Applied Economics Module 1 PDF

Applied SENIOR HIGH Economics SCHOOL Self-Learning Module 1 Quarter 4 Business Environment  EXPECTATIONS After goi...

Applied SENIOR HIGH Economics SCHOOL Self-Learning Module 1 Quarter 4 Business Environment  EXPECTATIONS After going through this module, you are expected to: 1. define environmental scanning; 2. differentiate internal and external environment; and 3. discuss the micro and macro environment factors. PRETEST Directions: Read each statement carefully. Choose the letter of the best answer and write it on a separate sheet of paper. 1. It is a process of identifying the internal and external elements that affect the. A. Business Analysis B. Business Environment C. Environmental Analysis D. Environmental Scanning 2. It includes all internal and external factors that affect the performance of the company. A. Environmental Analysis B. Environmental Scanning C. Business Analysis D. Business Environment 3. These factors are controllable by the management. A. Micro Environment B. Macro Environment C. Internal Environment D. External Environment  4. These factors are beyond the control of the management however, have a great impact on the performance, decision making, and strategy of the business. A. External Environment B. Internal Environment C. Macro Environment D. Micro Environment 5. It is a strategic tool to identify the external and internal environment. A. Environmental Analysis B. Environmental Scanning C. Business Analysis D. Business Environment RECAP Directions: Describe the effects of taxation on income, indirect tax, and inflation. 1. ______________________________________________________________________________. 2. ______________________________________________________________________________. 3. ______________________________________________________________________________. LESSON Business Environment It includes all internal and external factors that affect the company performance and functions. It includes employees, customers, management, supply and demand, business regulations, and competition.  Every business organization has an internal and external environment. For the organization to be successful, it is important to study its environment regularly. This is to assess any developments and understand factors that can contribute to its success. Environmental scanning is a process used by organizations to monitor their external and internal environments. The purpose of the scan is to identify the opportunities and threats affecting the business. As a part of the environmental scanning process, the organization collects the information regarding its environment and analyzes the impact of changes in the market. Environmental analysis is a strategic tool in assessing the level of threats or opportunities that might affect the business. This eventually helps the management team to make better decisions. Internal Environment The internal environment of the organization consists of factors that are controllable by the management. As the figure above shows, the internal environment of an organization consists of various elements like the value system, mission/vision/goals/objectives of the organization, structure, culture, quality of employees, labor unions, technological capabilities, etc. These elements lie within the organization and any changes to them can affect the overall success of the business. External Environment There are two elements in the external environment: micro and macro. These environmental factors are beyond the control of the business but they still minimize the impact if the business has an effective strategic plan. Micro Environment Factors 1. Suppliers Suppliers can control the success of the business when they hold power. The supplier holds the power when they are the only or the largest supplier of the goods in the market. 2. Resellers Market intermediaries, middleman, or resellers have a great contribution to the delivery of products to the ultimate consumers. For example, if the reseller has a reputable name then this reputation can be leveraged in marketing the product. 3. Customers A customer is an individual or business that purchases goods or services. Customers are important because they drive revenues. Without them, businesses have nothing to offer. Most public-facing businesses compete with other companies to attract customers, either by aggressively advertising their products or by lowering prices to expand their customer bases. 4. Competition Those who sell the same or similar products and services as your organization is called competitors. The presence of one or more competitors can reduce the prices of goods and services as the companies attempt to gain a larger market share. Macro Environment Factors 1. Political factors These are about how and to what degree a government intervenes in the economy. It includes government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labor law, environmental law, and trade restrictions. 2. Economic factors Economic factors have a significant impact on how an organization does business and also how it is profitable. These factors include economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses. 3. Social Factors These include the shared belief and attitudes of the population. These factors are population growth, age distribution, health consciousness, career, attitudes and so on. 4. Technological Factors Technological factors affect the management and marketing in three ways: new ways of producing goods and services, new ways of distributing goods and services, and new ways of communicating with target markets. 5. Environmental Factors These factors have become important due to the increasing scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company. 6. Legal Factors It includes health and safety, equal opportunities, advertising standards, consumer rights and laws, product labeling, and product safety. It is clear that companies need to know what is and what is not legal in order to trade successfully. ACTIVITIES Activity: Environmental Scanning Directions: Think of one (1) business establishment nearby. Identify the micro and macro environment factors that affect the business establishment. Micro Environment Factors 1. Suppliers 2. Resellers 3. Customers 4. Competitors Macro Environment Factors 1. Political 2. Economic 3. Social 4. Technological 5. Environmental 6. Legal