Applied Eco M1

PTS COLLEGE & ADVANCED STUDIES INC.
APPLIED ECONOMICS WEEK 1

Name: ______________________________________________ Date: _________________
Grade & Strand: __________________________ Teacher: Lovely Joy T. Barroga
Welcome to the Applied Economics Self Learning Module on Business Environment!

This module was designed to provide you with fun and meaningful opportunities for guided and
independent learning at your own pace and time. You will be enabled to process the contents of the
learning material while being an active learner.
LESSON
Business Environment
It includes all internal and external factors that affect the company’s 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.
1
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.
2
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
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
To summarize what you have learned in the lesson, answer the following questions:
1. What is environmental scanning?
2. What is the difference between the internal and external environments?
3
3. What are the micro and macro environment factors?
Reflect on this!
“You cannot get through a single day without having an impact on the
world around you. What you do makes a difference and you have to
decide what kind of a difference you want to make.”
—Jane Goodall
Directions: Read each statement carefully. Write T if the statement is correct, otherwise write F.
1. Economic factors include economic growth, interest rates, exchange rates,
inflation, disposable income of consumers and businesses.
2. 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.
3. Environmental analysis is a process used by organizations to monitor their

external and internal environments.
4. A customer is an individual or business that purchases products.
“Henceforth there is laid up for me a crown of righteousness, which the Lord, the righteous judge, shall give me at that
day: and not to me only, but unto all them also love his appearing.” 2 Timothy 4:8

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PTS COLLEGE & ADVANCED STUDIES INC.

APPLIED ECONOMICS WEEK 1

Welcome to the Applied Economics Self Learning Module on Business Environment!

Market intermediaries, middleman, or resellers have a great contribution to the delivery

A customer is an individual or business that purchases goods or services. Customers

Macro Environment Factors

Micro Environment Factors

Macro Environment Factors

2. What is the difference between the internal and external environments?

3. Environmental analysis is a process used by organizations to monitor their

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