CHAPTER 2 : THE FIRM and it’s

ENVIRONMENT
The business environment may be classified into two types:

EXTERNAL BUSINESS ENVIRONMENT

• refers to the forces/factors outside the organization which my affect,
either positively or negatively, the performance of the organization.

INTERNALBUSINESS ENVIRONMENT
• refers to the forces/factors within the organization which my affect,
either positively or negatively, the performance of the organization.
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ENVIRONMENT
The GENERAL EXTERNAL BUSINESS ENVIRONMENT
includes:
• Economic
• Socio-cultural
• Politico-legal
• Demographic
• Technological
• World and ecological situations.
CHAPTER 2 : THE FIRM and it’s
ENVIRONMENT
The SPECIFIC EXTERNAL BUSINESS ENVIRONMENT
includes:
• Stakeholders
• Customers
• Pressure groups
• Investors
• Employees
CHAPTER 2 : THE FIRM and it’s
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The INTERNAL BUSINESS ENVIRONMENT
includes:
• The organizations’ resources
• Research and development
• Production
• Procurement of supplies
• Products and services offered
CHAPTER 2 : THE FIRM and it’s
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ENVIRONMENTAL SCANNING
• Involves the seeking for and sorting through data about the
organization’s environment.
• is a process of gathering, analyzing, and dispensing information
for tactical or strategic purposes.
• It is monitoring and interpreting sweep of social,
political, economic, ecological, and technological events to spot
budding trends that could eventually impact industry
CHAPTER 2 : THE FIRM and it’s
ENVIRONMENT
ENVIRONMENTAL SCANNING
• Involves the seeking for and sorting through data about the
organization’s environment.
• is a process of gathering, analyzing, and dispensing information
for tactical or strategic purposes.
• It is monitoring and interpreting sweep of social,
political, economic, ecological, and technological events to spot
budding trends that could eventually impact industry
CHAPTER 2 : THE FIRM and it’s
ENVIRONMENT
COMPONENTS OF ENVIRONMENTAL SCANNING
• The development of a competitive mindset
• Considering of future business scenarios
• Business prediction/forecasting
• 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
CHAPTER 2 : THE FIRM and it’s
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CULTURAL INTELLIGENCE
• Is an individual’s ability to favorably receive and adjust to an
unfamiliar way of doing things.

MONOCHRONIC CULTURE
• Is a culture where people tend to do one
thing at a time.

POLYCHRONIC CULTURE
• Is a culture that is more flexible on time and it is used to
accomplish many different things at one time.
CHAPTER 2 : THE FIRM and it’s
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ECONOMIC DEVELOPMENT
• Is a total process which includes not only economic growth or
the increase in the amount of goods and services produced by
the country’s economy but also consider the social, political,
cultural and spiritual aspects of the country’s growth.
CHAPTER 2 : THE FIRM and it’s
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ECONOMIC DEVELOPMENT PHASES/STAGES
• Economic growth
• Improvement of human development index
• Availability of benefits science and
provided by technology
• Societal improvement of the opportunities and
• General welfare of its members.
CHAPTER 2 : THE FIRM and it’s
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BUSINESS ORGANIZATION
• Is a collection of people working together to achieve a common
purpose related to their organization’s mission, vision, goals and
objectives and sharing a common organizational culture.

ORGANIZATIONAL CULTURE
• Is the set of beliefs and values shared by organization members
and which guide them as they work together to achieve their
common purpose.
CHAPTER 2 : THE FIRM and it’s
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BUSINESS ORGANIZATION
• Is a collection of people working together to achieve a common
purpose related to their organization’s mission, vision, goals and
objectives and sharing a common organizational culture.

ORGANIZATIONAL CULTURE
• Is the set of beliefs and values shared by organization members
and which guide them as they work together to achieve their
common purpose.
CHAPTER 2 : THE FIRM and it’s
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TYPES OF BUSINESS ORGANIZATION

SIMPLE BUSINESS ORGANIZATION

• Is an organization with few departments, centralized authority with a
wide span of control, with few formal rules and regulations

FUNCTIONAL BUSINESS ORGANIZATION

• Groups together people with similar or related duties, practices,
delegation of authority to functional managers like the personal
manager, sales manager or financial managers but allow CEOs to
retain authority for strategic decisions.
CHAPTER 2 : THE FIRM and it’s
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TYPES OF BUSINESS ORGANIZATION

DIVISIONAL BUSINESS ORGANIZATION

• Is made up of semi-autonomous, separate business units, with a
division head responsible for his unit’s performance.

NON-PROFIT BUSINESS ORGANIZATION

• Are organizations designed for the purpose of achieving their goals,
giving service to clients without expecting monetary gains or
financial benefits for their endeavors
CHAPTER 2 : THE FIRM and it’s
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TYPES OF BUSINESS ORGANIZATION

PROFIT BUSINESS ORGANIZATION

• Are organizations designed for the purpose of achieving their goals
and achieving stability through income generation and profit making.

OPEN/FLEXIBLE BUSINESS ORGANIZATION

• Are formed to meet today’s changing work environment and includes:
Team structures, matrix business organizations, project business
structures, boundary less business organizations and virtual business
organizations.
CHAPTER 2 : THE FIRM and it’s
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COMPETITIVE ENVIRONMENT

• Refers to specific groups of people with which the company/firm

interacts

• The company’s customers, rival firms, new entrants, substitutes and

suppliers make up the firm’s competitive environment forces.

• The abovementioned competitive environment forces have the

power to influence the nature of the competition among rival
companies so the firm must learn to adapt to or influence also the said
competition.
CHAPTER 2 : THE FIRM and it’s
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COMPETITIVE ENVIRONMENT

• The less power each of these competitive environment forces have,

the more profitable the industry will be.

• The firm’s managers must be able to identify the varying needs of its
customers and focus on creating customer value.

• The firm must also know the answers to the questions “who are our
rival companies?” “who are the new entrants to the industry?” “what
are their different or new and better ways of providing value to
customers?”
CHAPTER 2 : THE FIRM and it’s
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COMPETITIVE ENVIRONMENT
• The firm must realize that the substitutes are the biggest opportunity
or threat in an industry and this implies that they may have to think of
new strategies in order to compete with them. (landline phones have
cellphones as substitute)

• The firm must also realize the importance of their suppliers that
provide them with major inputs: raw materials for manufacturing
goods, money from investors, and financial institutions, and people
who supply them with new ideas and help in the production of goods
and services that they offer.
CHAPTER 2 : THE FIRM and it’s
ENVIRONMENT
customers

suppliers Rival firms

COMPAN
Y

New
substitutes
entrants
CHAPTER 2 : THE FIRM and it’s
ENVIRONMENT
TASK 1

Identify and list down the customers, rival firms, new entrants,
substitutes and suppliers of Philippine Airlines (PAL) or any known
Philippine Company listed among the top 100 Philippine Corporations.
CHAPTER 2 : THE FIRM and it’s
ENVIRONMENT
ASSESSMENT 1

Which cultural dimensions are practiced in the Philippines? Put a (/) or an

(x) mark beside the cultural dimension to express your affirmative or
negative response.

1. Low power distance 6. Collectivism

2. High power distance 7. masculinity
3. Low uncertainty avoidance 8. Femininity
4. High uncertainty avoidance 9. Individualism
5. Short term thinking 10. Long term thinking
CHAPTER 2 : THE FIRM and it’s
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ASSESSMENT 2

Fill in the blanks with the correct answer. Answer may be one of the
following: Simple, Functional, Divisional, Profit, Non-Profit,
Open/Flexible, Boundaryless or Virtual Business Organization

(1) Business Organizations maintain their

stability through income generation.
(2) Business Organizations made up of
semi- autonomous units.
CHAPTER 2 : THE FIRM and it’s
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(3) Business Organizations formed to meet today’s changing work
environment.
(4) Business Organizations is easy to manage because it has
few departments, centralized authority and few rules and regulations.
(5) Business Organizations that groups together those with similar or
related specialized duties.
(6) Business Organizations that assigns experts belonging to
different departments to work together on one or more projects.
CHAPTER 2 : THE FIRM and it’s
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(7) Business Organizations who design is flexible and unstructured.

(8) Business Organizations whose members are physically
dispersed and who, oftentimes, communicate electronically through
computers.