Enterprise Setting

and Environment
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 At the end of the session, learners must
be able to:

Learning 1. Differentiate macroenvironment from

microenvironment
Objectives
2. Analyze factors in the business
environment affecting business operations
using SWOT Analysis and PESTLE Analysis
 Business Environment

It refers to all forces which are relevant

to the functioning of a business
 Internal

• Employees
• Organizational structure
Types of • Other internal mechanisms of the
organization
Business
External
Environment • Factors beyond the control of the
organization
• Relates with suppliers, customers,
creditors, government, etc.
Internal Environment (6 M’s)
• Man • Machinery
• Money • Management Structure
• Marketing Resources and Nature
• Miscellaneous Factors
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 • Company’s human resources

Man • It is part of the internal environment because the company has absolute
control on changing this factor for the success of the company.
 • This consists of financial policies, financial positions, and capital structure.
Money • The company has control over its sources of capital and money flow.
Marketing • This consists of the brand equity, distribution network, advertising activities
Resources and overall marketing efficiency.
 • Company’s physical assets and facilities
• It includes production capacity, technology, and infrastructures which
Machinery influences the competitiveness of the firm.
• Acquiring the right machines, equipment, and other assets for production is
essential to achieve a more efficient flow of work.
Management • This include the organizational structure of a firm and composition of board
Structure and of directors which influence its decision-making.

Nature
Miscellaneous • These include research and development, company image and brand
equity, value system, and competitive advantage.
Factors
External Environment
Micro/Operating Environment Macro/General Environment
• Where your company operates and • It affects the operation of all existing
can directly influence the business entities, such as decision-
functionality of all your businesses making, formulation of strategies, etc.
processes.
• Examples: customers, suppliers,
resellers, competitors, and the public
Microenvironment/
Operating
Environment
• Customers
• Suppliers
• Shareholders
• Media
• Competitors
Customers

• You must make sure that you

satisfy their needs and wants
and make sure to provide the
benefits they are willing to pay
for.
• This includes offering customers
the best quality products at
reasonable prices.
Suppliers

• Increase in the price of raw

materials or poor performance
of supplier could result to low
quality products or delays in
meeting deadlines of clients.
Shareholders

• Shareholders are investors who

own shares of the company.
• Since they are part-owners of a
firm, they exercise the right to
vote on decisions affecting the
company’s operations.
Media

• The media greatly influences

how a company and its products
are perceived by people –
customers. It can either make or
break a firm.
• It is important to manage the
media in such a way that it will
promote positive things about
the firm and reduce the impact
of negative publicity.
Competitors

• It is vital to be aware of your

competitor’s response to
changes so you can act fast and
maintain your position in the
market.
 Macroenvironment/
General Environment
• Socio-cultural and demographics
• Technology
• Economic Conditions
• Ecology and Physical Environment
• Political and Legal
Socio-cultural and
demographics
• Changes in culture and lifestyle
• Social factors include customs,
traditions, values, beliefs,
literacy, life expectancy, etc.
• Demographics refer to size,
distribution, density and
growth rate of population

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Technology
• Technology changes quickly
• It determines the quality of products and services offered by
firms
• It comes in many forms such as medical devices, new
plastics, and production techniques
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 Economic conditions
• Economic stability occurs in the
absence of excessive fluctuations in
the macroeconomy

• A stable economy provides a

framework for improved performance

• MSMEs motivated to upgrade would

experience growth opportunities
during economic booms
Inflation
• Quantitative measure of the
rate at which the average
price level of a basket of
selected goods and services
in an economy increases over
a period of time

• Indicates a decrease in the

purchasing power of a
nation’s currency
Gross Domestic
Product
• Total value of everything
produced in the country

• If the economy produces less

than the value it produces
before, the growth rate will
be negative – RECESSION

• If the recession stays negative

long enough, the recession
turns into DEPRESSION Source: Philippine Statistics Authority
Business Cycle

Source: Investopedia
 • Businesses are affected on a daily basis
due to environmental and ecological
changes

Ecology and • Climate change, for instance, impacts

Physical water and fuel costs

Environment
• Other relevant considerations include
availability of natural resources, weather
and climatic condition, location aspect,
topographical factors, etc.

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 Political and Legal
Environment
• This includes the political system,
government policies, and their attitude
towards the business community

• The stability of the government influences

business and related activities; laws and
regulations affect businesses depending on
their nature

• For example: Laws on the limit on resource

harvesting or transport of forest resources
from one place to another.
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 Totality of external forces

Specific and general forces

Features of Dynamic nature

Business Uncertainty
Environment Relativity

Multi-faceted
Features of Business Environment

1. Totality of External Forces

Business environment is the sum total of all things internal and external to
business firms, and as such, is collective in nature
Features of Business Environment

2. Specific and General Forces

Specific Forces – affect individual

enterprises directly and immediately (e.g.
investors, customers, competitors,
suppliers)

General Forces – have impact on all

business enterprises and may affect an
individual firm indirectly only
Features of Business Environment

3. Dynamic Nature

Business environment keeps on changing

whether in terms of technological
improvement, shifts in consumer
preferences or entry of new competition
in the market
Features of Business Environment

4. Uncertainty

It is difficult to predict future

happenings, especially when
environment changes are taking place too
frequently (e.g. information technology or
fashion industries)
Features of Business Environment

5. Relativity

It differs from country to country and even from region to region. Political
conditions differ among countries.

Demand for a product in an area may be different from the demand for the
same product in a different area
Features of Business Environment

6. Multi-faceted

Changes in the business environment are frequent and depend on knowledge

and existence of business person.

Changes may be opportunities for some and may be threats for others.
Why is it important
understand BE?
1. First Mover Advantage
Early identification of opportunities helps an enterprise to be
the first to exploit them instead of losing them to
competitors.
Why is it important
understand BE?
2. Identification of Threats
Early recognition of threats helps in taking corrective actions
and improving strategies to survive the competition.
Why is it important
understand BE?
3. Coping with Rapid Changes
All types of enterprises are facing increasingly dynamic
environment. In order to effectively cope with these
significant changes, firms must understand and examine the
environment and develop suitable course of action.
Why is it important
understand BE?
4. Improving Performance
They will also aim to improve their performance based on the
information they have about their target market.
Why is it important
understand BE?
5. Giving Direction for Growth
It enables the business to identify the areas for growth and
expansion of their activities.
Why is it important
understand BE?
6. Meeting Competition
It helps the firms to analyse the competitors’ strategies and
formulate their own strategies accordingly in order to cope
with the rapidly increasing competition.
Why is it important
understand BE?
7. Continuous Learning
The managers are motivated to continuously update their
knowledge, understanding and skills to meet the predicted
changes in realm of business.
 Tools in Assessing the Business Environment

SWOT Analysis PESTLE Analysis

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SWOT Analysis

• A high-level strategic
planning model that helps
organizations identify where
they’re doing well and
where they can improve,
both from an internal and
external perspective.
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 STRENGTHS
What are we good at?
Positive factors that can contribute to success

• skills of your employees and workers

• your expertise
• availability of the resources you need (materials,
information, machines and equipment, money,
etc)
• strong demand for your product or service
• low capital requirement
• brand (if a franchise)
 Negative factors that can cause your
business to stagnate or become sluggish
WEAKNESSES
What are we not • having unclear goals and targets
• poor leadership
good at? • inadequate skill workers
• low morale among workers
• inefficient processes and equipment
• unstable supply of materials
• seasonal demand
• lack of capital
OPPORTUNITIES
“Where do we see big possibilities for our organization?”

Conditions that will allow your business to earn more income

• government support (loans, good infrastructure, technical and marketing

assistance, incentives, etc.)

• technological innovations (communications technology, cost-saving devices,

software programs for business application)
THREATS
“What do we see on the horizon as being potentially harmful to
our organization?”

Conditions in the environment that will have negative effect on your business

• emerging and strong competition

• entry of cheap imports
• flight of skilled laborers in favor of overseas jobs
• declining market
• shortage of raw materials
• political crisis
• too much legislation
STRENGTH WEAKNESS
• Have many return customers • Don't pay much attention to marketing –
• Customers do say they like the service and dependent on word-of-mouth and website
give positive word of mouth by • Don't have a marketing plan
recommending grooming services to others • Lack of budget
• Mobile grooming van has eye-
catching logo and gives some exposure when
performing on-site services

OPPORTUNITIES THREATS
• Take advantage of the increasing popularity of • Other dog grooming businesses in
dogs town, competition is increasing
• Increasing use of social media- place some • One dog grooming business has a series of
social media ads radio ads running and is also running
• Increase the amount of walk-in traffic newspaper ads once a week
• Local annual Pet Fair • Another competitor has partnered with the
• Kennel clubs, rescue societies, local SPCA local SPCA to host a dog washing and
(Society for the Prevention of Cruelty to grooming day every few months (by donation
Animals) to the SPCA)
PESTLE/STEEPLE P Political
Analysis E Economic
A tool which gives a bird’s eye view S Social
of the whole environment from
different angles and is used when
planning to launch a business
T Technological
L Legal
Refer to this video link for detailed discussion on
PESTLE Analysis:
https://www.youtube.com/watch?v=bYn4CyL3r5
w
E Environmental
Political

Deals with the current direction of

the political parties and the extent
that government intervenes in the
economy.

Examples: tax policy,

regulation/de-regulation, the level
of bureaucracy, foreign trade
policy, small business funding
grants, etc.
Economic

Performance of the economy that

greatly affects how small
businesses operate and make
decisions.

Examples: Economic growth, stock

market performance,
unemployment trends, interest,
and inflation rates.
Social

Ethical, cultural, and demographic

aspects that affect the demand for
a small business’s
products/services and how it
operates.

Examples: population growth,

immigration, age distribution,
lifestyles, health consciousness,
buying habits, education level,
emphasis on safety, religion, and
beliefs.
Technological

Affects how a small business brings

its product or service to market. It
helps Small Business Owners to
evaluate the status of the
business’s current technology.

Examples: research and

development (R&D) activity,
automation, technology incentives,
technology lifecycle, the rate of
technological change, and the role
of the Internet.
Legal

All the regulations and laws that can positively or

negatively affect small business operations and
profitability.

Examples: intellectual property law, consumer

protection law, health and safety law, tax regulations,
employment law, advertising standards, product
labeling regulations, health-care laws, and retirement
laws.
Environment

Ecological and environmental

aspects that may impact small
businesses involved in industries
such as farming, tourism, and
insurance.

Examples: geographical location,

weather, climate, climate change,
pollution, waste management,
attitudes towards “green” or
ecological products and renewable
energy.
 At the end of the session, learners must
be able to:

Learning 1. Differentiate macroenvironment from

microenvironment
Objectives
2. Analyze factors in the business
environment affecting business operations
using SWOT Analysis and PESTLE Analysis
 Hampel-Milagrosa, A. 2014. Micro and small enterprise upgrading in the
Philippines: the role of the entrepreneur, enterprise, networks, and business
environment. The German Development Institute. ISSN 1860-0468. ISBN 978-
3-88985-640-1

Institute of Company Secretaries of India. 2012. Business Environment and

Entrepreneurship Foundation Programme Study Material Paper 1. Accessed
from
https://www.academia.edu/3470078/Business_Environment_and_Entreprenu
ership

References: https://www.rappler.com/thought-leaders/211285-analysis-reasons-
philippine-inflation-now-highest-asean

https://www.history.com/topics/great-depression/great-depression-history

https://think.ing.com/snaps/philippines-inflation-decelerates-to-2.6

https://tradingeconomics.com/philippines/gdp