Org-Mgt-Module-4 PDF

Module 4: The Firm and its Environment  Objectives identify the various forces or elements of the firm’s environment summarize the various forces affecting the firm using PEST Analysis and the SWOT Analysis; and describe the local and inte...

Module 4: The Firm and its Environment  Objectives identify the various forces or elements of the firm’s environment summarize the various forces affecting the firm using PEST Analysis and the SWOT Analysis; and describe the local and international environment of a firm 2 Internal Environment - consist of elements that have direct impact on business operations. External Environment - consist of factors that have indirect but significant influence on the operations of the business. These factors, however, cannot be controlled by the firm. Microenvironment - known as the “operating environment.” The factors in this environment have a direct relevance to the business operations but are uncontrollable to a certain extent. Macroenvironment - known as the “general environment.” The factors in this environment are beyond the control of the firm but are important determinants of success. The Environment of the Firm  Environmental Scanning is the actual monitoring and evaluation of information from the external and internal environment of a business organization. The information is then provided to the key people to guide the organization in its business operations and in preparing for target market operations. Modes of Environmental Scanning 1. Ad hoc environmental scanning is not often done and is usually applicable only during the crisis situation. 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 aboard range of environmental factors. It is also reffered to as continuous learning done to monitor the components of an organization's internal environment.  Forces in the Firm’s Environment Political Forces Economic Forces Sociocultural Forces Technological Forces Natural Forces PEST Analysis include laws, regulations, and restrictions that may intervene or affect the company's business course. directly affect the capability of business to generate profits. These include economic growth, interest rates, exchange rates, inflation rates. include demographic aspects such as age, group, religion, civil status, and the economic status of consumers. include research and development activities, automation, licensing, patenting, technological shifts, and outsourcing decisions. SWOT and PEST Analysis PEST Analysis is a most used in anlyzing the Political, Economic, Social, and Technological forces affecting the company. This technique focuses on the factors that define the macroenvironment of the business. Application of PEST Analysis SWOT and PEST Analyses SWOT Analysis is a technique that identifies the Strengths and Weaknesses of the company, as well as the Opportunities and Threats it faces. In conducting this analysis, it is imperative to note that strengths and weaknesses are part of the company's internal environment, while opportunities and threats are part of its external environment. SWOT Analysis include the company's attribue that give competitive edge over other. are the attributes of the company that need to be improved or changed. are factors or events that can give positive impact to the company if properly addressed. are external factors which may negatively impact the company. Application of SWOT Analysis Strategic Planning: SWOT and PEST Analyses To adequately deal with the forces of the external environment, managers and decision-makers apply certain techniques in gathering and analyzing information and subsequently conducting strategic planning. Strategic planning techniques such as the SWOT analysis and PEST analysis consider the elements of the firms's internal and external environment in formulating business plans and decisions. SWOT analaysis is primarily used to analyze the microenvironment, while PEST analysis conducted to address the firm's macroenvironment. Benefits of Strategic Planning using SWOT and PEST Analyses SWOT and PEST analysis help companies in formulating strategies and aligning their vision and mission to the general direction of the business environment where they operate.SWOT analysis focuses on the external environment through the threats and opportunities, while all aspect of PEST analysis consider the external environment of the firm. It is recommended that the information gained from PEST analysis be used in identifying the opportunities and threats in SWOT analysis.  The Local Business Environment The local business environment is defined by political,social, and technological forces that affect business forms. Examples of forces affecting the local business environment include weather conditions, calamities, unpredictable prices, and the sourcing of business functions.  The international environment is also defined by political, economic, social and technological forces. Companies that operate on an international scale should take note of the environments of specific countries they operate. Political environment specifically the stabilityof the goverment. Economic infrastucture and the income of consumers. Cultural differences, taboos, customs, and traditions are part of the social environment Compatibility of its technology with that of the country they are doing business with in the conduct of their operations.  End of Lesson 4