Module 3
Module 3
Organization and
Management
Quarter 1 – Module 3
Environmental Forces That Affect Local
and International Business
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Organization and Management – SHS
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Lesson ENVIRONMENTAL FORCES THAT AFFECT
LOCAL AND INTERNATIONAL BUSINESS
This module explains the need to understand the internal and external
factors that affect the operation of a local and international business. This
enables the learner to analyze various environmental forces through the use
of environmental scanning the PEST Analysis and SWOT Analysis.
External Environment – are those that exist outside the firm and often
regarded as uncontrollable factors.
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Let’s see how far you know by
simply answering the following
questions below.
1. These factors occur within the premises of an organization and directly affect the
operation of the business.
A. Internal factors C. External factors
B. Political factors D. Social factors
3. This is the oldest yet popular environmental scanning used by the business.
A. SWOT Analysis C. Porters Five Forces
B. PEST Analysis D. None of the above
4. These are factors that are concerned with the financial policies, financial position
and capital structure that also affect business performance and strategies.
A. Economic factors C. Financial factors
B. Political factors D. Social factors
5. This includes the society together with its preference, priorities, pattern of beliefs,
purchasing power, educational background and others.
A. Internal factors C. External factors
B. Political factors D. Social factors
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Now, try the activity before you
proceed to the lesson. Have fun!
Do this…
Activity #1 – Clustering of Environmental Factors
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The Internal and External
Environment of Business
Understand that…
When a business activity is performed in an international level, this can be
termed as international business. The functions, techniques and processes are just
the same with the domestic or local business. The only difference is that in
International business, activities are carried outside the country. While the term
environment of a business firm, pertains to external factors and forces that surround
the firm and at the same time influence the firm in decision making and operations.
The international business environment includes different aspects like: social,
political, economic, regulatory, tax, cultural, legal and technology. They do not have
control over the external environment, their success depends upon how well they
adapt to it.
The different environmental factors that affect the business can be broadly
categorized as internal and external factors. Internal factors are those that occur
within the premises of an organization and directly affect the different operations of
the business.
Macro
environmental
Factors
External Factors
Micro
environmental
*Value System Factors
*Financial Factors
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What are these Environmental Factors?
➢ Value System. It denotes the culture and norms of the business. This is the
regulatory framework of a business which every employee must abide and act
within the context.
➢ Financial Factors. These are the factors like financial policies, financial
position and capital structure which also affect a business performance and its
strategies.
➢ Internal Relationship. Factors like the amount of support the top
management enjoys from its shareholders, employees and the board of
directors also affects the smooth functioning of a business.
• Suppliers are those people who are responsible for supplying necessary
inputs to the organization and ensure the smooth flow of production.
• Competitors are the close challengers of the business. It also refers to the
numbers of similar competitive product brand, size, and market
capitalizations. And in order to survive the competition, one has to keep a
close look in the market and formulate policies and strategies to produce
innovative output.
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• Social Factors include the society together with its preferences, priorities,
pattern of beliefs, purchasing power, educational background and others.
• Demographic Factors refer to the study of people, such as their age, sex,
marital status, occupation, family size etc. Since demography is
uncontrollable because you cannot control the sex, age, marital status in the
environment, this enabling you to predict future trends and consumptions of
your product.
Direction: You own a computer shop in the city; identify factors that might affect
your business as mentioned in the above discussion. Specifically, what might be
your shop’s strengths and weaknesses compared from other internet shops nearby.
What are also the opportunities and threats your shop might be facing? Enumerate
them using the table below.
__________________________
Business Name
Strengths: Weaknesses:
Opportunities: Threats:
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What more should I know?
ENVIRONMENTAL SCAN
SWOT MATRIX
Strengths Opportunities
These are the These are chances for
advantages of your development,
company over the advances or
other. expansions.
Internal External
Factors Factors
Weaknesses Threats
These are the limited These are
resources available in circumstances or
your company. situation which you
cannot control.
SWOT Analysis
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Let’s see what have you learned…
Practice Task 1
Direction: Read carefully the statement below. Write TRUE if you agree that the
statement is correct and FALSE if not.
_________4. Inflation does not affect both local and international businesses.
_________5. You cannot stop the advancement of technology, but you can adapt to
changes it offers.
_________6. The internal factors occur within the premises of an organization and
directly affect the operation of the business.
Practice Task 2
Direction: Read carefully and underline the right word/s that is being described by
the statement.
1. (Internal relationship, Social factors) include/s the society together with its
preference, priorities, pattern of beliefs, purchasing power, educational background
and others.
2. These are factors concerning financial policies, financial position and capital
structure that also affects business performance and strategies. (Financial factors,
Economic factors)
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3. The (PEST analysis, SWOT analysis) is the oldest yet popular environmental
scanning used by the business.
4. The (internal factors, external factors) occur within the premises of an
organization and directly affect the operation of the business.
6. These are people who are responsible for supplying the needs of the organization
and ensure the smooth flow of production. (Suppliers, Marketing Intermediaries)
Direction: Encircle the letter from the given options that identifies the given
statement.
2. This are factors that exist outside the company and often regarded as
uncontrollable factors
A. Internal Factors C. External Factors
B. Social Factors D. Financial Factors
3. They are said to be the challengers of the business which they offer similar
competitive products and services.
A. Supplier C. Market Intermediaries
B. Competitors D. Internal Relationship
4. This refers to the study of people, such as their age, sex, marital status,
occupation, family size and etc. which can be used to predict future trend on
products.
A. Social Factors C. Technological Factors
B. Economic Factors D. Demographic Factors
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5. It is the simplest and oldest tool used for environmental scanning.
A. SWOT Analysis C. PESTLE Analysis
B. PEST Analysis D. Porter’s Five Forces
6. A business activity that is carried outside the country.
A. Local Business C. International business
B. Domestic Policy D. Domestic Facility
7. This is the adaption of technological changes for advancement in order for the
business to survive.
A. Economic Factors C. Technological Factors
B. Political Factors D. Social Factors
Additional Activity:
1. Think of a simple business you would like to venture and have the following:
a. Name of your business
b. Location of the business
c. Make a simple SWOT analysis
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How far do you know (Pretest):
1. A 3. B 5. C 7. C
2. C 4. A 6. D
Learning Activity 1
Learning Activity 2
Practice Task 1
1. False 5. True
2. True 6. True
3. True 7. False
4. False
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Practice Task 2
Post Test
1. A 6. C
2. C 7. C
3. B 8. B
4. D 9. Micro-environment
5. A 10.Macro-environment
Reference:
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