CHAPTER 2 THE FIRM AND ITS ENVIRONMENT Today, companies operate in a dynamic environment. Varying environmental forces can potentially affect business operations and dealing with these forces is a matter of profitability, sustainability, and survival. It is crucial for managers to understand the various aspects of the environment, respond to discrepancies in business operations, direct the company in decision making and confronting problems, and offer solutions to those issues. However, some companies fail because they are not able to cope with the changes and meaningfully employ the lessons imparted by their experiences in dealing with them. Environmental forces are either internal or external and may have positive or negative effects on the firm. Whichever the case, companies and organizations should be ready to face challenges and address issues intelligently and strategically to achieve meaningful results. This unit introduces the environmental forces that affect the operations of companies. Their strengths and weaknesses are analyzed, as well as the opportunities that they can take advantage of and the threats that can affect them. An overview on environmental scanning is provided through the political, economic, social, and technological forces that affect firms. The local, international, and ethical aspects of the environment are also highlighted. Lastly, the phases of economic development and the forms of business organizations are discussed. At the end of this unit, students will have
a wider perspective of the business environment and a greater appreciation of the dynamic and challenging world of business. Lesson 4.Environmental Scanning: SWOT and PEST Analyses The external environment is a major factor that influences a company’s operations. It has significant effect on the operations of the business and is often beyond the control of the manager. A good understanding of the business environment will enable managers to identify opportunities and challenges, anticipate changes and developments, and formulate plans and decisions that will benefit their respective business firms. Environmental scanning refers to the monitoring and evaluation of information from the external and internal environment. There are three modes of environmental scanning: ad hoc, regular, and continuous scanning.The two types of environment of a firm are the internal environment consists of factors that are directly controlled and can be freely modified by the firm itself. It includes the employees, the board of directors, and the managers, among others. On the other hand, the external environment consists of factors that cannot be controlled by the firm. There are two types of external environment, the microenvironment and the macro environment.
SWOT analysis is a technique used in identifying the Strengths, Weaknesses, Opportunities, and Threats that define a company. Strengths and weaknesses are part
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- Fall '19
- Business, Ethics, Corporation