ORGANIZATION

AND MANAGEMENT
MODULE 3:

THE FIRM & ITS

ENVIRONMENT

Instructress: Ms. Maj Nonato

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 The Firm and its Environment

The company’s ability to establish a relationship and serve its customers. The marketing environment
Marketing Environment is the combination of external and internal factors and forces which affect of a business consists of an internal
and an external environment.

Source:https://www.managementstudyhq.com/functions-of-management.html

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 The Firm and its Environment

The internal environment is company-specific and includes

owners, workers, machines, materials etc. The external
environment is further divided into two components: micro &
macro. The micro or the task environment is also specific to the
business but external. It consists of factors engaged in producing,
distributing, and promoting the offering. The macro or the broad
environment includes larger societal forces which affect society
as a whole. The broad environment is made up of six
environment
components: demographic, economic, physical, technological,
political-legal, and social-cultural

The business environment may be classified into two types:

EXTERNAL BUSINESS ENVIRONMENT • refers to the
forces/factors outside the organization he external environment
constitutes factors and forces which are external to the business
and on which the marketer has little or no control. The external
environment is of two types: Micro & Macro Environment

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 Micro Environment

The micro-component of the external environment is also known as the task environment. It comprises of external forces and
factors that are directly related to the business. These include suppliers, market intermediaries, customers, partners, competitors and
the public

• Suppliers include all the parties which provide resources needed

by the organization.

• Market intermediaries include parties involved in distributing

the product or service of the organization.

• Partners are all the separate entities like advertising agencies,

market research organizations, banking and insurance companies,
transportation companies, brokers, etc. which conduct business
with the organization.

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 Micro Environment

• Customers comprise of the target group of the organization.

• Competitors are the players in the same market who targets

similar customers as that of the organization.

• Public is made up of any other group that has an actual or

potential interest or affects the company’s ability to serve its
customers.

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 Macro Environment

The macro component of the marketing environment is also known as the broad environment. It constitutes the external factors and
forces which affect the industry as a whole but don’t have a direct effect on the business. The macro-environment can be divided into
6 parts.

a) Demographic Environment
The demographic environment is made up of the people who
constitute the market. It is characterized as the factual
investigation and segregation of the population according to their
size, density, location, age, gender, race, and occupation.

b) Economic Environment
The economic environment constitutes factors which influence
customers’ purchasing power and spending patterns. These
factors include the GDP, GNP, interest rates, inflation, income
distribution, government funding and subsidies, and other major
economic variables.

c) Physical Environment
The physical environment includes the natural environment in
which the business operates. This includes the climatic
conditions, environmental change, accessibility to water and
raw materials, natural disasters, pollution etc.

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 Macro Environment

d) Technological Environment
The technological environment constitutes innovation, research
and development in technology, technological alternatives,
innovation inducements also technological barriers to smooth
operation. Technology is one of the biggest sources of threats and
opportunities for the organization and it is very dynamic.

e) Political-Legal Environment
The political & legal environment includes laws and government’s
policies prevailing in the country. It also includes other pressure
groups and agencies which influence or limit the working of the
industry and/or the business in the society.

f) Social-Cultural Environment
The social-cultural aspect of the macro-environment is made up
of the lifestyle, values, culture, prejudice and beliefs of the
people. This differs in different regions.

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 Internal business Environment

Refers to the forces/factors within the organization which may

affect, either positively or negatively, the performance of the
organization. These components can be grouped under the Five
Ms of the business, which are:
▪ Men
▪ Money
▪ Machinery
▪ Materials
▪ Markets

The internal environment is under the control of the marketer and

can be changed with the changing external environment.
Nevertheless, the internal marketing environment is as important
for the business as the external marketing environment. This
environment includes the sales department, marketing department,
the manufacturing unit, the human resource department, etc.

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 Environmental Scanning

• Involves the seeking for and sorting through data about the

organization’s environment.

• is a process of gathering, analyzing, and dispensing information

for tactical or strategic purposes.

• It is monitoring and interpreting sweep of social, political,
economic, ecological, and technological events to spot budding
trends that could eventually impact industry

• Involves the seeking for and sorting through data about the

organization’s environment.

• is a process of gathering, analyzing, and dispensing information

for tactical or strategic purposes.

• It is monitoring and interpreting sweep of social, political,
economic, ecological, and technological events to spot budding
trends that could eventually impact industry

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 Components of Environmental Scanning

• The development of a competitive mindset

• Considering of future business scenarios
• Business prediction/forecasting
• Benchmarking

• 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

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CULTURAL INTELLIGENCE

• Is an individual’s ability to favorably receive and adjust to an unfamiliar way of doing things.

MONOCHRONIC CULTURE
• Is a culture where people tend to do one thing at a time.

POLYCHRONIC CULTURE
• Is a culture that is more flexible on time and it is used to accomplish many different things at one time

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 Economic Development

• Is a total process which includes not only economic growth or the increase in the amount of goods and services produced by the
country’s economy but also consider the social, political, cultural and spiritual aspects of the country’s growth.
• Economic growth
• Improvement of human development index
• Availability of benefits provided by science and technology
• Societal improvement of the opportunities and
• General welfare of its members.

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 BUSINESS ORGANIZATION
• Is a collection of people working together to achieve a common purpose related to their organization’s mission, vision, goals and
objectives and sharing a common organizational culture.
ORGANIZATIONAL CULTURE
• Is the set of beliefs and values shared by organization members and which guide them as they work together to achieve their common
purpose.

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 Type of Business Organization

1. SIMPLE BUSINESS ORGANIZATION

• Is an organization with few departments, centralized authority with a wide span of control, with few formal rules and
regulations
2. FUNCTIONAL BUSINESS ORGANIZATION
• Groups together people with similar or related duties, practices, delegation of authority to functional managers like the
personal manager, sales manager or financial managers but allow CEOs to retain authority for strategic decisions.
3. DIVISIONAL BUSINESS ORGANIZATION
• Is made up of semi-autonomous, separate business units, with a division head responsible for his unit’s performance.
4. NON-PROFIT BUSINESS ORGANIZATION
• Are organizations designed for the purpose of achieving their goals, giving service to clients without expecting monetary
gains or financial benefits for their endeavors
5. PROFIT BUSINESS ORGANIZATION
• Are organizations designed for the purpose of achieving their goals and achieving stability through income generation and
profit making.
6. OPEN/FLEXIBLE BUSINESS ORGANIZATION
• Are formed to meet today’s changing work environment and includes: Team structures, matrix business organizations,
project business structures, boundary less business organizations and virtual business organizations.

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 Competitive Environment

• Refers to specific groups of people with which the company/firm interacts • The company’s customers, rival firms, new entrants,
substitutes and suppliers make up the firm’s competitive environment forces.
• The abovementioned competitive environment forces have the power to influence the nature of the competition among rival
companies so the firm must learn to adapt to or influence also the said competition

A. MONOCHRONIC CULTURES refer to cultures wherein people tend to do one thing at a time; also, these cultures
emphasize punctuality and sticking to set rules.

B. POLYCHRONIC CULTURES are more flexible as regards time; accomplishing many different things at once is also
common for these cultures.

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 Formative Assessment
Let’s see what you have

I. Identify the following:

______________________1. It refers to the forces/factors within the organization which may affect, either positively or negatively, the performance of the organization.
______________________2. It is the combination of external and internal factors and forces which affect the company’s ability to establish a relationship and serve its customers.
______________________3. It comprises of external forces and factors that are directly related to the business. These include suppliers, market intermediaries, customers, partners,
competitors and the public.
______________________4. It includes parties involved in distributing the product or service of the organization.
______________________5. They are the players in the same market who targets similar customers as that of the organization
______________________6. Made up of any other group that has an actual or potential interest or affects the company’s ability to serve its customers.
______________________7. It constitutes the external factors and forces which affect the industry as a whole but don’t have a direct effect on the business. The macro-environment can be
divided into 6 parts.
______________________8. These are all the separate entities like advertising agencies, market research organizations, banking and insurance companies, transportation companies,
brokers, etc.
______________________9. It is characterized as the factual investigation and segregation of the population according to their size, density, location, age, gender, race, and occupation.
 
______________________10. It includes laws and government’s policies prevailing in the country. It also includes other pressure groups and agencies which influence or limit the working of
the industry and/or the business in the society.
______________________11. Involves the seeking for and sorting through data about the organization’s environment.

______________________12. It is an organization with few departments, centralized authority with a wide span of control, with few formal rules and regulations.
______________________13. These are organizations designed for the purpose of achieving their goals, giving service to clients without expecting monetary gains or financial benefits for
their endeavors
______________________14. It refers to cultures wherein people tend to do one thing at a time; also, these cultures emphasize punctuality and sticking to set rules.
______________________15. These are more flexible as regards time; accomplishing many different things at once is also common for these cultures.

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 Formative Assessment
Let’s see what you have

II. Essay (5pts. each)

1. How do the competitors affect the business?

2. What is the difference between a Macro and a Micro business?

3. Is Physical environment significant in operating a business? Why?

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