Math 12 ABM Org - MGT Q1
Math 12 ABM Org - MGT Q1
Math 12 ABM Org - MGT Q1
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OBJECTIVES
At the end of the lesson, the learners are expected to:
K: identify various forces/elements of the firm’s environment and
summarize these forces using the PEST and SWOT analysis;
S: describe the local and international business environment of the firm; and
A: appreciate the importance of analyzing various forces/elements of the business
environment using PEST and SWOT strategies.
LEARNING COMPETENCY:
Analyze various forces/elements influencing local and international
business environment using PEST and SWOT strategies (ABM_AOM11)
I. What Happened
Let us have a recall!
Managerial Levels
Organizations typically have three levels of management with their respective
managers – top-level managers, middle level managers, and frontline or lower-level
managers.
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Managerial Skills
Managerial skills may be classified as the following.
Conceptual Skills
Human Skills
Technical Skills
PRE-TEST:
Modified Identification. Choose the correct answer from the given devices below.
Write only the letter of your answer in your activity notebook.
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Definition of Terms
Environmental scanning – seeking for and sorting through data about the
environment
Inflation – a period of above normal general price increases, as reflected in the
consumer and wholesale price indexes
Inflation rate – rate reflected during a period of above normal general price increases
Interest rates – the total amount that a borrower must pay annually to the lender and
above the total amount borrowed
Changing options – the consumers change in preference of goods and services
offered
Gross National Product (GNP) – total domestic and foreign output claimed by the
residents of a country
Gross Domestic Product (GDP) – total final output of goods and services
produced by the country’s economy, within the country’s territory
DISCUSSION
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environments may affect the strategies that management will make and use.
The general business environment includes the economic, sociocultural,
politico-legal, demographic, technological, and world and ecological situations. All
these must be considered as managers plan, organize, staff, lead, and control their
respective organizations.
Inflation, rates of interest, changing options in stock markets, and people’s
spending habits are some examples of factors/elements of economic
situations. Economic situations may affect management practices in organizations.
For example, companies may postpone expansion plans if bank loan interests are too
high.
Sociocultural situations include the customers’ changing values
and preferences; customs could also affect management practices in companies. For
example, Filipino customers are now conscious of the importance of avoiding fatty
foods, so many food companies now make sure that the products they offer are
cholesterol-free or are low in cholesterol. In doing so, they avoid losing their
customers.
Politico-legal situations refer to national or local laws, international laws, and
rules and regulations that influence organizational management. For example, labor
laws related to preventing employers from firing their employees without due process
require the former to allow the latter to exercise their right to present their position
during disciplinary action before their employment can be terminated.
Demographic situations such as gender, age, education level, income, number
of family members, geographic origin, etc., may also influence some managerial
decisions in organizations. For example, decisions regarding the hiring of human
resources may be affected by an organization’s management policy that
shows prejudice to the hiring of married females who are in the child-bearing
age because they would like to minimize the payment of maternity leave benefits.
The technological situations of companies involve the use of varied types of
electronic gadgets and advanced technology such as computers, robotics,
microprocessors, and others that have revolutionized business management; e-
commerce, teleconferencing, and sophisticated information systems have rapidly
changed the ways that business is conducted in the 21st century.
World and ecological situations are related to the increasing number of global
competitors and markets, as well as the nature and conditions of the changing natural
environment. Products produced by companies, of course, must cater to the changing
needs of people in the global community, while, at the same time, considering their
impact on the natural environment. For example, car manufacturing managers must
give the go signal for the development of vehicles that are
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environmentally friendly instead of only being focused on the product’s
speed, fuel economy, and design.
Meanwhile, the specific business environment focuses on stakeholders,
customers, pressure groups, and investors or owners and their employees.
Stakeholders are parties likely to be affected by the activities of the
organization, while customers are those who patronize the organization’s
products and services. Increasing customer sophistication makes it
necessary for managers of organizations make crucial decisions regarding the
development of products with higher value and the improvement of their
services to meet their patrons’ increasing demands. Also, this has
prompted companies to solicit feedback from their customers to avoid dissatisfaction
that may lead them to patronize another company offering similar products and
services instead.
Suppliers are those who ensure the organization’s continuous flow
of needed and reasonably priced inputs or materials required for producing their
goods and rendering their services. Inputs mentioned also include financial and labor
supply. Managers decide what, where, and when to buy their supplies to
favor with their organization’s supply orders.
Pressure groups are special-interest groups that try to exert influence on
the organization’s decisions or actions. For instance, pressure from the
Food and Drug Administration on some department stores and drug stores led them to
stop selling beauty products containing lead and to stop ordering or importing such
products from their suppliers.
The organization’s investors or owners provide the company with the
financial support it needs. The company, of course, cannot exist without them; thus,
they greatly influence organizational management. Top-level, middle-level, and
lower-level managerial decisions are all influenced, in one way or another, by the
investors or owners of organizations. Branching out, offering new products and
services, and applying for needed loans are all affected by the
investors’ or owners’ way of thinking.
Employees are comprised of those who work for another or for an employer in
exchange of salaries/wages or other considerations. Employees execute the
company’s stability. For example, managerial decisions are
influenced by the company’s knowledge workers.
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The organization’s internal environment must also be subjected to
internal analyses. Internal strengths and weaknesses, opportunities, and threats
(SWOT) with regards to its resources (financial, physical, mechanical, technological,
and human resources), research and development endeavors, production of goods,
procurement of supplies (materials, inputs, and finance), and products and services
must all be considered prior to organizational planning.
Figure A. The SWOT analysis or matrix is one of the most structured and used
planning method to evaluate a business venture.
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will alter the future of business. It could be used in making decisions regarding
offshoring, branching out locally, and expanding or downsizing the company.
However, the accuracy of such business predictions may not always be assured.
Benchmarking is defined as the process of measuring or comparing one’s
own products, services, and practices with those of the recognized
industry leaders in order to identify areas for improvement. Best practices of said
industry leaders are observed so that understanding their competitive advantage would
be easier. This is followed by gathering information about the company in order to
identify gaps; this in turn, could be used to find out the underlying reasons for
performance differences. From these said reasons, a set of best practices in
one’s own company will be listed down and that, ultimately, leads to
the company’s improved performance.
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power distance. In the US, subordinates just use the name or nickname of the boss
when addressing him or her, indicating low power distance.
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is counterproductive since it encourages the postponement of performing tasks that
can be done immediately to another day.
Managing and disciplining workers who practice this habit would be easier for
managers if they are able to identify the workers who adhere to such negative work
habit and prevent them from doing it. This, however, is easier said than done because
it is difficult to explain a country’s unique cultural characteristics.
Managing in a Worldwide Environment: Cultural, Politco-legal, and Economic
Environments
The call for business to go global is hard to resist as this is the trend prevailing
in the 21st century. The economic and social benefits that come with globalization are
said to be among the positive outcomes. Globalization advocates, however, fail to
realize the very serious challenges faced by managers in adjusting to the cultural
differences among different countries where they intend to do business. The culture of
different countries is rooted in their history, religion, traditions, beliefs, and deep-
seated values, and because of these, managing globally can be very complicated.
Besides the cultural environment, the politico-legal and economic
environments must also be considered. The politico-legal environment refers to the
laws and political climate of different countries. Some countries have stable laws and
good political climate while others have the opposite—unstable laws and risky
political climate. Awareness of the economic issues of countries where organizations
intend to establish business is also very important. For instance, do they have a free
market or a planned economy? Answering this question is the first step because the
country’s economic system has the potential to influence the
organization’s decision-making. Other economic matters that must be considered
are the inflation rates, the gross national product/gross domestic product, the currency
exchange rates, taxation systems and others.
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Photo credit: https://courses.corporatefinanceinstitute.com/courses/corporate-business- strategy-course
Political Factors
When looking at political factors, you are looking at how government policy and
actions may affect the economy, as well as the specific industry the business operates in.
These include the following:
Tax Policy
Labor Law
Environmental law
Trade Restrictions
Tariffs
One of the reasons that elections tend to be a period of uncertainty for a country is
that different political parties have diverging views on economic policy. The P in PEST
analysis stands for Political.
Economic Factors
Economic Factors take into account the various aspects of the economy, and how the
outlook on each area could impact your business. These economic indicators are usually
measured and reported by Central Banks and other Government Agencies.
Economic Growth rates
Interest Rates
Exchange Rates
Inflation
Often these are the focus of external environment analysis. The Economic outlook is
of extreme importance for a business, but the importance of the other PEST factors should
not be overlooked.
Social Factors
PEST analysis also takes into consideration social factors, which are related to the
cultural and demographic trends of society. Social norms and
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pressures are key to determining a society’s consumerist behavior. Factors to
be considered include the following:
Cultural Aspects
Health Consciousness
Population Growth rates
Age Distribution
Career Attitudes
Technological Factors
Technological Factors are linked to innovation in the industry, as well as innovation
within the overall economy. Not being up to date on the latest trends of a particular industry
can be extremely harmful to operations. Technological Factors include the following:
Research & Development Activity
Automation
Technological Incentives
The rate of change in technology
(Retrieved from PEST Analysis n.d)
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III. What Have I Learned
SUM IT UP!
Business environment refers to the factors or elements affecting a business
organization. It may be divided into the External and Internal Business Environments. The
External Business Environment includes the factors and element outside the organization
which may affect its performance, either positively or negatively while the Internal Business
Environment refers to the factors or elements within the organization which may also affect
its performance, either positively or negatively.
The general business environment includes the economic, sociocultural, politico-
legal, demographic, technological, and world and ecological situations. All these must be
considered as managers plan, organize, staff, lead, and control their respective organizations.
The specific business environment focuses on stakeholders, customers, pressure
groups, and investors or owners and their employees.
Components of the Internal Business Environment
An organization’s internal business environment is composed of its
resources, research and development, production, procurement of supplies, and the products
and the products and services it offers.
Geert Hofstede, also cited by Schermerhon (2008), showed how selected countries
ranked on the five cultural dimensions he studied:
Power Distance
Uncertainty Avoidance
Individualism-Collectivism
Masculinity-Femininity
Time Orientation
What is PEST Analysis?
PEST Analysis is a strategic framework used to evaluate the external environment
for a business by breaking down opportunities and threats into Political, Economic, Social,
and Technological factors.
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POST TEST:
MODIFIED MATCHING TYPE: Classify the following and write the correct answer in the
appropriate column. Do it in your activity notebook.
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