Teodoro M.

Luansing College of Rosario

SENIOR HIGH SCHOOL DEPARTMENT

Name of Teacher: Cristine C. Bathan Reference: Organization and Management

Subject: Organization and Management Author: Edilynda G Enriquez
Academic Year: 2020-2021 Topic: The Business Environment pt.1
Semester: First Quarter: 1 Pages: 17-22
Duration:4 days Module: 3

CONTENT STANDARD
The learners demonstrate an understanding of…
1. The basic concepts and theories of management
2. The role of business in the environment, and how the environment affects the firm.
3. The importance of planning concepts in business success.

PERFORMANCE STANDARD
The learners are able to…
1. Apply management theories and concepts in solving business cases.
2. Analyze the various environmental forces affecting the firm and summarize these using
Political Economic Social and Technology Analysis (PEST) and Strengths, Weaknesses,
Opportunity, and Threats (SWOT) Analysis frameworks
3. Formulate effective plans for a specific business endeavor.

MOST ESSENTIAL LEARNING COMPETENCIES

Analyze various forces/ elements influencing local and international business environment using
PEST and SWOT strategies.
.

I LEARNING OBJECTIVES
1. Define business environment.
2. Identify various elements of business environment
3. Learn PEST and SWOT analyzes

II INTRODUCTION
Knowing and understanding the environment to where you will put up your business is
critical. Environmental factors affect every aspect of business such as its nature, prices of the
product, location, distribution scheme and the like.

III DISCUSSION
The Business Environment

National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines

Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]
 Teodoro M. Luansing College of Rosario

Understanding the business environment and the ability to adapt to its changing phase
contribute to the success of the business operation. Business environment may be defined as the
total surroundings, which have a direct or indirect bearing on the functioning of a business. It
may also be defined as the set of external factors such as economic factors, social factors,
political and legal factors, demographic factors, technical factors, etc. which are uncontrollable
in nature and affects the business decisions of firm.
Business environment refers to outside forces affecting the business operation that are
beyond the control of the business, and it directly or indirectly affects how the business
enterprise functions. These factors and forces over customers, competitors, suppliers,
government and the social, cultural, political technological and legal conditions. The changes in
the business environment are constantly changing, unpredictable and dynamic. It differs from
place to place, region to region and country to country. As political conditions in the Philippines
is different from that of China and Malaysia and that the fashion and culture of people in
Singapore is different from those in India.

The Environmental Forces

Competitive

Economic
Political

Environmental
Forces

Legal and Technological

Regulatory

Sociocultural

Factors affecting Business Environment

National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines

Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]
 Teodoro M. Luansing College of Rosario

External environment is the uncontrollable forces that outside the organization. It is

considered uncontrollable because the business firm has no control over them, but can
respond and adopt to the treats using the resources of the internal environment.
The following are the uncontrollable forces in the external environment:

1. Sociocultural Environment- Sociocultural environment or social and cultural forces

refer to the structure and dynamics of individuals and groups and their behaviors, beliefs, thought
patterns and lifestyles, interpersonal relationship, poverty, life expectancy rate, literacy, etc. The
sociocultural structure and values that a society practice has a considerable influence in the
business firm. For instance, during Christmas season, festivities or any other important occasion
there is an increase in the demand for clothes, fruits, house ornaments, furniture, etc. Note that
the consumption patterns vary significantly according to the differences in social structures.

2. Political Environment- This include the political form, the government policies, and
attitude towards the business community. All these aspects have a substantial alignment with the
strategies adopted by the business firms.
Government attracts investors and therefore would open a significant opportunity for
growth and expansion of an organization. Strikes, lockouts, and labor disputes adversely affect
the business operations. However, with the competitive business environment, trade unions now
are becoming flexible and shows maturity to keep up and support through workers’ participation
in management.

3. Technological Environment- As most would say, “you cannot stop the

advancement in technology, but you can learn to adapt to its changes.” Technology includes the
methods, techniques, and approaches adopted for product goods and services and its distribution.
Technology changes so fast that it affects the industry tremendously. To survive and grow in the
market, a business has to adapt to technological changes from time to time. There are some
companies nowadays who created a department solely to focus on “continuous improvement and
innovation” because no company could keep afloat with outdated technology.

4. Legal Environment- This refers to the set of laws, regulations, and legalities that affect
the business operations. Every business organization has to follow and obey within the
framework and requirements of the law. For instance, government restrictions on the importation
and exportation of certain product might hinder those firms that operate in that particular field.

5. Competition- “Know thy competitors” is the rule of thumb in the industry. Knowing
who the players are in the similar industry would give the firm a good vantage point. It is

National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines

Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]
 Teodoro M. Luansing College of Rosario

important to know the competitors’ activities and then design effective strategies using the firm’s
controllable variables.

6. Economic Environment- The survival and success of every business depend fully on its
economic environment. This refers to economic growth, interest rates, foreign exchange rates,
inflation rates, unemployment rates, globalization of the economy, etc. All these help in
improving the pace of economic growth and is vital to all business activities.

PEST and SWOT Analyzes Framework

As business management practitioner, analysis and evaluation are necessary for learning
the internal and external factors that can affect the business operation to be able to come up with
excellent strategies to survive the competition in the industry. SWOT and PEST analysis are the
two most common analyzes framework being used.
SWOT Analysis simply means Strengths, Weaknesses, Opportunities and Threats was
first tested by Alfred Humprey (1926-2005), American business and management consultant
while doing a research project at the Stanford Research Institute in the 1960s and 1970s. SWOT
examines four elements:
 Strengths- the advantages or the internal attributes that support a positive result, or the
edge that you have over the competitors.
 Weaknesses- The disadvantages or internal characteristics that work against a successful
outcome compared to the competitors.
 Opportunities- Current external factors or trends that can be used to be taken advantage.
 Threats- Current external factors which may cause a problem to cause a negative impact
and can jeopardize the business.
SWOT Analysis aims to help the organization match its available resources against its
competitors. SWOT analysis works efficiently during the planning stage. It is a good way to
introduce relevant internal and external factors of the analysis and evaluation as the team goes on
a brainstorming.

Favourable Unfavourable
Strengths Weaknesses

What are your strengths? What are your weaknesses?

What do you do better than What do your competitors do
others? better than you?
What unique capabilities and What can you improve given
resources do you possess? the current situation?
What do others perceive as What do others perceive as
your strengths? your weaknesses?

National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines

Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]
 Teodoro M. Luansing College of Rosario

Opportunities Threats

What trend or conditions

What trends or conditions may negatively impact you?
may positively impact you? What are your competitors
What opportunities are doing that may impact you?
available to you? Do you have solid financial
support?
What impact do your
weaknesses have on the
threats to you?

PEST Analysis refers to Political, Economic, Social and Technological that describes a
framework of macro-environmental or the uncontrollable external factors used in doing an
environmental scanning for market research as part of strategic management. PEST analysis is
said to be created by Francis Aguilar, a Harvard Professor, to which he used PEST analysis as
scanning tool. It gives an overview of the environment forces that the company has to consider to
understand better the market growth.

PEST Analysis framework has four factors:

 Political- it is how the government intervenes in the economy. The laws, global issues,
legislation, regulations, which may have a direct effect on the business.
 Economic- Taxes, interest rates, inflation, the stock markets and consumer confidence
have to be considered.
 Social- Changes in lifestyle and buying trends, media, major events, ethics, advertising
and publicity factors.
 Technological- Innovations, access to technology, licensing, manufacturing, research
funding, global communications.

Political Factors Economic Factors

 Government type and  Stage of business cycle

stability  Impact of globalization
 Tax policy  Labor costs
 Changes in the political  Likely changes in the
environment economic environment
 Regulation and de-
regulation trendsRd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines
National
 Levels of corruption
Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]
 Teodoro M. Luansing College of Rosario

Social Factors Technological Factors

 Population growth rate  Research and

 Population health, development activity
education, and social mobility  Impact of emerging
 Lifestyle choices and technologies
attitude s toward socio cultural  Impact of technology
changes transfer

PEST analysis helps the business spot opportunities and red flags on significant threats. It
guides the direction of change within the business environment and contributes to avoid starting
projects that are likely to fail for reasons beyond the control of the business firm. It can also help
loose up unconscious assumptions when for an instance the firm plans to enter a new country,
venture into a market or region because it helps to see the bigger picture of the environment.

NOTE: PLEASE WRITE YOUR ANSWERS ON A YELLOW PAD PAPER

IV. ENGAGEMENT

Directions. Answer the following questions.

1. What is the importance of understanding one’s business environment?

2. Why should a certain business must know their competitors?

3. Explain the factors being evaluated in SWOT analysis.

___________________________________________________________________________

National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines

Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]
 Teodoro M. Luansing College of Rosario

4. Explain the factors being evaluated in PEST analysis.

___________________________________________________________________________

V. ASSIMILATION

1. Evaluate a certain fast food chain of your choice using SWOT analysis.
___________________________________________________________________________

2. Supposing that you will put up a water refilling station in near your school. Evaluate it
using PEST analysis.

Economic Factors Sociocultural Factors

1 1
2 2
3 3
4 4

Suppliers
(Who org pays)
1
2
3
4

Competitors Complementors
(Buyers spend less) (Buyers spend more)
1 1
2 National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines
Tel. No.: 0917-187-2929/ 043 781 1483 2
3 _________ 3
Email: [email protected]
4 4
 Teodoro M. Luansing College of Rosario

National Rd., Brgy. Namunga, Rosario, Batangas, 4225 Philippines

Tel. No.: 0917-187-2929/ 043 781 1483
Email: [email protected]