The Firm and its

Environment
The environment in which a business operates
is a major consideration in determining an
organization’s design and structure.

A company’s strategy and approach must be

aligned to limitations and capabilities of its
external and internal environment.
Environmental Scanning
- Seeking for and sorting through data
about the environment
Environmental Scanning
Is the monitoring, evaluation, and
dissemination of information from external
and internal environments to key people
within the corporation.
Components of Environmental
Scanning
1.Start with developing a competitive
mindset.
2.Learn business prediction
3.Practice benchmarking
Components of the External Business
Environment: General and Specific
Failure to consider a company’s general and
specific business environments may affect the
strategies that management will make and
use.
General Business Environment
1. Economic
2. Sociocultural
3. Political/legal
4. Demographic
5. Technological
6. Global
ECONOMIC
Inflation, rates of interest, changing
options in stock market and people’s
spending habits.
Sociocultural
Include the customes’ changing
values and preferences.
Political/legal
Refer to national or local laws
international laws, and rules and
regulations that influence
organizational management.
Demographic
Demography – study of the population

Include gender, age education level, income,

number of family members, geographic origin,
etc.
Techonological
Involve the use of varied types
of electronic gadgets and
advanced technology such as
computers, robotics,
microprocessors and others that
have revolutionized business
management
Global
Related to the increasing
number of global competitors
and markets as well as the
nature and conditions of the
changing natural environment.
How does the external environment
affect managers?
1. Jobs and employment – work
arrangement
2. Environmental uncertainty – amount of
change happening
3. Stakeholder relationship
Specific Business
Environment
STAKEHOLDERS
Stakeholders – are parties likely to be
affected by the activities of the
organization. They are affected by an
organization’s decisions and actions.
Why should managers care about
managing stakeholder relationships?
It can lead to desirable organizational
results such as predictability of
environmental changes, more successful
innovations and greater degree of trust.
Organization’s stakeholders
1. Employees
2. Customers
3. Shareholders
4. Suppliers
5. Government
6. Media
7. Competitors
8. Pressure groups
9. Communities
Components of the Internal
Business Environment
1.Resources
2.Organizational departments
3.Products/services