Copy of Revised Module 3-Q1 Organization and Management- PDF

ORGANIZATION & MANAGEMENT Quarter 1 -Module 3 The Firm and Its Environment Jesilo O. Crisostomo Compiler/Contextualizer Organization and Management - Grade 11 Quarter 1 – Module 3: The Firm and Its Environment Republic Act 8293, section 176 states that: No copy...

ORGANIZATION & MANAGEMENT Quarter 1 -Module 3 The Firm and Its Environment Jesilo O. Crisostomo Compiler/Contextualizer Organization and Management - Grade 11 Quarter 1 – Module 3: The Firm and Its Environment Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the Government of the Philippines. However, prior approval of the government agency or office wherein the work is created shall be necessary for exploitation of such work for profit. Such agency or office may, among other things, impose as a condition the payment of royalties. Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names, trademarks, etc.) included in this module are owned by their respective copyright holders. Every effort has been exerted to locate and seek permission to use these materials from their respective copyright owners. The publisher and authors do not represent nor claim ownership over them. Published by the Department of Education-CEBU CITY DIVISION Region VII Development Team of the Module Compliers/Contextualizers: Jesilo O. Crisostomo- Teacher 1- Apas National High School Editors / Reviewers: Alice Ganar, Anna Hazel Vasaya, John Paul Kapuno, Joy Andilab, Remus C. Mariñas, Daisy Von Dy and Florenda Geyroza Illustrator: Jesilo O. Crisostomo- Teacher 1- Apas National High School Management Team: RHEA MAR A. ANGTUD, EdD Schools Division Superintendent DR. GRECIA F. BATALUNA Chief, Curriculum Implementation Division DR.LUIS DERASIN, Jr. EPS- Araling Panlipunan/SHS Division Coordinator VANESSA L. HARAYO,LLB EPS-in-charge of LRMS Department of Education – School Division of Cebu City, Region VII Office Address: New Imus Ave., Barangay Day-as Cebu City Telephone No: (032) 253 2559 E-mail Address: [email protected] I  First Quarter Week 3- Module 3 The Firm and Its Environment Content Standard : The learners have an understanding of the role of business in the environment, and how the environment affects the firm Performance Standard : The learners shall be able to analyze the various environmental forces affecting the firm and summarize these using Political, Economic, Social and Technological analysis (PEST) and Strength, Weaknesses, Opportunities, and Threats (SWOT) analysis frameworks. Competency/Code : Analyze various forces/elements influencing local and international business environment using PEST and SWOT strategies. (ABM_AOM11-Ic-d-4) (ABM_AOM11-IC-d-5) What I Know Multiple Choice: Choose the letter of the correct answer and write it on a separate sheet of paper. ________1. It refers to the factors/elements within the organization which may affect, either positively or negatively the performance of the organization. a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment ________2. It refers to the factors/elements outside the organization which may affect, either positively or negatively the performance of the organization. a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment ________3. It includes those players whose decisions and actions have a direct impact on the company. A type of environment where production and selling of commodities are the two important aspects of modern business. a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment 1 ________4. It is the condition that exist in the economy as a whole, rather than in a particular sector or region. a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment ________5. It is a management method whereby an organization can assess major external factors that influence its operation in order to become more competitive in the market a. PEST c. AIDA b. SWOT d. Organizing ________6. It is a technique used to determine and define your Strengths, Weaknesses, Opportunities, and Threats. a. PESTEL c. AIDA b. SWOT d. Organizing ________7. It is the process of gathering information about events and their relationships within an organization’s internal and external environments. a. Environmental Scanning c. Micro-environment b. Environmental Forces d. Macro-environment ________8. It is an inherent constraint or limitation which creates a strategic disadvantage for a business. a. Strength c. Opportunity b. Weaknesses d. Threats ________9. It is a favorable condition in the organization’s environment enabling it to strengthen its position. a. Strength c. Opportunity b. Weaknesses d. Threats _______10. It is an unfavorable condition in the business environment causing damage to the organization. a. Strength c. Opportunity b. Weaknesses d. Threats 2  What I Need to Know Every organization, whether business or non-business, has its environment. The organizational environment is always dynamic and ever changing. Changes today are so frequent and every change brings so many challenges that the managers and leaders of the organization need to be vigilant about the environmental changes. The environment of an organization consists of its surroundings and anything can affect its operations, favorably or unfavorably. As we study and immerse ourselves in the process of Organization and Management, it is necessary to identify various forces/elements of the firm’s environment using the PEST and SWOT analyses. This module will assist you in understanding the following lessons:  Environmental forces and environment scanning  Understanding business environment  Components of business environment  PEST and SWOT analysis After going through this module, you are expected to be able to:  Analyze various forces/elements influencing local and international business environment using PEST and SWOT strategies. Lesson Environmental Forces and 1 Environment Scanning In order to run the business successfully, it is necessary to understand the environment in which the business operates. Understanding environmental forces that surrounds the business, is a major factor that we need to consider in determining organization’s design and structure. Considerations such as uncertainty, procurement, and competition are broadly classified in two types of environmental factor that affects the organization. A company’s strategy and approach to operations must be aligned with the limitations of its environmental forces. 3  What’s In If a business wants to be successful, it is necessary for them to fully understand what factors that exert great impact on the development of their company. Once they know about positive and negative effects within and outside the company, they can produce suitable strategies to handle any predicted situation. Therefore, examining internal and external factors is considered the most important task for a business before the management launch any strategic plan. ACTIVITY: Identifying internal and external factors Instruction: Below are environmental factors that affect organization and business operations. Write I if it is an internal environment factor and E if its external environment factor. Use a separate sheet of paper for your answers. _____ 1. Plans and Policies ______6. Labor Management _____ 2. Marketing and Media ______7. Technology _____ 3. Input or Suppliers ______8. Competitors _____ 4. Corporate image and brand equity ______9. Economic _____ 5. Plant, machinery and equipment ______10. Value Proposition What’s New Understanding Business Environment To get a proper understanding of the business environment, we should analyze individual elements of this term. First, environment can be acknowledged as the surroundings or conditions in which a specific activity is carried on. Second, we must know and understand that a business firm is a social entity which is formed by a hierarchy of structure where all necessary items of its own are activated together to reach the collective goal. Therefore, it is absolute that every factor inside and outside a business organization has a profound influence on business activities. In other words, internal and external environment create a business environment. 4  Figure 1. Components of business environment What is It ENVIRONMENT FORCES AND ENVIRONMENT SCANNING Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine development and forecasts of factors that will influence organizational success. Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an organization’s internal and external environment. It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. ENVIRONMENTAL SCANNING Is the process of gathering information about events and their relationships within an organization’s internal and external environments. The basic purpose of environmental scanning is to help management determine the future direction of the organization. 5 Types of Environment 1. Internal Environment. Refers to the factors/elements within the organization which may affect, either positively or negatively, the performance of the organization. 2. External Environment. Refers to the factors/elements outside the organization which may affect, either positively or negatively, the performance of the organization. Factors constitute the external environment of an organization 1. 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. 2. Macro-environment. Is 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. Factors Constitute Micro-Environment 1. Suppliers of inputs. An important factor in the external micro-environment of a firm is the supplier of 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. 2. Customers. The people who buy and use firm’s product and services. They play an important part in the external micro-environment where sales of a product or services are essential for a firm's survival growth which is necessary to keep them satisfied. A concern for customers’ satisfaction is required for the success of a business firm. 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. 4. Competitors. Persons who are rivals against another. In business, a company in the same industry or a similar industry which offers a similar product or service. 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. 5. Public. Public plays an important force in external micro-environment. Environmentalists, media groups, women’s associations, consumer protection groups, local groups, citizens association are some important examples of public which have an important bearing on the business decisions of the firm. The existence of various types of public, influences the working of business firms and compels them to be socially responsible. 6 FACTORS OF MACRO-ENVIRONMENT 1. Economic Forces. Are factors such as monetary and fiscal policies, interest rate, employment, inflation rate, demographic changes, political changes, energy, security, and natural disasters. All of these have a direct effect on how businesses produce and distribute their products or services.  Economic Growth- leads to an expansion in customer expenditures. This gives company the opportunity to expand their operations and earn higher profit.  Economic Decline- leads to a reduction in customer expenditures. It increases competitive pressures and causes price wars in mature industries.  Interests Rates- important because they influence a company’s cost capital, and therefore its ability to raise funds and invest in new assets. The lower the interest rates are, the lower the cost capital of the companies will be, and the more investment there will be.  Currency Exchange- in general a weaker peso supports exports by effectively making them less expensive; increased export activity should lead to expanded production and employment, and contributes directly to GDP by reducing the trade deficit or increasing its surplus, whichever the case may be.  Price Inflation- can destabilize the economy, producing slower economic growth, higher interest rates, and volatile currency movements. It pushes the economy into recession. High inflation is threat to the companies.  Price Deflation- if prices are falling, the real price of fixed payments goes up. This is damaging for companies and individuals with a high level of debt who must make regular fixed payments on that debt. 2. Social, Cultural, Demographic and Natural Environment Forces. Shape the way how people live, work, produce and consume. 3. Political, Government and Legal Forces. Political processes shape a society’s law, which constrain the operations of organizations and managers and thus create both opportunities and threats. 4. Technological Forces. Technological forces influence organization in several ways. A technological innovation can have a sudden and dramatic effect on the environment of a firm. Technological change can disseminate existing businesses and even the entire industries since it shifts demand from one product to another. The four most important macro-economic forces are: 1. The growth rate of the economy 2. Interest rates 3. Currency exchange rates; and 4. Inflation (or deflation) rates The internal environment offers strengths and weaknesses to business while the external environment brings opportunities and threats. 7 ACTIVITY: Environment Forces Instruction: Below are the factors affecting business operations. If the factor is related to macro-environment write “Macro” and if it is related to micro-environment, write “Micro”. Use a separate sheet of paper for your answers. _________1. Environmental pollution ________6. Supply and Demand _________2. Product competition ________7. Climate change _________3. Prospects of sales growth ________8. Public opinion _________4. Interests rates ________9. Internet connectivity _________5. Exchange rates ________10. Education level as variable SWOT Analysis A SWOT analysis is a strategic planning technique used to help a person or organization identify strengths, weaknesses, opportunities and threats related to business competition or planning. The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision. The four influencing environmental factors known as SWOT Analysis are:  Strength – an inherent capacity of an organization which helps it gain a strategic advantage over its competitors.  Weakness – an inherent constraint or limitation which creates a strategic disadvantage for a business.  Opportunity – a favorable condition in the organization’s environment enabling it to strengthen its position.  Threat – an unfavorable condition in the organization’s environment causing damage to the organization. PEST Analysis PEST Analysis (political, economic, social and technological) is a management method whereby an organization can assess major external factors that influence its operation in order to become more competitive in the market. As described by the acronym, those four areas are central to this model. PEST focuses on external environmental factors that affect the business, whereas SWOT analysis focuses on both internal and external factors. PEST explores the political and legal landscape by looking at employment laws, political issues, taxes and regulations that impact the business. 8  PEST ANALYIS TEMPLATE Political Factor Economic Social Factor Technological Factor Factor Ecological/Environmental Home economy Lifestyle trends Research funding Issues situation Government policies General Demographics Innovation taxation issues potential Trading policies Market and Media views Intellectual trade cycles property issues Wars and conflicts Specific Ethical Issues Global industry factors communications Government term and Interest and Advertising and Maturity of change exchange rates publicity technology  Political. These are the external factors that influence the business environment. Government decisions and policies affect a firm’s position and structure, Tax laws, monetary and fiscal policies as well as reforms of labor and workforce, all influence companies in future. These factors are important and need to be managed in order to overcome uncertainty.  Economical. Economic factors are the most important since it impacts business in the long run. Inflation, interest rates, economic growth and demand/supply trends are to be considered and analyzed effectively before planning and implementing. Economic factors affect both consumers and enterprises.  Social. Social factors involve the trends of population, domestic markets, cultural trends and demographics. These factors help businesses assess the market and improve their products/service accordingly.  Technological. This analyzes the technology trends and advancements in business environment, innovations and advancements lowers barriers to entry plus decreased production levels as it results in unemployment. This includes research and development activity, automation and incentives. 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 9 Source: https://www.business-to-you.com/porters-five-forces/ Figure 2. Porter’s Five Forces 10  What’s More ACTIVITY: Analyzing ME Instruction: Below is a SWOT analysis template. Copy the template on a separate sheet of paper and list down five (5) SWOT analysis about yourself. STRENGTHS WEAKNESSES OPPORTUNITIES THREATS What I Have Learned Instruction: Complete the following statements in a separate sheet of paper. In this module, I have learned that: a. to get a proper understanding of the business environment, we should analyze _____________________________________________________________________________ _____________________________________________________________________________ b. a SWOT analysis is a ________________________________________________________ ______________________________________________________________________________ c. a PEST analysis is a _________________________________________________________ ______________________________________________________________________________ 11  What I Can Do ACTIVITY: Do Your Own SWOT and PEST Analysis Instruction: Now we know that each element of a SWOT and PEST analysis is concerned with the kinds of exploratory questions. We can ask to get the ball rolling, it’s time to actually get to work and create your own SWOT and PEST analysis. To illustrate how it works, assuming that you have a family owned restaurant, with a single location operating in an urban area. Create your own SWOT and PEST analysis. Copy the template on a separate sheet of paper for your answer sheet. See example number 1 for you to have a guide in answering number 2 and 3 items. SWOT ANALYSIS TEMPLATE STRENGTH: WEAKNESSES: 1. Good Reputation among local 1. Currently not using food delivery community apps/technology 2. 2. 3. 3. OPPORTUNITIES: THREATS: 1. Potential for growth via food delivery 1. Uncertain economic environment apps/technology 2. 2. 3. 3. PEST ANALYSIS TEMPLATE POLITICAL FACTOR: ECONOMICAL FACTOR: 1. Tax laws 1. Inflation 2. 2. 3. 3. 12 SOCIAL FACTOR: TECHNOLOGICAL FACTOR: 1. Trends of population 1. Research and development 2. 2. 3. 3. Assessment Multiple Choice: Choose the letter of the correct answer and write it on a separate sheet of paper. ________1. It refers to the factors/elements within the organization which may affect, either positively or negatively, the performance of the organization a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment ________2. It refers to the factors/elements outside the organization which may affect, either positively or negatively, the performance of the organization. a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment ________3. These are factors such as monetary and fiscal policies, interest rate, employment, inflation rate, demographic changes, political changes, energy, security, and natural disasters. a. Economic forces c. Political and legal forces b. Natural forces d. Demographic forces ________4. It refers to the condition that exists in the economy as a whole, rather than in a particular sector or region. a. Internal Environment c. Macro-environment b. External Environment d. Micro-environment ________5. It is a management method whereby an organization can assess major external factors that influence its operation in order to become more competitive in the market. a. PEST c. AIDA b. SWOT d. Organizing ________6. It refers to a technique used to determine and define your Strengths, Weaknesses, Opportunities, and Threats a. PESTEL c. AIDA b. SWOT d. Organizing 13 ________7. It refers to the process of gathering information about events and their relationship within an organization’s internal and external environments. a. Environmental Scanning c. Micro-environment b. Environmental Forces d. Macro-environment ________8. It is an inherent constraint or limitation which creates a strategic disadvantage for a business. a. Strength c. Opportunity b. Weaknesses d. Threats ________9. It analyzes the technology trends and advancements in business environment, innovations and advancements lower barriers to entry plus decreased production levels as it results in unemployment. a. Political c. Social b. Economical d. Technological _______10. It involves the trends of population, domestic markets, cultural trends and demographics. These factors help businesses assess the market and improve their products/service accordingly. a. Political c. Social b. Economical d. Technological _______11. It increases competitive pressures and causes price wars in mature industries. a. Economic Growth c. Interests Rates b. Economic Decline d. Price Inflation _______12. It can destabilize the economy, producing slower economic growth, higher interest rates, and volatile currency movements. a. Economic Growth c. Interests Rates b. Economic Decline d. Price Inflation _______13. It is important because they influence a company’s cost capital, and therefore its ability to raise funds and invest in new assets. a. Economic Growth c. Interests Rates b. Economic Decline d. Price Inflation _______14. It gives company the opportunity to expand their operations and earn higher profit. a. Economic Growth c. Interests Rates b. Economic Decline d. Price Inflation _______15. It is an important factor in the external micro-environment of a firm such as raw materials and components. a. Customers c. Marketing intermediaries b. Supplier of inputs d. Competitors 14 References: Illustrations: Components of Business Environment, August 12, 2020, https://www.managementstudyhq.com/functions-of -management.html Porter’s Five Forces, March 12, 2020 https://www.business-to-you.com/porters-five- forces/ Online sources: Business Environment, August 12, 2020, https://www.businessmanagementideas.com/business-environment/business- environment Internal and External Environment Factors that Influences Organizational Decision Making, August 12, 2020, https://www.iedunote.com/organizational-environment- elements Understanding of Business Environment, August 12, 2020, https://www.mageplaza.com/blog/what-are-internal-external-environmental-factors- that-affect-business.html#internal-and-external-factors-what-are-they Strategic Management: Formulation and Implementation, August 13, 2020, https://www.strategy-formulation.24xls.com/en106 SWOT analysis and PEST analysis, August 13, 2020, https://riccentre.ca/wp- content/uploads/2012/01/Session-1-Takeaways-Guidlines.pdf SWOT vs PEST, March 14, 2020, https://pestleanalysis.com/swot-vs-pest-analysis/ How to do a SWOT analysis for your business, August 14, 2020 https://www.wordstream.com/blog/ws/2017/12/20/swot-analysis 16