FACTORS/ELEMENTS OF

FIRM’S ENVIRONMENT
ORGANIZATION AND MANAGEMENT

Keanno Johndee G. Hipe 11- ABM

OBJECTIVES

• Identify various forces/elements of the firm’s environment.

• Describe the internal and external environmental factors/

elements of a firm/business environment.

• Differentiate how these factors influence the performance of a firm.

WHAT IS BUSINESS?

• Business is largely responsible for bringing into the market a wide array of
products,which were not made available in the past.High technology items like
colored televisions,video equipment,cellular phones,and computers are sold
openly in the market.

• Business may be defined as all profit-seeking activities and enterprises that

provide goods and services necessary to an economic system.

• Profits refer to the rewards for business persons who take the risks involved
and marketing good and services.
KINDS OF BUSINESS
KINDS OF BUSINESS

• Commerce.Business firms,which are engaged in buying

and selling of goods and services,are classified as
commerce.Also included in this category are
trading,merchandizing,and markets.
Examples:
Supermarkets,dry goods,peddlers,sari-sari store,and
importers,
KINDS OF BUSINESS

• Industry.Industries are those,which are mainly engaged in production.

Consumer’s goods are goods intended for ultimate consumption while Producer’s
goods are goods intended for use of business and industry.
Industry business may be further classified into:
a.Genetic industries are those involved in agriculture,forestry,and fish culture.
b.Extractive industries are those involved in the extraction of goods from natural
resources.
c.Manufacturing industries convert raw materials into finished products.
d.Construction industries are those engaged in building infractructures.
KINDS OF BUSINESS

• Services.A service business is one,which sells service to the buyer.

Services firms may be classified as:
a.Recreation-moviehouses,television and radio stations,theaters for
drama and stage presentations,resorts.
b.Personal-restaurants,barber shops,transportation,hotels,tailoring
shops,slimming salons.
C.Finance-banks,insurance companies,investment houses,financing
institutions,credit unions,savings,and loan associations.
OBJECTIVES OF BUSINESS

• Professional managers maintain that a business firm should achieve the

following multiple objectives:
1.creation and distribution of a product or service;
2.satisfaction of personal objectives like profits for owners,salaries and other
compensation for executives,wages and other compensation for employees,
psychic income for all,including pride in work,security,recognition,and
acceptance;
3.protection and enhancement of the human and physical resources of
society;
4.economy and effectiveness of operation.
BUSINESS
ENVIRONMENT
WHAT IS BUSINESS ENVIRONMENT?

• Business (represents the organized efforts of enterprise to supply

goods/services to consumers)
• Environment (Includes the factors which can lead to opportunities for or
threats to the firm)
• The Business Environment encompasses all conditions,circumstances,
and influence surrounding which affecting the development of an
organization.It is divided into two,the External and Internal Business
Environment.
TWO PARTS OF AN BUSINESS ENVIRONMENT

• Internal Business Environment refers to the factors or

elements within the organization which may also affect its
performance, either positively or negatively.
• External Business Environment includes the factors
and elements outside the organization which may affect
its performance,either positively or negatively.
INTERNAL BUSINESS ENVIRONMENT

Plans and Policies Human Resource Financial Resouce

Plant and Labor management

Corporate image
machinery relationship

Promoter’s Vision
FACTORS OF INTERNAL ENVIRONMENT

• Plans and Policies

The plans and policies of the firm should be properly framed taking into
consideration the objectives and resources of the firm.Proper plans and policies
help the firm to accomplish its objectives.
• Human resources
The survival and success of the firm largely depends on the quality of human resources.
The social behavior of the employees greatly affects the working of the business.The
characteristics of human resources like skill,quality,morate,commitment can contribute to
the success of the organization.
FACTORS OF INTERNAL ENVIRONMENT

• Financial Resource
Capital is the lifeblood of every business.Finance relates to money.A firm needs
adequate funds to meet its working capital and fixed capital requirements.There
is a need to have proper management of working capital and fixed capital.
• Corporate Image
A firm should develop,maintain and enhance a good corporate image in the
minds of employees,investors,and customers etc.Poor corporate image is a
weakness of the firm.
FACTORS OF INTERNAL ENVIRONMENT

• Plant and Machinery

Plant and machinery is the internal part of the business firm.If the machines are obsolete
or outdated, they should be replaced by a new one,or that adversely affects the business
firm.

• Labor And Management Relation

Better Labor-Management relationship helps increasing the morate of the employees and
motivates them to put efforts in the business.Such strong relationship enhances
organizations development.
FACTORS OF INTERNAL ENVIRONMENT

Promoter’s Vision
The promoter should have far sight vision to forecast
opportunities and threats in the business so that the
opportunities are properly grabbed and threats are diffused
off in time.
EXTERNAL ENVIRONMENT

• External Factors are unpredictable and uncontrollable.They are beyond the control of
the company.
• According to William Glueck and Jauck,”In Environment there are several factors
which constantly bring opportunities and threats to the business firm.It
includes social,economic,technological,and political conditions”.
• External environment is further classified as:
-Micro Environment
-Macro Environment
EXTERNAL ENVIRONMENT MICRO FACTORS

Micro Factors
Customers Competitors Suppliers Society Intermediaries

The company has to

identify its The members of
competitor’s It is necessary to the society Include agents
activities,information have reliable include: Financial and brokers
Consumer is the must be collected source of supply institutions who help the
king of the market about competitors in for the smooth Sharehloders business firm
respect of their working of the Government to find the
prices,products, and firm. Employees customers.
promotion and General Public
distribution
strategies.
EXTERNAL ENVIRONMENT MACRO FACTORS

Macro Factors
Economic Socio-cultural Political-legal

It refers to:
It includes the *National or
costumers’ Local Laws
Factors that changing *International
may affect values and Laws
management preferences; *Rules and
practices in customs could regulations
organizations. also affect That influences
management organizational
management.
practices in
companies.
EXTERNAL ENVIRONMENT MACRO FACTORS

Macro Factors
Demographic Technological World and Ecological

Such as Related to the increasing

The use of varied number of global
Gender,Age,Edcation
Level,Income, types of electronic competitors,markets,and
Number of Family gadgets advanced changing natural
Member,Geographic, technology such as environment.
Origin,etc.,may also computers,robotics, It must cater to the changing
influence some microprocessors,and needs of people in the global
managerial decisions other revolutionized community,at the same
in Organizations. business time,their impact on the
Natural Environment.
management.