ORGANIZATION AND MANAGEMENT

Quarter 1 week 2 Module 2

The Firm and its Enviroment

Learning Competency
Analyze Various forces/elements
Influencing local and international
Business environment using the PEST
And SWOT strategies

Objectives:

This module will help learners immerse in organization and management to identify the
different forces and elements that may affect business environment using the PEST and
SWOT analysis. The learners may also understand the internal and external environment
of the business.
LESSON Environmental Forces and 3
Environmental Scanning

As we study and immerse ourselves in “Organization and Management” in the process is

necessary to identify various forces/ elements of the firm’s environment using the PEST and
SWOT analyses. The module is subjected to discuss Module 2 environmental Forces and
Environmental Scanning.

After going through the module, you are expected to:

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

Let us start your journey in leaving

thru a Pre-test.
PRETEST
Good luck!

Matching-Type:
Directions: Choose the appropriate WORD in the box and write the CORRECT answer in the space provided
before the number.

External Business SWOT Porter’s Five Forces

Internal Business Organizer Chart PESTEL

1. Refers to the factors/ elements outside the organization which may affect, either
positively or negative, the performance of the organization.
2. Refers to the factors/elements within the organization which may affect, either
positively or negatively, the performance of the organization.
3. Is a technique used to determine and define your STRENGTHS, WEAKNESS,
OPPORTUNITIES, and THREATS.
4. Is a framework that helps analyzing the level of competition within a certain
industry.
5. Is a framework or tool used to analyze and monitor the macro environmental
factors that may have a profound impact on an organization’s performance.

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 HOW TO USE THIS MODULE?

Before starting the module, I want you to set aside other task that will disturb you
While enjoying the lessons. Read the simple instruction below to successfully enjoy the
objectives of this kit. Have fun!

1. Follow carefully all the contents and instruction indicated in every page of this
module.
2. Write on your notebook the concepts about the lessons. Writing enhances learning,
That is important to develop and keep in mind.
3. Perform all the provided activities in the module.
4. Let your facilitator/ guardian assess your answers using the answer key card.
5. Analyze conceptually the posttest and apply what you have learned.
6. Enjoy studying!

PARTS OF THE MODULE

 Expectations- These are what you will be able to know after completing the lessons in
the module.
 Pre-test-This will measured your prior knowledge and the concepts to be mastered
throughout the lesson.
 Looking Back to your Lessons- This section will measure what learning and skill did you
understand from the previous lesson.
 Brief Introduction- This section will gave you an overview of the lesson.
 Activities-This is a set activities you will perform with a partner.
 Remember-This section summarizes the concepts and applications of the lessons.
 Check your Understanding-It will verify how you learned from the lesson.
 Post-test-This will measure how much you have learned from the entire module.
 LOOKING BACK TO YOUR LESSON

TRUE or FALSE

Directions: Before each statement, write TRUE if the statement is CORRECT and FALSE if the statement is
INCORRECT. Write your answer in the space provided.

1. The process of measuring or comparing one’s own products, service, and practice with those of
the recognized industry leaders in order to identify areas for improvement is called
Benchmarking.
2. SWOT analysis is a technique used to determine and define your skills, weakness, opportunities
and threats.

3. PESTEL analysis is a framework or tool used to analyze and monitor the macro- environmental
factors that may have a profound impact on an organization’s performance.

4. A good indicator of competitive rivalry is the concentration ratio of an industry.

5. The final element of SWOT is Strength.

BRIEF INTRODUCTION Enjoy reading…..

Environmental Forces and Environmental Scanning

The environment in which a business operates is a major consideration in determining an organization’s

design structure. Considerations such as uncertainty, procurement, and competition are linked with the external
environment. A company’s strategy and approach to operations must also be aligned with the limitations of its
external environment.

Definition of Terms

1. Environmental scanning means seeking for and sorting through data about the
environment.
2. External business environment refers to the factors/elements outside organization
which may affect, either positively or negatively, the performance of the organization.
3. Internal business environment refers to the factors/elements within the organization,

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 Business Environment

External Environment Internal Environment

Micro Environment Macro Environment
 Suppliers of  Economics
Inputs  Political Legal
 Customers  Technological
 Marketing  Global
Intermediaries  Socio Cultural
 Competitors  Demographic
 Public  Natural
 Ecological
 Value System
 Mission and Objectives
 Organizational Structure
 Corporate Culture
 Quality of Human
Resources
 Labour Unions
 Physical Resources and
Technological Capabilities

The various components of business environment are External environment consist of those
factors that affect a business enterprise from outside. Externel environments includes shareholders,
competitors, customers, society, government laws and regulations, policies and technology.

4. Micro-environment includes those players whose decisions and actions have a direct impact on
the company. Production and selling of commodities are the two important aspects of modern
business. Accordingly, the micro-environment of business can be divided.
5. Macro- environment is the condition that exist in the economy as a whole, rather than in a
particular sector or region. In general, the macro environment includes trends in the gross
domestic product (GDP, inflation, employment, spending, and monetary and fiscal policy.

The various constituents of micro-environment are as under:

1. Suppliers of inputs: An important factor in the external micro-environment of a firm is the
supplier of its inputs such as a raw materials and components. Normally, most firms do not
depend on a single supplier of inputs. To reduce risk and uncertainty business firms prefer
to keep multiple suppliers of inputs.
2. Customers: The people who buy and use a firm’s product and service are an important part
of external micro-environment. Since sales of as product or service is critical for a firms.
Besides, a business firm has to compete with rival firms to attract customers and thereby
increase the demand and market for its product.
3. Marketing intermediaries: In the firm’s external micro-environment, marketing
intermediaries play an essential role of selling and distributing its products to the final
customers. Marketing provides an important link between a business firm and ultimate
customers.

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 4. Competitors: Different firms in an industry compete for sale of their products this
competition may be based on pricing of their products and non-price competition through
competitive advertising such as sponsoring some events to promote the sale of different
varieties and models of their products. Because of liberalization and globalization of the
Indian economy since the adoption of economic reforms there has been a significant
increase in the competitive environment of business firms. Now, Indian firm’s must compete
not only with each other but also with foreign firms whose products can be imported. In
America, American firms faced a lot of competition from the Japanese firms producing
electronic goods and automobiles.
5. Publics: Finally, publics are an important force in external microenvironment.
Environmentalist, media groups, women’s associations, consumer protection groups, local
groups, Citizen Association are some important examples of publics which have an import
bearing on the business decisions of the firm. The existence of various types of publics
influences the working of business firms and compels.

External Macro Environment

Apart from micro-environment, business firms face large external environmental forces.
An important fact about external macro environment forces is that they are uncontrollable by the
management. Because of the uncontrollable nature of macro forces a firm must adjust or adapt it to
these external forces. These factors are:
1. Economic Environment: Economic environment includes all those forces which have an
economic impact on business. Accordingly, total economic environment consist of agriculture,
industrial productions, infrastructure, and planning, basic economic philosophy, stages of
economic development, trade cycles, national income, per capita income, savings, money
supply, price level and population.
2. Political-legal Environment: Business firms are closely related to the government. The
political- legal environment includes the activities of three political institutions, namely,
legislature, executive, and judiciary which usually play a useful role in shaping, directing,
developing and controlling business activities.
3. Technological Environment: Technological environment is exercising considerable influence
on business. Technology implies systematic application of scientific or other organized
knowledge to practical tasks or activities. Business makes it possible for technology to reach the
people in proper format.
4. Global or Internal Environment : Global environment plays an important role in shaping
business activity. With the liberalization and globalization of the economy, business
environment of an economy has become totally different wherein it has to bear all shocks and
benefits arising out global environment.
5. Socio-cultural Environment: Social and cultural environment also influences the
business environment indirectly. These include people attitude to work and wealth,
ethical issues, role of family, marriage, religion and education and also social responsive.

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 6. Demographic Environment: The demographic environment includes the size and growth of
population. Life expectancy of the people, rural-urban distribution of population, the technology
skills and educational levels of labor force. All these demographic features have an important
bearing on the functioning of business firms.
7. Natural Environment: Natural environment influences business in diverse ways. Business is
modern times is dictated by nature. The natural environment is the ultimate source of many
inputs such as raw materials and energy, which includes geographical and ecological factors
such as minerals and oil reserves, water and forest resources, weather and climatic conditions
are all highly significant for various business activities.
8. Ecological Environment: Due to the efforts environmentalist and international organizations
such as the world bank the people have now become conscious of the adverse effects of
depletion of exhaustible natural resources and population of environment by business activity.
Accordingly, laws have been passed for conversation of natural resources and prevention of
environment population. These laws have imposed additional responsibilities and cost for
business.

Internal Environment:

The factors in internal environment of business are to extent controllable because the firm can change
or modify these factors to improve its efficiency. However, the firm may not be able to change all the
factors. The various internal factors are:
1. Value system: The value system of an organization means the ethical beliefs that guide the
organizations in achieving its mission and objectives. It is a widely acknowledge fact that the
extent to which the value system is shared by all in the organization is an important factor
contributing to its success.
2. Mission and objectives: The business domain of the company, direct of development,
business philosophy, business policy etc. are guide by the mission and objectives of the
company. The objective of all firms is assumed to be maximization, of profit. Mission is
defined as the overall purpose or reason for its existences which guide and influences
decisions and economic activities.
3. Organizations structure: The organizational structure, the composition of the board of
directors, the professionalism of management etc. are important factors influencing
business decisions. The nature of the organizational structure has a significant influence
over the decisions making process in an organization. An efficient working business
organization requires that the structure should be conducive for quick decision making
4. Corporate culture: Corporate culture is an import factor for determining the internal
environment of any company. In a closed and threatening type of corporate culture the
business decisions are taken by top level managers while the middle level and lower level
managers have no say in business decisions making. The leads to lack of trust and
confidence among subordinates officials of the company and secrecy pervades throughout
the organization.

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 5. Quality of human resources: Quality of employees that is human resources of a firm
is an important factor internal environment of a firm. The characteristics of the
human resources like skill, quality, capability, attitude and commitment of its
employee etc. could contribute to the strength and weakness of an organization.
6. Labor unions: Labor unions collectively bargains with the managers for better wages and
better working conditions of the different categories of workers. For the smooth working of
a business firm good relations between management and labor unions is required.
7. Physical resources and technology capabilities: physical resources such as plant and
equipment and technological capabilities of an firm determine is competitive strength which
is an important factor for determining its efficiency and unit cost of production. Research
and development capabilities of a company determine its introduce innovations which
enhance productivity of workers.

Specific Components of the External Business Environment

Stakeholders, Customers, Suppliers Pressure groups, Organization’s investors or owners and Employees.

Component of the Internal Business Environment

1. Resources – financial, physical, mechanical, technological, and human resources must be
subjected to internal analysis (SWOT)
What Is a SWOT Analysis?
A SWOT analysis is a technique used to determine and define your Strengths, Weaknesses,
Opportunities, and Threats (SWOT). SWOT analyses can be applied to an entire company or
organization, or individual projects within a single department. Most commonly, SWOT analyses are
used at organizational level to determine how closely a business is aligned with its growth trajectories
and success benchmarks, but they can also be used to ascertain how well a particular project – such as
an online advertising campaign – is performing according to initial projections.

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Porter’s Five Force

Porter’s five analysis is a framework that helps analysing the level of competition within a
certain industry. It is especially useful when starting a new business or when entering a new industry
sector. According to this framework, competitiveness does not only come from competitors. Rather, the
state of competition in an industry depends on five basic forces: threat of new entrants, bargaining
power of suppliers, bargaining power of buyers, threat of substitute products or services, and existing
industry rivalry.

PESTEL Analysis. A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework
or tool used to analyses and monitor the macro-environmental factors that may have a profound impact
on an organization’s performance. This tool is especially useful when starting a new business or entering
a foreign market. It is often used in collaboration with other analytical business tools such as the SWOT
analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and
external factors. PESTEL is an acronym that stands for Political, Economic, Social, Technological,
Environmental and Legal Factors.

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 1. Developing a competitive mindset – by seeking and sorting through data about environment,
you may be able to understand and predict the various changes, opportunities and threats that
may affect organizations in the future.

2. Considering future business scenarios – by realistic consideration of both worse-case scenario or

unfavorable future conditions, as well as middle ground possible conditions, you will have an
idea or what to do in the future.

3. 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 cannot always be assured.

Benchmarking – 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.

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 ACTIVITIES

Activity 1: Independent Activity

Directions: Here a SWOT analysis template that you can fill in with your own strengths,
weakness, opportunities, and threats.

List down in the table at least 5 SWOT analysis about yourself.

STRENGTHS WEAKNESS OPPORTUNITIES THREATS

Activity 2: Independent Activity

Rubrics: Content=30%, Understanding/Application= 25%, Original Thinking= 25% structure= 10%

and Grammar= 10%.

Directions: Answer the following questions be able to write your answer on the space provided
for after each question.

1. Why is SWOT analysis important? Explain in 3-5 sentences.

2. When do you use SWOT and how do you create a SWOT analysis? Explain your answer in 3-5
sentences.

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 REMEMBER

 The environment in which a business operates in a major consideration in determining

organization’s design structure. Consideration such as uncertainty, procurement, and
competition are linked with the external environment.
 Micro-environment consist of factors in the company’s immediate environment that affects the
performance of the company
 Macro –environment includes larger factors such as economic, demographic, organization
structure, corporate culture, quality of human resources, labor unions, physical resources and
technological capabilities.
 SWOT analysis is technique used to determine and define your strengths, weakness,
opportunities and threats.
 Porter’s five forces analysis is a framework that helps analyzing the level of complete within a
certain industry. It is especially useful when starting a new business or when entering a new
industry sector.
 PESTEL analysis (formerly known as PEST analysis) is a framework or tool used to analyses and
monitor the macro- environmental factors that may have a profound impact on an
organization’s performance.
 Benchmarking is the process of the measuring or comparing one’s own products, services and
practice with those of the recognized industry leaders in order to identify areas for
improvement.

CHECK YOUR UNDERSTANDING

IDENTIFICATION

Directions: Identify the following statements below. Write your answer in the space provided before the
number.

1. Consists of those factors that affect a business enterprise from outside.

It includes shareholders, competitors, customers, society, government laws and regulations,
policies and technology.
2. Has various internal factors such as value system, mission and objectives, organization structure,
quality of human resources, labor unions and physical resources and technological capabilities.
3. The parties likely to be affected by the activities of the organization.
4. Patronize the organization’s product and services.
5. Ensure the organization’s continuous flow of needed and reasonably priced inputs or materials
required for producing their goods and rendering their services or materials required for
producing their good and rendering their service.
Post-test

MULTIPLE CHOICE: Choose the letter of the best answer. Write your answer in the space provided.

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1. Environment consists those factors that affect a business enterprise from outside. External
environment includes shareholders, competitors, custormers, society, government laws and
regulations, policies and technology.
a. Internal Environment
b. Micro Environment
c. Macro Environment
d. External Environment
2. 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.
a. SWOT Analysis
b. PESTEL Analysis
c. Benchmarking
d. Porter’s Analysis
3. It is a form of business organization established for the purpose of purchasing and marketing the
products of its members, whose profits are distributed to the members (in the form of
patronage dividends), not on the basis of the members equity.
a. Partnership
b. Sole Corporation
c. Corporation
d. Cooperative
4. When the preconditions for take-off are met, a society can take off. Educated individuals start
inventing new processes and tools, and access to capital through financial markets and banks
make it possible tom produce goods and services on a larger scale.
a. Traditional Society
b. Precondition for Take –Off
c. Take-Off
d. Drive to maturity
5. It boosts economic revenue on a smaller scale, but one that’s of vital importance, directly and
positively affecting the health, quality of life and purchasing power of residents in the local
community.
a. Small Business
b. Corporation
c. Contracting
d. Franchising
6. Is the ultimate source of many inputs such as raw materials and energy, which firms use in their
productive activity? Includes geographical and ecological factors such as minerals and oil
reserves, water and forest resources, weather and climatic conditions are all highly significant
for various business activities.
a. Economic Environment
b. Demographic Environment
c. Natural Environment
d. Ecological Environment

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 7. Form of business which has unlimited liability. Creditors may period may proceed not only
against the assets and property of the business, but also after the personal properties of the
owner. In other words, the law basically treats the business and the owner as one and the same.
a. Partnership
b. Sole properties
c. Sole cooperation
d. Corporation
8. Is a framework or tool used to analyses and monitor the macro- environmental factors that may
have a profound impact on organization’s performance.
a. SWOT Analysis
b. Porter’s Analysis
c. PESTEL Analysis
d. Benchmarking
9. Are to a certain extent controllable because the firm can change or modify these factors to
improve its efficiency. However, the firm may not be able to change all the factors.
a. Micro Environment
b. Macro Environment
c. Internal Environment
d. External Environment
10. Analysis is a frame work that helps analyzing the level of competition within a certain industry. It
is especially useful when starting a new business or when entering a new industry sector.
According to this framework, competitiveness does not only come from competitors, Rather,
the stare of competition an industry depends on five basic forces.

REFLECTIVE LEARNING SHEETS

Reflective Question: Now that we are experiencing the COVID-19 pandemic, can you use SWOT analysis
in today’s situation? Kindly write at least three(3) information in each box.

STRENGHTS WEAKNESS OPPORTUNITIES THREATS

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