TAGBILARAN CITY COLLEGE

College of Business and Industry

Tagbilaran City, Bohol

Emily C. Tabigue
Course Code ABM104 Instructor
Charwen Namocatcat
Organization and etabigue.tcc@gmail.com
Course Title Email
Management cnamocatcat.tcc@gmail.com
Course Credits 3 Contact Number 0963-001-7912
Course Classification Consultation Hours
Pre-Requisite(s) Consultation Venue TCC Faculty Office

Learning Module 2 : The firm and its Environment

Duration of Delivery : February 12 – February 16, 2024
Due Date of Deliverables : February 16, 2024

Module 2 – The firm and its Environment

Learning Outcomes:
 Discuss SWOT and PEST Analyses.
 Identify the types of external environment.
 Identify the modes of environmental scanning
 The firm and its Environment
The business firm’s environment refers to the conditions
and elements that define its operations and determine its success.
There are two types of firm’s environment
1. Internal Environment – consist of elements that have a
direct impact on the business. These include the employees, board
of directors, and the managers. The elements of the internal
environment are directly controlled and can be freely modified by
the firm itself.
2. External Environment - consist of factors that have indirect
but significant influence on the operations of the business. These
factors, however, cannot be controlled by the firm.

There are two types of external environment

1. Microenvironment – is also known as the “operating

environment”. It consists of the customers, suppliers
and competitors. The factors in this environment have a
direct relevance to the business operations but are
uncontrollable to a certain extent.
2. Macroenvironment – is also known as “general
environment”. It consists of economic, political. Social,
legal, and technical environment of the business
organization. The factors in this environment are
beyond the control of the firm but are important
determinants of success.
 Environmental Scanning

Environmental scanning is the actual

monitoring and evaluation of information from the
external and internal environment of a business
organization. The information is then often provided to
the key people to guide the organization in its business
operations and in preparing for target market positions.

There are three modes of environmental scanning

1. Ad hoc environmental scanning – is not often done and is
usually applicable only during a crisis situation. The firm
does ad hoc scanning to determine whether a problem is
either external or internal.
2. Regular scanning – is usually done at least once a year or at
regular intervals.
3. Continuous scanning – refers to the continuous collection
of date on a broad range of environment factors. It is also
referred to as continuous learning done to monitor the
components of an organization’s internal environment.

Strategic Planning: SWOT and PEST Analyses

To adequate deal with the forces of the external
environment, managers and decision-makers apply certain
techniques in gathering and analyzing information and
subsequently conducting strategic planning, Strategic planning
techniques such as the SWOT analysis and PEST analysis consider
the elements of a firm’s internal and external environment in
formulating business plans and decisions.
SWOT analysis is primarily used to analyze the
microenvironment, while PEST analysis is conducted to address
the firm’s macroenvironment.

SWOT Analysis
SWOT analysis is a technique that identifies the Strengths and
Weaknesses of a company, as well as the Opportunities and Threats it faces.
In conducting this analysis, it is imperative to note that strengths and
weaknesses are part of the company’s internal environment, while
opportunities and threats are part of its external environment.

Strengths – good brand name, quality of products, good services, good

reputations, and skilled staff, credit standing, good communication and etc.
Weaknesses – lack of access to technology, poor location, lack of facilities and
equipment, poor transportation and etc.
Opportunities – new markets, potential profits, additional sources of raw
materials, better location, new customers and etc.
Threats – increase in the price of resources, entry of new competitors, high
inflation rates and etc.
 PEST Analysis
PEST Analysis is a method used in analysing the Political,
Economic, Social and Technological forces affecting the company.
This technique focuses on the factors that define the
macroenvironment.

 Political – Political factors include laws, regulations, and

restrictions that may intervene or affect the company’s business
course. Significant political factors include tax policies, labor laws,
environmental laws, trade restrictions and tariffs.
 Economic – Economic factors directly affect the capability
of business to generate profits. These include economic growth,
interest rates, exchange rates and inflation.
 Social – Social factors include demographic aspects such as age,
group affiliation, religion, civil status, and the economic status of
consumers. Analyzing social factors can also help a company
implement changes and improvement in its operations, product
and services.
 Technological – Technological factors include research and
development activities, automation, licensing, technological shifts
and etc.

Link between SWOT and PEST analyses