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Firm and its Environment

Business Environment

 Refers to the factors or elements affecting business organization.

 It is divided into:

 External Business Environment

 Internal Business Environment

External Business Environment

 Includes the factors and elements outside the organization which may affect its performance,
either positively or negatively

Systematic Monitoring of External Forces

 Is necessary to improve the management of companies

Components of External Business Environment

General External Business Environment

 Economic

 Socio-cultural

 Politico-legal

 Demographic

 Technological

 Word and Ecological Situations

Economic Situations

 may affect management practices in organizations.

Example:

 Companies may Postpone expansion plans if bank loan interests are too high.

Sociocultural Situations

 include the costumers’ changing values and preferences; customs could also affect
management practices in companies.

 Ex. Filipino costumers are now conscious about the importance of avoiding fatty foods.

Politico-legal Situations

 refers to:

 National or Local Laws,

 International laws

 Rules and regulations

Example:

Labor Laws related to preventing employers from firing their employees without due process
Demographic Situations

 such as Gender, Age, Education Level, Income, Number of Family Members, Geographic
Origin, etc., may also influence some managerial decisions in Organizations.

 Decisions Regarding Hiring of Human Resources maybe affected by an organization’s


management policy.

Technological Situations

 Involve the use of varied types of electronic gadgets and advanced technology such as
Computers, Robotics, Microprocessors, and others that have revolutionized business
management; e-commerce, teleconferencing, and sophisticated information system.

World and Ecological Situations

 are related to the increasing number of global competitors and markets, as well as the nature
and conditions of the changing natural environment.

 It must cater to the changing needs of people in the global community, while, at the same time,
considering their impact on the natural Environment

 Ex. Car manufacturing managers must give the go signal for the development of vehicles that
are environmental friendly.

Specific External Business Environment

 STAKEHOLDERS

 CUSTOMERS

 PRESSURE GROUPS

 INVESTORS or OWNERS

 EMPLOYEES

Stakeholders

 are parties that has interest in a company or business

 Primary stakeholders are its investors, employees, customers and suppliers

Customers

 are those who patronized the organization’s product and services

Suppliers

 are those who ensure the organizations continuous flow of needed materials required for
producing their goods and rendering their services

Pressure Groups

 interest groups that try to exert influence on the organization’s decisions or Actions

Investors or Owners

 provide the company with the financial support needs

Employees

 Are those who work for another or for an employer in exchange of salaries/wages or other
considerations
INTERNAL BUSINESS ENVIRONMENT

 Refers to the factors or elements within the organization which may also affect its
performance, either positively or negatively.

Internal Business Environment is composed of:

 Resources

 research and development

 Production

 procurement of supplies

 and the products and services it offers

Environmental forces

 an identifiable element in the physical , culture , demographic, economic, political , regulatory,


or technological environment that affects the survival, operations, and growth of an
organization.

 Most environmental forces may be outside of a company control.

ENVIRONMENTAL SCANNING

 Is a process of gathering, analyzing, and dispensing information for tactical or strategic


purposes.

 The environmental scanning process entails obtaining both factual and subjective information
on the business environments.

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