ABM 3 -

ORGANIZATION
AND
MANAGEMENT
CHAPTER 2: The Firm and Its
Environment
Lesson 3: The Local and International
Business Environment of the Firm

Jennifer T. Pelegrino, MPA

Instructor
Objectives: • Describe the local and
international business
environment.
• Explain the role of business
in relation to the economy.
The Local and International Business Environment of the

Firm
 The local and international business environment of a firm refers
to the external factors and conditions that can impact the
operations, performance, and decision-making processes of a
business at both the domestic and global levels.

 These environments are dynamic and can include a wide range

of factors that may influence the success or challenges faced by
a firm. Here are some key components of the local and
international business environments:
A. The Local Environment of the Firm
The local business environment of a firm refers to the specific
conditions and factors that influence its operations within a
particular geographical area or country.

Understanding and navigating the local business environment

is crucial for companies as it directly impacts their day-to-day
activities, decision-making processes, and overall success.
A. The Local Environment of the Firm
 Local business needs to comprehend and adjust to each national
environment in various features of business.
 Cyclical changes tend to affect a domestic firm more intensely
than an international firm, making it more vulnerable to the ups
and downs of the domestic market.
 In a local business environment, communication is typically
easier than in an international environment.
 In a local environment, access to materials and labor may be
limited.
 However, providing local jobs can lead greater public goodwill
for the company and its local environment.
B. The Philippine Business Environment
 The business environment in the Philippines is influenced by
various factors, including economic, social, political,
technological, and legal considerations. It's important to note
that the business landscape can evolve, and there may have been
changes or developments since then (ao January 2022).
 B. The Philippine Business Environment
Here's an overview of key aspects of the Philippine business environment:

Economic Factors:

 GDP Growth: The Philippines has been experiencing steady economic growth, driven by
factors such as the business process outsourcing (BPO) industry, remittances from overseas
Filipino workers (OFWs), and a growing consumer market.
 Inflation and Interest Rates: Monitoring inflation rates and interest rates is crucial for
businesses to assess economic stability.

Social Factors:

 Demographics: The country has a young and growing population, which presents both
opportunities and challenges for businesses targeting the local consumer market.
 Cultural Diversity: The Philippines is culturally diverse, and understanding cultural nuances
is essential for businesses operating in the country.
B. The Philippine Business Environment
Here's an overview of key aspects of the Philippine business environment:

Infrastructure:

 Transportation and Logistics: Infrastructure development, including improvements in

transportation and logistics, is important for the efficient movement of goods and services.

Competitive Landscape:

 Industry Competitiveness: Various industries, including retail, manufacturing, and services,

contribute to the competitive landscape. Understanding market dynamics is crucial for business
success.

Environmental and Sustainability Factors:

 Environmental Policies: Environmental considerations are becoming more important, with

businesses facing pressure to adopt sustainable practices.
C. On Handling Business Matters in the
Philippines
 Business matters are always best dealt with on a face-to-face basis in a warm and
pleasant atmosphere.

 Filipino likes to be indirect, talk about mutual friends and family, exchange
pleasantries, and share jokes (unlike the Western business persons who always
think that time is gold and are direct to the point)

 Filipinos cultivate friends, establish valuable contact, and develop personal

rapport.

 Philippine business has its own etiquette. Ex. As a show of respect, Filipino usually
address people by their titles, like Attorney Ong, Dr. Imperial, etc.

 Handing out business cards is standard procedure, establishing cordial relations.

C. On Handling Business Matters in the
Philippines
 Most correspondences, contracts, letters, and other documents are written in
English. Among Filipinos, it is common to hear “Taglish” during informal
conversations.

 Body language and hand gestures (ex. , Raised eyebrow, a faint smile, a scratch on
the head) are also integral to how Filipinos express themselves.

 Texting/sending short messages through mobile phones, has now become a choice
medium.

 A person who invites customarily pays (business lunches and dinners). Dress is
according to venue.

 Christmas is also a time to show appreciation to people with whom a businessmen

have regular business dealings with through tokens and gifts.
D. International Business Environment
 Different sets of regulations may apply when a firm operates in international
environments. Must follow local environmental and labor regulations, the laws of
its home country pertaining to international business, and any global regulations
that apply, and tax laws.

 Understanding each target market’s preference poses a challenge when operating in

international markets. Difficult to predict customer preferences.

 There is a substantial difference in attitudes, beliefs, motivation, morality,

superstition, and perception, as well as other characteristics, in different countries.
D. International Business Environment
 In 1928, Geert Hofstede developed a model in which worldwide differences in
culture are categorized according to five dimensions:

1. Power distance – is the degree of inequality among people which the population of
a country considers normal.
2. Individualism vs. collectivism – is the degree to which people in a country prefer to
act as individuals or as members of a group.
3. Masculinity vs. femininity – is the degree to which values like assertiveness,
performance, success, and competitiveness are used to guide decisions versus
values like quality of life, warm personal relationships, service, and solidarity.
4. Uncertainty avoidance – is the degree to which citizens of a country prefer
structured over unstructured situations, rigidity of procedures, or willingness to
accept risk and potential failure.
5. Time orientation – is the extent to which decisions is based on long-term
orientation versus short-term orientation, past versus present versus future, and
punctuality.
E. The Role of Business to the Economy
 Is to act as a vehicle for economic progress.

 This means business catalyzes economic growth and eases poverty. A higher standard of living
for people in a country is the outcome of the presence of business in the economy.

 Businesses produce the goods and services that people need. Businesses make possible
exchange among people and provide for more selection, quantity, and quality of products and
services at affordable prices, instead of having to produce everything that people consume on
their own.

 In a local community scenario, businesses bring progress and modernization to communities. It

also provides employment opportunities.

 Businesses pay higher taxes if they earn more profit, including local taxes. This then utilized
for local services like police and fire departments as well as schools.
E. The Role of Business to the Economy
 In the Philippines, MSMEs (Micro, Small and Medium Enterprises) contribute
importantly to its economy.

 MSMEs are the backbones of the country’s economy, counting for 99.6% of all
registered businesses that provide work for 70% of the country’s labor force.

 MSMEs also produce about 30% of the Philippines' total output. During the 20th
century, an Asian Development Bank (ADB) study confirmed that 50% of
innovations are created by new and small firms. Indeed, these businesses have a
greater direct impact on Filipinos’ lives.
THANK
YOU
See you next time!