Awareness of the economic technological factors)
economic issues of countries where organizations intend to establish around the world
business is also very important. For instance, do they have a free market or Globalization – refers to changes
a planned economy? Answering this question is the first step because the in the dimensions of external
country’s economic system has the potential to influence the organization’s environment that result to
decision-making. Other economic matters that must be considered are increased interdependence and
integration among people and
the inflation rates, the gross national product/gross domestic product, organizations around the world
the currency exchange rates, taxation system, and others.

Fast Learning Review

1. Define cultural intelligence. How important is it in terms of doing business globally?

2. Is it easier to manage business in countries with high power distance rating? Explain your answer.

3. Which is valued by members of a Filipino society: masculinity or femininity? Explain your choice.

4. Why should a country’s politico-legal issues be considered when managing in a worldwide environment?

Exercise
1. How would you describe Philippine culture? Do you think it would be easy for a foreign or expatriate manager
to manage his or her company in the Philippines? Explain your answer.
2. Interview a schoolmate who is from another country. Ask him or her to describe what the business world is
like in his or her country. Write a brief paper describing the result of your interview.

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LESSON 3
Phases of Economic Development
Definition of Terms
Economic development –
is a total process which includes
A lthough material wealth accumulation is among the concerns of
genuine economic development, its greater concern is the total
improvement of the quality of people’s lives. This, in turn, is related to
not only economic growth or the sustainable economic development issues in a country which greatly
increase in the given amount of
goods and services produced by influences business management.
the country’s economy, but also Sustainable economic development ensures that the present needs of
considers the social, political, a particular generation are fully met without endangering the ability of
cultural, and spiritual aspects of the future generations to also fully meet their own needs. Business manag-
country’s growth
ers must be conscious of their decisions to avoid the abuse of ecological
Economic development phases –
elements—air, water, and soil—as this will threaten sustainable economic
are the distinct stages involved
in the total process of economic development.
development in a particular Different countries have different management strategies to encourage
country. These include economic ecological respect and prevent damage to the environment. Common
growth, improvement of the environmental and ecological problems that have to be dealt with by
Human Development Index (HDI),
availability of benefits provided business managers include destruction of natural habitats, depletion of
by science and technology, and clean water resources, urban, industrial, and agricultural pollution, and
the societal improvement of the many more.
opportunities and general welfare In September 2000, world leaders gathered for the Millennium
of its members
Summit, and thus adopted the United Nations (UN) Millennium Dec-
Economic growth – increase in
laration. By doing so, they had committed their nations to a global part-
the given amount of goods and
services produced by the country’s nership toward the reduction of extreme poverty and the pursuit of the
earning Millennium Development Goals (MDG).

HDI, 2012
Korea, Rep
0.9

Mexico Chile
Malaysia
Turkey
Tunisia Brazil
Thailand
Mauritius
0.7 China
FIGURE 2.3 United Nations Develop-
ment Programme (UNDP) reported that in Indonesia
Vietnam
2012 almost all countries improved their India
human development status. This figure Lao PDR Ghana
Bangladesh
identifies the 40 countries from the south 0.5
Uganda
with notable improvements since 1990.
Rwanda
Note: Countries above the 45 degree line
had a higher HDI value in 2012 than in 1990.
Black and gray markers indicate countries with
significantly larger than predicted increases 0.3
12
in HDI value between 1990 and 2012 given 20
DI
their HDI value in 1990. These countries were =H
90
identified based on residuals obtained from a I 19
HD
regression of the change in log of HDI between
2012 and 1990 on the log of HDI in 1990. Coun- 0.1
tries that are labelled are a selected group of 0.1 0.3 0.5 0.7 0.9
rapid HDI improvers. HDI, 1990
Source: HDRO calculations Highlighted 18 Big improvers Others

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The MDGs, according to the UN, are “the world’s time-bound and ➤ Adam Smith was the first
quantified targets for addressing extreme poverty in its many dimensions “development economist.” His work,
— income poverty, hunger, disease, lack of adequate shelter, and exclu- The Wealth of Nations, was published
sion — while promoting gender equality, education, and environmental in 1776. The scientific study of the
processes and problems of society in
stability.” The deadline for the fulfillment of the MDGs was set for 2015.
Asia, Africa, and North America has
The following are the MDGs: emerged only over the past 50 years.
1. Eradicate extreme hunger and poverty
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, Malaria, and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development

Meanwhile, the National Economic and Development Authority

(NEDA) has laid out the Philippine Development Plan (PDP) 2011-2016,
which “adopts a framework of inclusive growth, which is high growth
that is sustained, generates mass employment, and reduces poverty.” The
PDP is focused on the following areas:
1. Pursuit of Inclusive Growth
2. Macroeconomic Policy
3. Competitive Industry and Services Sectors
4. Competitive and Sustainable Agriculture and Fisheries Sector
5. Accelerating Infrastructure Development
6. Resilient and Inclusive Financial Sector
7. Good Governance and the Rule of Law
8. Social Development
9. Peace and Security
10. Conservation, Protection, and Rehabilitation of the Environment
and Natural Resources

It is evident from the PDP focused areas that they cover not only
the economic and industrial goals of the Philippines but also the social,
environmental, and peace and security aspects.
The MDGs and the PDP can help guide the management of busi-
nesses in the Philippine setting. In particular, the PDP must be taken
into consideration in order to deem management as appropriate or
country-specific. “Inclusive growth means, first of
Another potential means for economic growth and development is all, growth that is rapid enough
the planned integration of the 10 Southeast Asian nations in 2015 which to matter, given the country’s
include the Philippines. The Association of Southeast Asian Nations large population, geographical
differences, and social complexity.
(ASEAN) Economic Community (AEC) could help the Philippines It is a sustained growth that creates
achieve its goal of inclusive growth that creates jobs and reduces poverty. jobs, draws the majority into the
According to a joint study by the International Labor Organization economic and social mainstream, and
(ILO) and the Asian Development Bank (ADB) titled “ASEAN Commu- continuously reduces mass poverty.”
nity 2015: Managing Integration for Better Jobs and Shared Prosperity,”
NEDA

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released in October 2014, the success of the AEC lies in decisive actions
taken by member states regarding policy recommendations, strengthening
regional cooperation that may bring about structural changes, improve-
ment of business and job opportunities and job quality, enhancement
of skills boosting productivity, better wages, and management of labor
migration. These may ensure that the benefits of equitable growth and
development are shared among member countries and sectors.
Since the AEC is envisioned to become a single common market
and production base for an estimated 600 million people of different
nationalities, it means freer flow of goods, services, investments, and labor.
The study concluded that “new opportunities for growth and prosperity
may emerge, but the challenge is to ensure that growth is inclusive and
prosperity is shared.”
Obviously, managers of businesses here in the Philippines must be
concerned about the findings of the study, as these are new challenges
for them. The improvement of management style and the skills training
and education of their human resources are needed in order to cope
with the possible changes that will be brought about by the ASEAN
integration in 2015.

Fast Learning Review

1. Is the term “economic development” synonymous with “economic growth?” Explain your answer.
2. What are the phases of economic development? Why is it important to understand the specific steps related
to these?
3. What do you think are the adverse effects when sustainable economic development practices in a country are
not implemented?
4. Name at least three business management decisions that could be affected by the Human Development Index
in a country’s economic development phases.

Exercise
1. Interview two of your Economics teachers. Ask them why economic development is important in the study of
business management. Compare and contrast their answers.
2. Choose another Asian country and discuss how factors in its economic development differ from those in the
Philippines.

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LESSON 4
Forms of Business Organizations

T he form of a business organization may depend on its purpose, nature

of operations, and resources. However, a business organization’s form
may change with the changing times and the demands they present.
Definition of Terms
Organization – a collection of
people working together to achieve
a common purpose
Changing Forms of Business Organizations Business organization – a
collection of people working
Change is constant and organizations continue to undergo various changes together to achieve a common
to ensure effectiveness, efficiency, and relevance in the world of business. purpose in relation to their
Business organizations may be traditional (simple, functional, divi- organization’s mission, vision, goals,
sional, profit, or nonprofit) or open/flexible in form according to Robbins and objectives, sharing a common
and Coulter (2009). organizational culture
Simple business organizations – these refer to business organizations Organizational culture – the set
with few departments, centralized authority with a wide span of control, of beliefs and values shared by
and with few formal rules and regulations. organization members which guide
them as they work together to
These are easy to manage because of their simple form. However,
achieve their common purpose
change of form follows as the company expands its operations.
Functional business organizations – these pertain to business orga-
nizations that group together those with similar or related specialized
duties that introduce the concept of delegation of authority to functional
managers like the personnel manager, sales manager, or financial manager
but allow CEOs to retain authority for strategic decisions.
Divisional business organizations – these are business organiza-
tions made up of separate business units that are semi-autonomous or
semi-independent, with a division head responsible for his or her unit’s
performance
In other words, each division has its own functional organization and
its own general manager; however, the central headquarters management
maintains responsibility for the delineation of organizational goals of the
individual divisions.
Profit business organizations – these are business organizations
designed for the purpose of achieving their organizations’ mission,
vision, goals, and objectives and maintaining their organizational stabil-
ity through income generation and profit-making activities. Immediate
revenues or cost factors account for their success or failure.
Nonprofit organizations – these are business organizations designed
for the purpose of achieving their organizations’ mission, vision, goals,
and objectives, providing service to clients without expecting monetary
gains or financial benefits for their endeavors. Their success or failure
may be measured by the high or low evaluation scores they obtain.
Open/flexible business organizations – these are formed to meet today’s
changing work environment.

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FIGURE 2.4 Starting out as a simple shoe

store in the 1950s, Shoe Mart (SM) has
evolved into one of the largest supermall
chains in the country today. Among its
supermalls is SM Mall of Asia in Pasay
City, one of the biggest malls in the
Philippines.

Business organizations affect and are affected by the environ-

ment; therefore, change becomes inevitable. Other forms of business
organizations:

1. Team structures – where the organization as a whole is made up of work

teams (small, but focused) that work together to achieve the organization’s
purpose; popular in collectivist culture.
2. Matrix business organizations – those which assign experts or spe-
cialists belonging to different functional departments to work together
on one or more projects; exhibit dual reporting relationships in which
managers report to two superiors—the functional manager and the
divisional manager.
3. Project business structure – a business organizational form with a flexible
design, where the employees continuously work on projects assigned to
them; projects may be short-term or long-term and members disband
when the project is completed.
4. Boundaryless business organization – a business organization whose
design eliminates vertical, horizontal, or external boundaries, and is
described to be flexible and unstructured; there are no barriers to infor-
mation flow and, therefore, completion of work is fast.
5. Virtual business organization – made up of a small group of full-time
workers and outside experts who are hired on a temporary basis to work
on assigned projects; members usually communicate online.

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Other basic forms of business that are legal in the Philippines are:
single proprietorship, partnership, corporation, and cooperative; these
are defined and discussed on p. 142, Lesson 2 of chapter 9.
Different organizations have different preferences as to the business
form that is appropriate for their needs and the purpose of their existence.
Managers, therefore, must be creative in finding ways to structure or
design and organize work in their respective firms.

Fast Learning Review

1. What is a business organization?
2. What is the difference between a profit and nonprofit business organization? Which, in your opinion, is easier
to manage? Explain your answer.
3. Name one strength and one weakness of each of the traditional business organization forms.
4. Name one strength and one weakness of each of the open/flexible business organization forms.

Exercise
1. Research on the Internet or the school library; name five profit business organizations and five nonprofit business
organizations.
2. Choose one known manufacturing company. Name at least five work teams which help the company achieve
their mission, vision, goals, and objectives.

Integration
At the end of the chapter, write two or three sentences to complete the following:
I realized that:

I resolved that:

The Firm and Its Environment 25

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