ENTREP Semi-Final Notes

MODULE 6: The Environment of the Entrepreneurial Venture

(they could greatly affect business. Major considerations that you have to know before establishing the
business)
External factors (macro) and internal factors of environment (micro) that affect in business

3 Environment of Entrepreneurial Venture

1. The Physical Environment
-(these are the things that we can see around us, could be natural or manmade but considered as a physical
environment)
Climate - an entrepreneur must consider the prevalent climatic condition of the area where he/she intends to
open the business to determine whether it can withstand or it is fit to the climatic condition in the local area.
(ibabagay mo yung business mo sa environment mo like kung mainit or malamig)
Wildlife - entrepreneur must ensure that his/her(consider if that business will have environmental impact on
the present condition of the area, local community, or country in general)
Physical Resources - the entrepreneur must critically assess the availability of natural raw materials in the
locality before opening a new business - must be sufficient for a long-term operation (should consider not only
availability but also the longevity)
- the availability or lack of raw materials will determine the cost of the products

2. The Societal Environment

- (the society as a whole dictates yung kapalaran ng business. Sa society nanggagaling ang customers)

Social Forces - elements in the society resulting human interactions that can influence the thought, behavior,
attitude, actions and even beliefs and customs of the people: Values, Traditions, Literacy level, Consumer
psychology, Time Orientation, Lifestyle patterns, Professional career roles
Political Forces - composed of the political parties, political systems, and other related political groups that
substantially influence the political stability of the country: Trade regulations, Taxation, Government stability,
Unemployment, Worker’s benefits, Election practices.
(Corporate tax 30%, 40% Foreigner Filipinos 60% yung pwedeng mag invest)
Cultural Forces - refers to the integrated characteristics of a group of people or ethnic group in a particular
society: Religion, Language, Beliefs, Customs (kina-sanayang gawin), Education.(Taboo- ito yung mga bawal
gawin, sabihin or pag-usapan sa ibang culture)
Economic Forces - factors that are primarily caused by the changes or movement in the Philippine economy
that has direct or indirect effects on the entrepreneurial venture: Interest rates, Inflation rates, Fiscal policies,
Monetary policies, Income, Exchange rate, Employment, Consumer confidence.
(Economics is using the natural resources and transforming them to something useful. It has the biggest
impact in businesses like inflation - tumataas ang presyo ng nilihin at bumababa ang value ng pera, interest
rate) (Buying power- power to buy goods or services but you’ll based it on income, the higher the income the
higher the buying power)(Interest rate ay nakapdende sa global market, like kapag tumaas ang dollar
exchange rate bababa or stable lang ang interest rate, kapag mababa naman ang dollar tataas ang interest
rate)
Legal Forces - the elements and bodies that are directly involved in the legislation and interpretation of laws
and ordinances: Product control, pricing and labelling (hindi ikaw ang maglalagay ng price, dapat may
sinusunod na batas, pwede ka makasuhan ng profiteering), Health and safety of the workers, Administration
of election process, Advertising and promotion, Exercise of profession, Education administration and fees.
-(dapat naaayon din yung quality sa advertisements in real life)
Technological Forces - refers to the trends and developments in computer and information technology:
Internet, Social Media, E-commerce (Shopee, Lazada, Online Shopping), Technological advancement,
Technological infrastructure.
-(Technological Diffusion kayang sumabay) (as technology advances, businesses also has to advance, but not
all businesses have the ability to cope with the advancement of technologies)(control devices using the
internet.)(IOT- Internet of Things)

Environmental Scanning -The process of gathering critical evaluation, and utilization of information on
events and activities and their (know what is happening around you, and the information gathered will be
utilize for certain things to make business flourish) (know what’s happening around you, gather information,
evaluate and utilize the information gathered) (continuous environmental scanning - tuloy tuloy, day to day,
for us to really gather important information for the business)
Environmental scanning is very important for the following reasons:
1. Portrays trends, activities and developments happening in the environment (it keeps on changing)
2. Identifies the expected threats and opportunities existing (O,T are external)
3. Points out possible factors that will determine success of the venture
4. Helps define the future path of the business or proposed business.
5. Assists in the formulation of the most appropriate entrepreneurial strategies (without strategies mahihirapan
ang business mo to manage, operate and survive)

Societal Environment Scanning Approach

- In scanning the societal environment
1. PESTEL Analysis - The PESTEL Analysis is the most widely accepted and commonly used environmental
scanning tool today. Though is not a perfect tool to scan the trends and developments in the external (Political
Economical Social Technological Environmental Legal) it is still considered the most appropriate tool because
of its features.
2. Environmental Forces Matrix - it broadly classifies the various environmental forces into their frequency
of occurrence and level of effect to the existing

Template of Environmental Forces Matrix

(when we’re talking about interest rate we’re talking about economics, pwedeng maging high ang effect ng
interest rate hindi man madalas ang occurrence but the effect is high because of the amount) (titignan kung
madalas nakikita o lumalabas at kung anong effect nito)

3. The Industry Environment

-The external environment layer where the trends and changes are easility, and immediately felt by the
business.
Government
- refers to the system or institution that handles the affair of a particular country, and has the jurisdiction over
the major activities happening within its territory, including international trade relations, the type of
government system operating in a particular country highly influences the business.

Suppliers
- refers to the individual persons or companies that provide the required materials, parts or service to the
business.
-They play a crucial role in the production of goods or services - they can delay the delivery of the
required raw materials and supplies or services.
-(without suppliers you wont be able to produce or come up with the product. They could affect the
business in terms of needs)

Customers
- buyers of goods or services produced or rendered by the business
- it must protect its customers in order to win their loyalty, and to attract new patrons

Competitors
- the forces in the industry environment that produce, sell, or render products or services which are
similar to those of the business
-Competitors can be classified as the direct and indirect:
Direct - produce and sell similar products or services
Indirect – produce and sell substitute products

Employees - are the workers of the business who are highly responsible for the production of goods or
delivery of services to the customers
- they help ensure the quality and quantity of products or services provided to the customers
- they are the backbone of the business
-(backbone of business, di tatayo ang business without them)

Creditors - refer to the bank, financial institutions, and financial intermediaries engaged in the
lending of money to the borrower usually for a fee or charge in the form of interest

Mas mataas ang effect ng external than internal factors

Industry Analysis Scanning Tools

Different industry forces must be properly evaluated and analysed. They can act as catalyst to the growth of
the business or become the primary cause of its failure

Environmental Scanning Tools:

▹ SWOT Model
▹ Forces of Competition Model
▹ Competitive Forces Model

SWOT Analysis
-It is a compilation of your company’s strengths, weaknesses, opportunities and threats. The primary objective
of a SWOT analysis is to help organizations develop a full awareness of all the factors involved
in making a business decision.
Forces of Competition Model
-also known as “Five Forces of Competition”
-popularized by Michael Eugene Porter
-the Five Forces Competing within the Industry are as follows:
• Potential new entrants
• Buyers
• Substitute products
• Supplier
• Rivalry among existing firms

Barriers to the Five Forces of Competition

- the five forces are considered threats to the entrepreneurial venture. Each competing forces has its own
bargaining power in the industry environment. However, the intensity of the threat of the five forces is
highly influenced by the level or degree of barriers affecting the
particular force.

*Potential New Entrants -new entrants refers to the one competitive force in the industry. It is a threat to
the business. The intensity of its threat will be affected by the presence of the following barriers:
strict government policy, substantial capital requirements, economies of scale, high cost of
product differentiation, high switching cost, difficulty in accessing distribution channels.

*Bargaining Power of Buyers - the threat that buyers may force down prices, bargain

*Bargaining Power of Suppliers - the threat that suppliers may raise prices or reduce the quality of
purchased goods and services.

*Rivalry Among Existing Firms - the treat that customers will switch their business to competitors within
the industry:
Numerous or equally balanced competitors, Slow industry growth, High fixed or storage cost,
Capacity augmented in large increments, High exit barriers

*Substitute Products and Services - the threat of limiting the potential returns of an industry by placing a
ceiling on the prices that firms in that industry can profitably charge without losing too many customers to
substitute products.
Products and services outside the industry that serve the same customer needs as the industry’s
products and services.