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**L:4 MAJOR PROBLEMS FACED BY BUSINESSES** **UNCERTAINTY** **-**It strikes fear in company executives because its effects can result in staggering costs. The common reaction to uncertainty is to stick with manageable short-term goals. **GLOBALIZATION** Is a concern of the top company executives...

**L:4 MAJOR PROBLEMS FACED BY BUSINESSES** **UNCERTAINTY** **-**It strikes fear in company executives because its effects can result in staggering costs. The common reaction to uncertainty is to stick with manageable short-term goals. **GLOBALIZATION** Is a concern of the top company executives because it require costly adjustments to cope with the challenges of serving new markets and trends. **INNOVATION** -Build a more innovative culture in their respective organizations. **GOVERNMENT POLICIES** -Adhere to the new government regulations and policies on environmental, financial, marketing, and other aspects of the business. **TECHNOLOGY** -Companies have to cope by investing in new technologies to take advantage of their benefits before they become obsolete. **DIVERSITY** -Adds value to products and services since different ideas and perspectives are utilized in the process. **COMPLEXITY** -Globalization and information technology have led to the emergence of a complex business environment. **INFORMATION OVERLOAD** -Innovations in information technology have led to fast-paced communication and the availability of large amounts of information on the internet. ** THE ENVIRONMENT OF THE FIRM** The **business firm's environment** refers to the condition and elements that define its operations and determine its success. **INTERNAL ENVIRONMENTS** -Consists of elements that have a direct impact on the business operations. **EXTERNAL ENVIRONMENTS** -Consists of factors that have an indirect but significant influence on the operations of the business. There are two types of external environments. 1. **MICROENVIRONMENT** -Is also known as the "OPERATING ENVIRONMENT" It consists of the customers, suppliers, regulatory agencies, and competitors. The factors in this environment have direct relevance to the business operations but are uncontrollable to a certain extent. 2. **MACROENVIRONMENT** -Is also known as the "GENERAL ENVIRONMENT". It consists of the economic, political, social, legal, and technical environment of the business organization. The factors in this environment are beyond the control of the firm but are important determinants of success. **ENVIRONMENTAL SCANNING** -Is the actual monitoring and evaluation of information There are three models of environmental scanning as follows: 1. **AD HOC ENVIRONMENTAL SCANNING**- this is not often done and is usually applied during a crisis. The firm does ad hoc scanning to determine whether a problem is either external or internal. 2. **REGULAR SCANNING**- is usually done at least once a year or at regular intervals. 3. **CONTINUOUS SCANNING**- refers to the continuous collection of data on a broad range of environmental factors. **STRATEGIC PLANNING: SWOT AND PEST ANALYSES** **SWOT ANALYSIS**- is a technique that identifies the Strengths and Weaknesses of a company, as well as the Opportunities and threats it faces. **STRENGTHS**- include the company's attributes that give a competitive edge over others. **WEAKNESSES** -- these are attributes of a company that needs to be improved or changed. **OPPORTUNITIES**- these are factors or events that can give a positive impact to the company if properly addressed. **THREATS**- external factors which may negatively impact the company. **PEST ANALYSIS -** Is a method used in analyzing POLITICAL, ECONOMIC, SOCIAL AND TECHNOLOGICAL FACTORS affecting the company. **POLITICAL FACTORS** -Include laws, regulations, and restrictions that may intervene or affect the company's business course. -Businesses also have to comply with the required legal documents, pay fees and secure permits before they begin their operations. **ECONOMIC FACTORS** -Directly affects the capability of businesses to generate profits. These include economic growth, interest rates, exchange rates, and inflation rates. **SOCIAL FACTORS** -Include demographic aspects such as age, group, affiliation, religion, civil status, and the economic status of the consumers. Companies focus on information regarding their target market, particularly its buying habits, attitudes, ethics, personalities, and values. **TECHNOLOGICAL FACTORS** -Include research and development activities, automation, licensing, patenting, technological shifts, and outsourcing decisions. An important technological factor at present is the Internet, which has greatly improved the way business functions are done. **L:5 THE LOCAL AND INTERNATIONAL BUSINESS ENVIRONMENTS** **LOCAL BUSINESS ENVIRONMENT** -Is defined by political, economic, social, and technological factors that affect business firms. **INTERNATIONAL BUSINESS ENVIRONMENT** -Also defined as political, economic, social, and technological forces. Companies that operate on an international scale should take note of the environments of specific countries they operate in. They should take note of the political environment specifically the stability of the government. ** THE FIVE PHASES OF ECONOMIC DEVELOPMENT** **MERCANTILISM**, **INDUSTRIAL REVOLUTION**, **FORDISM**, **POST FORDISM** and **GLOBALIZATION**. **L:6** **THE BUSINESS ORGANIZATION** FORMS OF BUSINESS ORGANIZATIONS There are three forms of business organizations based on the ownership structure. These are **sole proprietorship**, **partnership**, and **corporation**. A **wise manager** considers the characteristics of the business organization that he or she wishes to establish making the business plan as each presents unique advantages, opportunities, and challenges. 1. **SOLE PROPRIETORSHIP** Companies are owned by one person who is usually hands-on in managing day-to-day activities. It is own the entire business including all assets and profits. -**Assets** are resources with economic value that are owned and controlled by the business owners. -**Liabilities** are debts or obligations which arise during business operations. -Considered single taxpayers and are assigned a single Tax Identification number. Owners also apply for a business trade name and register the business with the Department of Trade and industry. **ADVANTAGE**: It is the most manageable and least expensive form of ownership. Proprietors have complete control over the business and can make decisions based on their own judgment. It is easy to implement changes in the business setup. Furthermore, if desired by the owner, the business can also be easily dissolved. **DISADVANTAGE**: The sole proprietorship has unlimited liability since they assume all the debts of the business. This may put personal assets at risk when the business experiences losses. Obtaining additional capital is also difficult because of the low guarantee of profitable returns to lenders. 2. **PARTNERSHIP** -Is a form of business organization where ownership of the business is shared by two or more members. The partners mutually agree on how decisions will be made and how the profits and losses will be shared. -Under the Civil code of the Philippines, a partnership is considered a juridical person or an entity having a separate legal personality from the partners. A partnership can either be a general partnership or a limited partnership. **GENERAL PARTNERSHIP** is a form of partnership wherein the partners have unlimited liability for the debts and obligations of the partnership. **LIMITED PARTNERSHIP** is a form of partnership wherein one or more general partners have unlimited liability and limited partners have liability that is only up to the amount equal to their capital contributions. **ADVANTAGES** : one of the advantages of a partnership is a wider capital base. **Expansion** is also easier since there are more people who will manage the different branches of the business. **DISADVANTAGE**: Partners are jointly liable for all the obligations and effects stemming from the decisions of the other partners. Unless the individual responsibilities and liabilities are clearly delineated, this may cause disagreement among the partners. Partnerships have a limited life because of their general instability. This instability is not referring to business unprofitability but rather to several internal factors which make the partnership vulnerable to dissolution. These internal factors include the death, withdrawal, or insolvency of a partner. 3. **CORPORATION**- Has a distinct personality separate from its owners. -Can enter contracts, secure loans, sue and be sued, hire employees, and pay taxes. -Has a minimum of five and a maximum of fifteen owners who are called shareholders. **Shareholders** elect a board of directors who oversee the major policies and decisions of the corporation. -Owned and established under the corporation Code and regulated by the SEC. -The minimum paid-up capital required of corporations in the Philippines is **5,000 pesos**. -Subject to tax, which is separate from the individual taxes of its shareholders. ** TWO TYPES OF CORPORATION** 1. **STOCK CORPORATION**- has a capital stock divided into shares and dividends. Surplus profits are given to shareholders depending on the number of shares held. 2. **NON-STOCK CORPORATION** -- does not issue shares of stock **ADVANTAGE**: One of the advantages of a corporation is its limited liability to its shareholders. **DISADVANTAGE**: The process of forming the corporation or incorporation is more complicated than forming a sole proprietorship and partnership. A corporation is closely monitored by the government and other local agencies like the SEC. ** FOUR FORMS OF FOREIGN BUSINESS ORGANIZATIONS** **BRANCH OFFICE**- is organized to do the activities of the lead office from the host country. The minimum paid capital of a branch office is **200,000 US DOLLARS**. This can be lowered to **100,000 US DOLLARS** if advanced technology is involved or at least 50 employees are directly employed. Ut required to register with the SEC. **REPRESENTATIVE OFFICE**- fully supported by the head office and does not obtain funds from its main office overseas. The initial minimum inward remittance is **30,000 US DOLLARS** for operating expenses. It should be registered with the SEC. **REGIONAL HEADQUARTER**- only performs activities that primarily involved supervision, communication, and coordination. **REGIONAL OPERATING HEADQUARTERS**- performs the following services to its affiliates, subsidiaries and branches in the Philippines. It derives its income from its activities in the country. The required capital is **200,000 US DOLLARS** as one time payment. **1. administration and planning** **2. Acquisition of the raw materials** **3. Marketing** **4. Technical support and communications** **5. Research and development** **CLASSIFICATION OF BUSINESSES** 1. **SERVICE BUSINESS**- this a type of business that provides labor and other services to customers. 2. **MERCHANDISING BUSINESS**- is a type of business that purchases products from other businesses like manufacturers and sells them to customers at a higher retail price. 3. **MANUFACTURING BUSINESS**- is a type of business where raw materials are transformed into finished goods through product processing labor and other manufacturing processes. **L:7 THE ETHICAL ENVIRONMENT OF THE FIRM** ** BUSINESS ETHICS AND MANAGEMENT** An **ethical issue** refers to a concern on which an individual must decide based on several alternatives of what is morally right or wrong. **PERSPECTIVES ON ETHICS** 1. **UNIVERSALISM**- this is the principle that states that all people should have certain values like honesty, respect, and cooperation. 2. **EGOISM**- this is the principle that promotes the greatest good to oneself. 3. **UTILITARIANISM**- this is the principle that focuses on the greatest good for the greatest number of people. 4. **RELATIVISM**- ethical behavior is based on a person's own and other relevant people's opinions and viewpoints. 5. **VIRTUE ETHICS**- this is the principle that states that morality depends on the maturity of a person with good moral character. **CORPORATE INTEGRITY** -Refers to that sense of "**wholeness**" created by the right relationships among the members of the corporation. **Cultural Dimension** has the most impact on the internal relationships in the company. The **Interpersonal dimension** focuses on the relationship among people. The **Organizational dimension** considers the main purpose of the business, particularly the economic and financial purposes, managerial purposes and civic purposes. The **social dimension** views the organization as actively engaging with society. The **natural dimension** looks into how the organization relates to nature. **CORPORATE SOCIAL RESPONSIBILITY** **Corporate social responsibility** refers to the engagement of the business firm in activities that pursue goals that are beneficial to society. **Corporate social responsibility** enhances a company's image. **Social obligations and social responsiveness** pertain to actions that are motivated by bon- mandatory reasons.