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The Firm and Its Environment

The document discusses the internal and external environments that influence organizations. The internal environment refers to factors within a company, while the external environment includes factors outside a company's control, such as political, economic, social, technological, and natural forces. The external environment can be divided into a general environment and task environment. A PEST analysis is also introduced as a framework for auditing the political, economic, social, and technological dimensions of an organization's external environment.

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LizbethHazelRivera
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205 views25 pages

The Firm and Its Environment

The document discusses the internal and external environments that influence organizations. The internal environment refers to factors within a company, while the external environment includes factors outside a company's control, such as political, economic, social, technological, and natural forces. The external environment can be divided into a general environment and task environment. A PEST analysis is also introduced as a framework for auditing the political, economic, social, and technological dimensions of an organization's external environment.

Uploaded by

LizbethHazelRivera
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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The Firm and Its

Environment
Organizations rely on the
environment for their continued
existence.
Business Environment

Internal Environment External Environment


refers to factors and other Environment refers to factors or elements
events within the company that that surround an organization
the way the firm is run. which may threaten an
influence management choices organization's operations.
and
TWO LAYERS

General Environment
It relates to the broad or uncertain aspects of the

External
organization's surroundings that may have an impact on
the organization's activities, directly or indirectly. It
includes the

Environment Political
Economic
Technological
Natural
Sociocultural

Task Environment
It refers to the different business sectors that
closely interface with an organizations.
Forces in the
Economic
Firm’s
Environment Technological

Political The
Firm

Natural
Sociocultural
Forces in the Firm’s Environment

Political-legal Economic
Dimension/Element Dimension/Element
The Firm Economic forces that affect firm
pertains to economic
Political forces in the
conditions relevant to the
environment pertain to rules
business.
and legal regulations.
Forces in the Firm’s Environment

Sociocultural Technological Natural


Dimension/Element Dimension/Element Dimension/Element

Sociocultural forces are Advancements in Technology Additional


people's characteristics and
lifestyles.
PEST
Environmental
Analysis
P E S T
Political Forces Economic Sociocultural Technological
Forces Forces Forces
Our Business Model
Mr. Rosario owns a pharmaceutical firm –
Wonder Drug – that is based in Manila. He
intends to put up branches in Cebu and in
Davao. However, the impending increase in
import taxes, the growing number of foreign
competitors present in Mindanao, and the
growing popularity of local herbs for heath
and medication among rural folks seem to
dampen his enthusiasm to open more
branches.

Will you recommend to Mr. Rosario to


proceed with opening more branches of
Wonder Drug? Why do you say so?
Our Business Model
Mr. Rosario owns a pharmaceutical firm –
Wonder Drug – that is based in Manila. He
intends to put up branches in Cebu and in
Davao. However, the impending increase in
import taxes, the growing number of foreign
competitors present in Mindanao, and the
growing popularity of local herbs for heath
and medication among rural folks seem to
dampen his enthusiasm to open more
branches.

Will you recommend to Mr. Rosario to


proceed with opening more branches of
Wonder Drug? Why do you say so?
S W
Strengths Weaknesses

O T
Opportunities Threats
The Local
and
International Business
Environment of the Firm
Understanding the
Local Environment
through an Industry
Analysis

A manager looks his or


her company as
belonging to a specific
industry wherein
competition with rival
companies exists.
Porter’s Five
Forces Model
Current data and investment
information
Rivalry among existing competitors

This measures how aggressive


the competitors are within the
industry.
Threat of substitute products

This refers to the number of other


alternative products that can be
used by customers to replace the
company’s product offering.
Threat of new entrants

This pertains to the level of ease or


difficulty to create a similar business in
the same industry.
Bargaining power of buyers

This measures the degree of


influence of the buyers or
customers to lower the product
prices.
Bargaining power of suppliers

This measures the degree of


influence of the suppliers to
command higher prices for their
raw materials.
Ways to Compete in
Local and International
Business

 lower cost
 quality
 speed or flexibility
 innovation
Investment Areas

1 Exporting and Importing

2 Licensing and Franchising

3 Joint Ventures and Strategic Alliances


Thank
you!

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