THE FIRM AND ITS

ENVIRONMENT
UNIT 2
 ORGANIZATION

• A group of people working together to

accomplish some specific purposes/goals.
• It is a social system that is formed to execute
well desired goals
 BUSINESS ENVIRONMENT

• It is the combination of both external and

internal factors that affect a firm’s operating
condition.

• INTERNAL FACTORS/MICROENVIRONMENT
• EXTERNAL FACTORS/MACROENVIRONMENT
 INTERNAL ENVIRONMENT/
MICROENVIRONMENT
• It includes forces affecting the organizations that are within the control
of the company.
• The company is able to manipulate these forces towards firms
advantage.

1. MANAGEMENT
2. MARKETING
3. FINANCE
4. PRODUCTION AND OPERATIONS
5. HUMAN RESOURCES
 INTERNAL ENVIRONMENT/
MICROENVIRONMENT
1. MANAGEMENT
• This pertains to the organizational goals and
objectives
• Organizational structure, managerial
composition, company philosophy, visions,
missions, plans, strategies and tactics and etc.
 INTERNAL ENVIRONMENT/
MICROENVIRONMENT
2. MARKETING
• This includes the marketing program of the company
covering the basic marketing mix – Product, Price,
Place and Promotions.
• Product quality, packaging, pricing, strategies,
intermediaries used, advertising efforts, company
image, discounts, market segmentations and sales
promotion tools.
 INTERNAL ENVIRONMENT/
MICROENVIRONMENT
3. FINANCE
•This includes the company’s resources.
•Profitability, financial performance,
financial statements results, income and
expenses.
 INTERNAL ENVIRONMENT/
MICROENVIRONMENT
4. PRODUCTIONS AND OPERATIONS
• Includes all aspects of manufacturing or operations
of the business.
• Quality and sources of raw materials, machinery and
equipment, production efficiency, technical
expertise, scheduling, delivery, maintenance, and
factory location.
 INTERNAL ENVIRONMENT/
MICROENVIRONMENT
5. HUMAN RESOURCES
• This aspects pertains to the people in the
organization.
• It includes motivation, compensation, training and
development, promotion, recruitment, selection,
placement, hiring procedures, benefits,
performance appraisal, and management labor
relations.
 EXTERNAL ENVIRONMENT/
MACRO-ENVIRONMENT
• It contains of the forces that are away from a company’s
control.

1. ECONOMIC ENVIRONMENT
2. SOCIO-CULTURAL ENVIRONMENT
3. POLITICO-LEGAL ENVIRONMENT
4. TECHNOLOGICAL ENVIRONMENT
5. NATURAL ENVIRONMENT
 EXTERNAL ENVIRONMENT/
MACRO-ENVIRONMENT
1. ECONOMIC ENVIRONMENT
• It includes economic forces such as balance
of trade, foreign exchange, competitive
situation, taxation, energy and oil prices,
employment, GNP, GDP and etc.
 EXTERNAL ENVIRONMENT/
MACRO-ENVIRONMENT
2. SOCIO-CULTURAL ENVIRONMENT
• This pertains to people and their culture
• Customs and traditions, religious affiliations,
perceptions, cultural values, demography,
ethnic and racial diversity.
 EXTERNAL ENVIRONMENT/
MACRO-ENVIRONMENT
3. POLITICO-LEGAL ENVIRONMENT
• Politico pertains to government while legal
pertain to law.
• It includes legislations regulating business, legal
restrictions, peace and order, presidency and
etc.
 EXTERNAL ENVIRONMENT/
MACRO-ENVIRONMENT
4. TECHNOLOGICAL ENVIRONMENT
• Refers to the advancement of science and
technology
• Includes inventions or discoveries,
technological breakthroughs, research and
developments, information technology, etc.
 EXTERNAL ENVIRONMENT/
MACRO-ENVIRONMENT
5. NATURAL ENVIRONMENT

• Includes typhoons, earthquakes, el nino, la

nina phenomena, pollution, ozone depletion,
deforestation, preservation.
 BUSINESS ORGANIZATIONS

• SOLE PROPRIETORSHIP
• PARTNERSHIP
• CORPORATION
• COOPERATIVES
 BUSINESS ORGANIZATIONS

1. SOLE PROPRIETORSHIP
• Business that is owned by only one person
called proprietor.
• Easy to set up; least expensive
• Faces unlimited liability
• Ownership of all profits
 BUSINESS ORGANIZATIONS

2. PARTNERSHIP
• An association of two or more persons bind
themselves to contribute money, property or
industry into a common fund, with the
intention of dividing profits among themselves.
• Partners divide profit or loss among themselves
 BUSINESS ORGANIZATIONS

3. CORPORATIONS
• Business entity that has separate legal
personality from its owners – ARTIFICIAL BEING
• Ownership in a stock corporation is
represented by shares of stocks.
• Board of Directors controls the activities of the
corporations
 BUSINESS ORGANIZATIONS

4. COOPERATIVE
• Business organization that is owned and
operated by a group of people or individuals
and is created for their mutual support and
benefits.
• Credit unions, cooperative banking and
housing cooperatives.
 SWOT ANALYSIS
• SWOT Analysis Matrix is a structured assessment tools used to
evaluate an organizations, industry or place or even a person.

INTERNAL ENVIRONMENTS
• STRENGTHS
• WEAKNESSES

EXTERNAL ENVIRONMENTS
• OPPORTUNITIES
• THREATS
 SWOT ANALYSIS
STRENGTHS
• Is something that a company is good at doing.
• Identifies what an organization excels at.

WEAKNESSES
• Are characteristics that a company lacks and put the firms at a
disadvantage relative to other business.
• It stops business from performing at its best.
• Potential to reduce progress
• Firms need to identify these weaknesses and analyze how they can be
enhance.
 SWOT ANALYSIS
OPPORTUNITIES
• Are the possibilities in the external environments that the
company can utilized to their advantages.
• It refers to the favorable external factors that a company
can use to its benefits.
• If successfully utilized, opportunities can be a competitive
advantages.
 SWOT ANALYSIS
THREATS
• Challenges in the external environment that can cause an
eminent problems to a business firms.
• Refers to the aspects that have the potential disadvantage
or negative impact to an organization.