Q1-Lesson 04

Organization
and
Management
 Q1- Lesson 04

Organization
and
Management
WITH TEACHER JOFEL :)
MS. MA. JOFEL MADELYN P. YARCIA
CLASSROOM
OPENING
PRAYER
Attendance
Checking!
Materials Needed for Class
•Notebook
•Pen
•Full attention
 Q1- Lesson 04

Environmental
Forces and
Environmental
Scanning
Learning Objective:
•Identify and analyze various
forces/elements influencing local
and international business
environment using PEST and SWOT
strategies
 Review: Lesson 3 CLASSIFICATION
OF MANAGERS
Functions, Roles and Skills of Manager!
BASED ON THEIR
MANAGER LEVEL IN THE COMPANY:
Manager is a person 3 MAIN Top managers
FUNCTIONS OF Middle managers
who has A MANAGER
First-line managers
1. Interpersonal roles.
responsibility for the Based on the tasks for
activities of other 2. Informational roles. which they are responsible
people in the 3. Decisional roles or Production manager
organization Personnel manager
Decision-making.
Finance manager
Sales manager
Review: Lesson 3
Functions, Roles and 3 MAIN FUNCTIONS OF A MANAGER
Skills of Manager!
1. Interpersonal roles.
MANAGERIAL figurehead
SKILLS leader
liaison
Technical Skills 2. Informational roles.
spokesperson
Conceptual monitor
Skills disseminator
3. Decisional roles or Decision-making
Human Skills entreprenuer
disturbance handler
resource allocator
negotiator
 Q1- Lesson 04

Environmental
Forces and
Environmental
Scanning
Background Information...
Just like human beings, business
enterprises do not exist in isolation. Each
business firm is not an island unto itself;
it exists, survives and grows within the
context of the element and forces of its
environment.
Background Information...

While an individual firm is able to do little to

change or control these forces, it has no
alternative to responding or adapting
according to them. A good understanding of
environment by business managers enable
them not only to identify and evaluate, but
also to react to the external forces.
 Definition of Terms...
Environmental scanning - seeking for and sorting through data
about the environment

External business environment - refers to the factors/elements

outside the organization which may affect, either positively or
negatively, the performance of the organization.

Internal business environment - refers to the factors/elements

within the organization which may affect, either positively or
negatively, the performance of the organization
 Definition of Terms...
Inflation - a period of above normal general price increases, as
reflected in the consumer and wholesale price indexes

Interest rates - the total amount that a borrower must pay annually
to the lender and above the total amount borrowed

Changing options - the consumers change in preference of goods

and services offered
 Definition of Terms...

People's spending habits - consumers' changing ways of spending

their money on goods and services

Economic situations -includes inflation rates of interest, people's

spending habits, changing options, etc.
 MICRO-ENVIRONMENT
Includes those players whose decisions and
actions have a direct impact on the company.
Production and selling of commodities are the
two important aspects of modern business.
Accordingly, the micro-environment of business
can be divided.
 MACRO-ENVIRONMENT
The condition that exist in the economy as a
whole, rather than in a particular sector or
region. In general, the macro environment
includes trends in the gross domestic product
(GDP, inflation, employment, spending, and
monetary and fiscal policy.
MICRO-ENVIRONMENT
1. Suppliers of inputs
2. Customers
3. Marketing intermediaries
4. Competitors
5. Publics
 MICRO-ENVIRONMENT
1. Suppliers of inputs:
An important factor in the external micro-
environment of a firm is the supplier of its inputs
such as raw materials and components. Normally,
most firms do not depend on a single supplier of
inputs. To reduce risk and uncertainty business
firms prefer to keep multiple suppliers of inputs.
 MICRO-ENVIRONMENT
2. Customers:
The people who buy and use a firm’s product and services
are an important part of external micro-environment.
Since sales of a product or service is critical for a firm's
survival and growth, it is necessary to keep the
customers satisfied. A concern for customers’
satisfaction is essential for the success of a business
firms. Besides, a business firm has to compete with rival
firms to attract customers and thereby increase the
demand and market for its product.
 MICRO-ENVIRONMENT
3. Marketing intermediaries:
In the firm's external micro-environment, marketing
intermediaries play an essential role of selling and
distributing its products to the final customers.
Marketing provides an important link between a
business firm and its ultimate customers.
 MICRO-ENVIRONMENT
4. Competitors:
Different firms in an industry compete for sale of their products. This
competition may be based on pricing of their products and non- price
competition through competitive advertising such as sponsoring
some events to promote the sale of different varieties and models of
their products. Because of liberalization and globalization of the
Indian economy since the adoption of economic reforms there has
been a significant increase in the competitive environment of
business firms. Now, Indian firms must compete not only with each
other but also with foreign firms whose products can be imported. In
America, American firms faced a lot of competition from the
Japanese firms producing electronic goods and automobiles.
 MICRO-ENVIRONMENT
5. Publics:
Finally, publics are an important force in external
microenvironment. Environmentalists, media groups, women’s
associations, consumer protection groups, local groups,
Citizens Association are some important examples of publics
which have an important bearing on the business decisions of
the firm. The existence of various types of publics influences
the working of business firms and compels them to be socially
responsible.
 External Macro Environment
Apart from micro-environment, business firms
face large external environmental forces. An
important fact about external macro
environmental forces is that they are
uncontrollable by the management. Because of the
uncontrollable nature of macro forces a firm must
adjust or adapt it to these external forces.
 External Macro Environment(Factors)
1. Economic Environment:
Economic environment includes all those forces which have
an economic impact on business. Accordingly, total
economic environment consists of agriculture, industrial
production, infrastructure, and planning, basic economic
philosophy, stages of economic development, trade cycles,
national income, per capita income, savings, money supply,
price level and population.
 External Macro Environment(Factors)
2. Political-legal Environment:
Business firms are closely related to the government. The
political- legal environment includes the activities of three
political institutions, namely, legislature, executive and
judiciary which usually play a useful role in shaping,
directing, developing and controlling business activities.
 External Macro Environment(Factors)
3. Technological Environment:

Technological environment is exercising considerable

influence on business. Technology implies systematic
application of scientific or other organized knowledge to
practical tasks or activities. Business makes it possible for
technology to reach the people in proper format.
 External Macro Environment(Factors)
4. Global or International Environment:

Global environment plays an important role in shaping

business activity. With the liberalization and globalization of
the economy, business environment of an economy has
become totally different wherein it has to bear all shocks
and benefits arising out of global environment.
 External Macro Environment(Factors)
5. Socio-cultural Environment:
Social and cultural environment also influences the business
environment indirectly. These include people’s attitude to
work and wealth, ethical issues, role of family, marriage,
religion and education and also social responsiveness of
business.
 External Macro Environment(Factors)
6. Demographic Environment:

The demographic environment includes the size and growth

of population, life expectancy of the people, rural-urban
distribution of population, the technological skills and
educational levels of labor force. All these demographic
features have an important bearing on the functioning of
business firms.
 External Macro Environment(Factors)
7. Natural Environment:
Influences business in diverse ways. Business in modern
times is dictated by nature. The natural environment is the
ultimate source of many inputs such as raw materials and
energy, which firms use in their productive activity. The
natural environment which includes geographical and
ecological factors such as minerals and oil reserves, water
and forest resources, weather and climatic conditions are all
highly significant for various business activities.
 External Macro Environment(Factors)
8. Ecological Environment:

Due to the efforts of environmentalists and international

organizations such as the World Bank the people have now
become conscious of the adverse effects of depletion of
exhaustible natural resources and pollution of environment
by business activity. Accordingly, laws have been passed for
conservation of natural resources and prevention of
environment pollution. These laws have imposed additional
responsibilities and costs for business firms.
 INTERNAL ENVIRONMENT
The factors in internal environment of
business are to a certain extent
controllable because the firm can change
or modify these factors to improve its
efficiency. However, the firm may not be
able to change all the factors.
 INTERNAL ENVIRONMENT
1. Value system:

The value system of an organization means the

ethical beliefs that guide the organization in
achieving its mission and objectives. It is a widely
acknowledged fact that the extent to which the
value system is shared by all in the organization is
an important factor contributing to its success.
 INTERNAL ENVIRONMENT
2. Mission and objectives:
The business domain of the company, direction of
development, business philosophy, business policy
etc. are guided by the mission and objectives of the
company. The objective of all firms is assumed to
be maximization of profit. Mission is defined as the
overall purpose or reason for its existence which
guides and influences its business decision and
economic activities.
 INTERNAL ENVIRONMENT
3. Organization structure:
The organizational structure, the composition of the
board of directors, the professionalism of
management etc. are important factors influencing
business decisions. The nature of the organizational
structure has a significant influence over the
decision-making process in an organization. An
efficient working of a business organization
requires that the organization structure should be
conducive for quick decision-making.
 INTERNAL ENVIRONMENT
4. Corporate culture:
Corporate culture is an important factor for
determining the internal environment of any
company. In a closed and threatening type of
corporate culture the business decisions are taken
by top level managers while the middle level and
lower level managers have no say in business
decision- making. This leads to lack of trust and
confidence among subordinate officials of the
company and secrecy pervades throughout the
organization.
 INTERNAL ENVIRONMENT
5. Quality of human resources:
Quality of employees that is of human resources of a
firm is an important factor of internal environment
of a firm. The characteristics of the human
resources like skill, quality, capability, attitude and
commitment of its employees etc. could contribute
to the strength and weaknesses of an organization.
 INTERNAL ENVIRONMENT
6. Labor unions:
Labor unions collectively bargains with the
managers for better wages and better working
conditions of the different categories of workers.
For the smooth working of a business firm good
relations between management and labor unions is
required.
 INTERNAL ENVIRONMENT
7. Physical resources and technological
capabilities:
Physical resources such as, plant and equipment
and technological capabilities of a firm determine
its competitive strength which is an important
factor for determining its efficiency and unit cost of
production. Research and development capabilities
of a company determine its ability to introduce
innovations which enhances productivity of
workers.
 SPECIFIC COMPONENTS OF THE
EXTERNAL BUSINESS ENVIRONMENT

Stakeholders, Customers, Suppliers, Pressure

groups, Organization’s investors or owners and
Employees.
 COMPONENT OF THE INTERNAL
BUSINESS ENVIRONMENT

1. Resources – financial, physical, mechanical,

technological, and human resources must be
subjected to internal analysis (SWOT)
SWOT ANALYSIS
A SWOT analysis is a technique used to determine
and define your Strengths, Weaknesses,
Opportunities, and Threats (SWOT). SWOT analyses
can be applied to an entire company or organization,
or individual projects within a single department.
Most commonly, SWOT analyses are used at the
organizational level to determine how closely a
business is aligned with its growth trajectories and
success benchmarks, but they can also be used to
ascertain how well a particular project – such as an
online advertising campaign – is performing
according to initial projections.
PORTER’S FIVE FORCES
Porter’s Five Forces analysis is a framework that
helps analyzing the level of competition within a
certain industry. It is especially useful when starting
a new business or when entering a new industry
sector. According to this framework,
competitiveness does not only come from
competitors. Rather, the state of competition in an
industry depends on five basic forces: threat of new
entrants, bargaining power of suppliers, bargaining
power of buyers, threat of substitute products or
services, and existing industry rivalry
PESTEL ANALYSIS
A PESTEL analysis or PESTLE analysis (formerly
known as PEST analysis) is a framework or tool used
to analyses and monitor the macro-environmental
factors that may have a profound impact on an
organization’s performance. This tool is especially
useful when starting a new business or entering a
foreign market. It is often used in collaboration with
other analytical business tools such as the SWOT
analysis and Porter’s Five Forces to give a clear
understanding of a situation and related internal and
external factors. PESTEL is an acronym that stands
for Political, Economic, Social, Technological,
Environmental and Legal factors.
 Components of Environmental Scanning
1. Developing a competitive mindset

By seeking and sorting through data about environment,

you may be able to understand and predict the various
changes, opportunities and threats that may affect
organizations in the future.
 Components of Environmental Scanning
2. Considering future business scenarios

By realistic consideration of both worse- case scenario or

unfavorable future conditions, as well as middle ground
possible conditions, you will have an idea or what to do in
the future
 Components of Environmental Scanning
3. Business prediction (also known as business
forecasting)

Method of predicting how variables in the environment will

alter the future of business. It could be used in making
decisions regarding offshoring, branching out locally, and
expanding or downsizing the company. However, the
accuracy of such business predictions cannot always be
assured.
 Components of Environmental Scanning
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.