Week 3 - The Firm And Its Environment

Question 1

What is an Organizational Environment?

Answer 1

The impact of the external environment on manager’s actions and behaviors
cannot be overemphasized. There are forces in the environment that play a
major role in shaping manager’s endeavors. The environment is defined as
outside institutions and forces outside the organization that potentially affect
an organization’s performance.

Question 2

The organization works within the framework provided by various elements
of society

Answer 2

-read-

Question 3

The elements which lie outside the organization are called

Answer 3

external environment or simply as environment

Question 4

The organization may create an environment internal to it which affects
the various subsystems of the organization

Answer 4

-read-

Question 5

This environments are composed of forces or institutions
surrounding an organization that affect performance, operations, and
resources. It includes all of the elements that exist outside of the
organization’s boundaries and have the potential to affect a portion or all
of the organization.

Answer 5

Organizational environment

Question 6

The organization needs to properly understand the environment for
effective management

Answer 6

-read-

Question 7

The different environmental factors that affect the business can be broadly
categorized as internal and has its own external factors

Answer 7

-read-

Question 8

include all those factors which exists outside the firm and are often
regarded as uncontrollable.. These external forces can further be
categorized as:
1. General Environment(Macro)
2. Task Environment (Micro)

Answer 8

External environment

Question 9

This is all those forces affecting the organization indirectly

Answer 9

General environment

Question 10

The general environment - The general environment or macroenvironment is all those forces affecting the organization indirectly.
These external forces are:

Answer 10

1. POLITICAL FACTORS: The political factors are related to the
   management of public affairs and their impact on the business. It is
   important to have a political stability to maintain stability in the trade.
   Inclusive of government regulations, laws, policies and activities
   designed to influence organizational performance in an indirect way.
2. ECONOMIC FACTORS: Economic factors includes economic conditions
   and economic policies that together constitutes the economic environment. These includes growth rate, inflation, restrictive trade
   practices etc. Which have a considerable impact on the business.
3. SOCIAL, CULTURAL, DEMOGRAPHIC FACTORS : Social factors includes
   the society as a whole alongside its preferences and priorities like the
   buying and consumption pattern, beliefs of people their purchasing
   power, educational background etc. Demographical factors include:
   size of the population, population growth rate, age composition,
   ethnic composition, density of population, family size, and income
   level. These have very significant implications on business.
4. TECHNOLOGICAL FACTORS: Latest technologies helps in improving
   the marketability of the product plus makes it more consumer
   friendly. Therefore, it is important for a business to keep a pace with
   the changing technologies in order to survive in the long run.

Question 11

These are related to the
management of public affairs and their impact on the business. It is
important to have a political stability to maintain stability in the trade.
Inclusive of government regulations, laws, policies and activities
designed to influence organizational performance in an indirect way

Answer 11

Political factors

Question 12

These includes economic conditions
and economic policies that together constitutes the economic environment. These includes growth rate, inflation, restrictive trade
practices etc. Which have a considerable impact on the business

Answer 12

Economic factors

Question 13

These includes
the society as a whole alongside its preferences and priorities like the
buying and consumption pattern, beliefs of people their purchasing
power, educational background etc.

Answer 13

Social factors

Question 14

These include:
size of the population, population growth rate, age composition,
ethnic composition, density of population, family size, and income
level. These have very significant implications on business.

Answer 14

Demographic factor

Question 15

Latest technologies helps in improving
the marketability of the product plus makes it more consumer
friendly. Therefore, it is important for a business to keep a pace with
the changing technologies in order to survive in the long run.

Answer 15

Technological factors

Question 16

This is inclusive of those sectors that have a direct
working relationship with the organization. Critical variables in the tasks
environment are:

1. CUSTOMER: Customers are the final purchasers of a good or service.
    A study of customers will help managers determine what the
   customers’ needs are and wants to be satisfied.
    Analysis of customer profiles allows the organization to develop it
   organizational strategy and structure in order to deliver a
   particular good or service that best suits the needs of the
   customer.
2. SUPPLIERS: Suppliers are those people who are responsible for
   supplying necessary inputs to the organization and ensure the smooth
   flow of production.
    Suppliers pricing strategy does affect the organization’s level of
   revenue earned.
3. LABOR: Labor markets include the people available for hire.
    well-trained, skilled, and knowledgeable personnel.
    highly competitive that increases the overall performance of the
   organization.
4. COMPETITORS: Competitors can be called the close rivals and in
   order to survive the competition one has to keep a close look in the
   market and formulate its policies and strategies as such to face the
   competition

Answer 16

Task environment

Question 17

These are the final purchasers of a good or service

Answer 17

Customer

Question 18

 A study of customers will help managers determine what the
customers’ needs are and wants to be satisfied.
 Analysis of customer profiles allows the organization to develop it
organizational strategy and structure in order to deliver a
particular good or service that best suits the needs of the
customer.

Answer 18

-read-

Question 19

These are those people who are responsible for
supplying necessary inputs to the organization and ensure the smooth
flow of production.

Answer 19

Suppliers

Question 20

 Suppliers pricing strategy does affect the organization’s level of
revenue earned.

Answer 20

-read-

Question 21

These include the people available for hire.

Answer 21

Labor market

Question 22

 well-trained, skilled, and knowledgeable personnel.
 highly competitive that increases the overall performance of the
organization.

Answer 22

Labor market

Question 23

This can be called the close rivals and in
order to survive the competition one has to keep a close look in the
market and formulate its policies and strategies as such to face the
competition.

Answer 23

Competitors

Question 24

Is composed of the elements within the organization, including current
employees, management, and especially corporate culture, which defines
employee behavior

Answer 24

Internal environmwnt

Question 25

are those factors which exist within the premises of an
organization and directly affects the different operations carried out in a
business.

Answer 25

Internal factors

Question 26

It implies the culture and norms of the business. In
other words, it means the regulatory framework of a business and
every member of the organization has to act within the limits of this
framework.

Answer 26

Value system

Question 27

Different priorities, policies and
philosophies of a business is guided by

Answer 27

Mission and objectives

Question 28

______ like financial policies, financial
position and capital structure also affects a business performance and
its strategies.

Answer 28

Financial factors

Question 29

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.

Answer 29

Internal relationship

Question 30

a structured planning tool that can be used to evaluate the
Strengths, Weaknesses, Opportunities, and Threats involved in running a
business venture.

Answer 30

Swot

Question 31

Using a ____ analysis can be used to help a business determine the
advantages or disadvantages of changes they want to make based on
internal and external factors.

Answer 31

SWOT

Question 32

 Characteristics of the business or a team that give it an advantage over
others in the industry.
 Positive tangible and intangible attributes, internal to an organization.
 Beneficial aspects of the organization or the capabilities of an
organization, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty.
 Examples - Abundant financial resources, Well-known brand name,
Economies of scale, Lower costs [raw materials or processes], Superior
management talent, Better marketing skills, Good distribution skills,
Committed employees.

Answer 32

Strengths

Question 33

 Characteristics that place the firm at a disadvantage relative to others.
 Weaknesses detract the organization from its ability to attain the core
goal and influence its growth.
 Weaknesses are the factors which do not meet the standards we feel they
should meet. However, weaknesses are controllable. They must be
minimized and eliminated.
 Examples - Limited financial resources, Weak spending on R & D, Very
narrow product line, Limited distribution, Higher costs, Out-of- date
products / technology, Weak market image, Poor marketing skills,
Limited management skills, Under- trained employees.

Answer 33

Weaknesses

Question 34

 Chances to make greater profits in the environment - External attractive
factors that represent the reason for an organization to exist & develop.
 Opportunities arise when an organization can take benefit of conditions
in its environment to plan and execute strategies that enable it to become
more profitable.
 Organization should be careful and recognize the opportunities and grasp
them whenever they arise.
 Examples - Rapid market growth, Rival firms are complacent, changing
customer needs/tastes, new uses for product discovered, Economic
boom, Government deregulation, Sales decline for a substitute product.

Answer 34

Opportunities

Question 35

 External elements in the environment that could cause trouble for the
business - External factors, beyond an organization’s control.
 Threats arise when conditions in external environment jeopardize the
reliability and profitability of the organization’s business.
 Compound the vulnerability when they relate to the weaknesses. Threats
are uncontrollable. When a threat comes, the stability and survival can be
at stake. Examples - Entry of foreign competitors, Introduction of new
substitute products, Product life cycle in decline, Changing customer
needs/tastes, Rival firms adopt new strategies, Increased government
regulation, Economic downturn.

Answer 35

Threats

Question 36

This can be defined as the
environment in different sovereign countries, with factors exogenous to the
home environment of the organization, influencing decision-making on
resource use and capabilities.

Answer 36

International business environment

Question 37

 The buying and selling of the goods and services across the border.
 The national border are crossed by the enterprises to expand their
business activities like manufacturing, mining, construction, agriculture,
banking, insurance, health, education, transportation, communication and
so on.

Answer 37

-read-

Question 38

Differences between Domestic and International Business
 Difference in currencies
 Difference in natural and geographical conditions
 Mobility of factors of production
 Sovereign political entities
 Imposition of tariffs and customs duties on imports and exports;
 Quantitative restrictions like quotas;
 Exchange control;
 Imposition of more local taxes etc
 Different legal systems

Answer 38

-read-

Question 39

Importance of International Business Environment

Answer 39

 Helps in expansion: Geographic expansion may be used as a business
strategy. Even though companies may expand their business at home.
 Helps in managing product life cycle: Every product has to pass
through different stages of product life cycle-when the product reaches
the last stages of life cycle in present market, it may get proper response
at other markets.
 Technology advantages: Some companies have outstanding technology
advantages through which they enjoy core competency. This technology
helps the company in capturing other markets.
 New business opportunities: Business opportunities in overseas
markets help in expansion of many companies. They might have reached
a saturation point in domestic market.
 Proper use of resources: Sometimes industrial resources like labor,
minerals etc. are available in a country but are not productively utilized.
 Availability of quality products: When markets are open, better quality
goods will be available everywhere. Foreign companies will market latest
products at reasonable prices. Good product will be available in the
markets.
 Earning foreign exchange: International business helps in earning
foreign exchange which may be used for strategic imports.
 Helps in mutual growth: Countries depend upon each other for meeting
their requirements. Philippines depends on gulf countries for its crude oil
supplies.
 Investment in infrastructure: International business necessitates
proper development of infrastructure.

Question 40

The following are the most important roles of businesses in the economy:

Answer 40

 Jobs – Businesses create jobs. The economy of the country directly is
depends upon the employment provided by big and small businesses.
 Tax revenue - Businesses pay taxes to the government and allows the
government to function on the tax collected from them.
 Efficient circular flow of the economy - Businesses are a very
important part of the circular flow of any market economy. They buy
resources from households in the resource market and sell to households
in the product market.
 Controlling inflation – Businesses improve economic sustainability and
it can help to control inflation.
 Economic growth - Businesses also allow the economy to work more
efficiently. When businesses compete with one another, they improve
their efficiency and help the economy grow. They also help the economy
grow through innovations.
 Reduced Social welfare system – Businesses generate wealth for
employees and business owners. As consequence it will reduce social
welfare systems.
 Increase standard of living/Quality of life – Businesses increase
employment and circulation of money in the society. When people have
higher income, they tend to have higher standard of living.
 Decrease poverty rate - Businesses employ people, provide income to
the working population. They generates employment at all levels across
the country

Question 41

This refers to process of change in the overall
economic activity.

Answer 41

Economic development

Question 42

 Meet basic necessities such as food, clothing, and shelter,
 Citizens have enough or more than enough for their basic necessities,
 There is growth of income;
 Extreme poverty is addressed;
 There is equality among members of society

Answer 42

Sustenance

Question 43

 The quality of life is good when there is respect, trust, and self-value.
 A person’s worth as an individual cannot simply be measured by the
ownership of material things which is often given emphasis by
progressive capitalist countries such as the United States.
 In the Philippines, material wealth is not the only important thing but
the love for one’s family, the family’s reputation, and a person’s
dignity and self-esteem. A country is developed if this unique need of
the people is addressed

Answer 43

Self esteem

Question 44

 This freedom is drawn from liberation from oppressive systems in
society, poverty and abuse, slavery, ignorance, and the absence of the
freedom to choose one’s culture or religion. This freedom can be seen
in the range of choices in a society.
 In general, freedom prevails if people live a comfortable life, if they
have the freedom to choose their religion, to vote and to express their
opinion about administration and governance, and if they enjoy equal
opportunities for education and employment.

Answer 44

Freedom in servitude

Question 45

He took an historical approach in suggesting that developed
countries have tended to pass through 5 stages to reach their current degree
of economic development.

Answer 45

Walt rostow

Question 46

This is an agricultural economy of mainly
subsistence farming, little of which is traded. The size of the capital stock
is limited and of low quality resulting in very low labor productivity and
little surplus output left to sell in domestic and overseas markets

Answer 46

Traditional society

Question 47

Agriculture becomes more mechanized and
more output is traded. Savings and investment grow although they are
still a small percentage of national income (GDP). Some external funding
is required - for example in the form of overseas aid or perhaps
remittance incomes from migrant workers living overseas

Answer 47

Pre-conditions for take-off

Question 48

Manufacturing industry assumes greater importance, although
the number of industries remains small. Political and social institutions
start to develop - external finance may still be required. Savings and
investment grow, perhaps to 15% of GDP. Agriculture assumes lesser
importance in relative terms although the majority of people may remain
employed in the farming sector. There is often a dual economy apparent
with rising productivity and wealth in manufacturing and other industries contrasted with stubbornly low productivity and real incomes
in rural agriculture.

Answer 48

Take off

Question 49

Industry becomes more diverse. Growth should
spread to different parts of the country as the state of technology
improves - the economy moves from being dependent on factor inputs for
growth towards making better use of innovation to bring about increases
in real per capita incomes

Answer 49

Drive to maturity

Question 50

Output levels grow, enabling increased
consumer expenditure. There is a shift towards tertiary sector activity
and the growth is sustained by the expansion of a middle class of
consumers.

Answer 50

Age of mass consumption

Question 51

is the simplest form of business. It is owned by an individual who has full
control/authority of its own and owns all the assets, as well as personally
answers all liabilities or losses. The fact that it is run by the individual
means that it is highly flexible and the owner retains absolute control
over it.

Answer 51

Sole proprietorship

Question 52

What are the advantages and disadvantages of sole proprietorship

Answer 52

Advantages:
 Less regulations by government in operating decisions
 Less conflict and disagreements in manner of management
 Easier to increase or decrease capital; hence, greatest flexibility in
decision making
 Best suited for small business
 Tax rate is lower than that of the corporate form or partnership
form
Disadvantages:
 Unlimited liability of owner
 Limited capital
 Limited management expertise especially if there are no other
professional managers

Question 53

is defined in Articles 1767 to 1867 of the Civil Code of the Philippines as
“a contract whereby two or more persons bind themselves to contribute
money, property, or industry into a common fund with the intention of
dividing profits among themselves

Answer 53

Partnership

Question 54

What are the advantages and disadvantages of partnership

Answer 54

Advantages:
 easy to organize
 unlimited liability
 huge resources
 better management
 better distribution of profits
Disadvantages:
 Unlimited liability of the partners
 Partners are solidarity liable
 It lacks stability
 Conflict arise
Classification of Partnership
 General partner - one whose liability extends to his separate
property
 Limited partner - one whose liability is limited to his capital
contribution
 Managing partner - one who manages the affairs of the
partnership.
 Industrial partner - one who contributes service only.

Question 55

is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly
authorized by law or incident to its existence A business’s organizational
structure influences issues, legal issues, financial concerns, and personal
concerns.

Answer 55

Corporation

Question 56

What are the advantages and disadvantages of corporation

Answer 56

Advantages of a corporation
 Generally inexpensive to register.
 All members must be active in the co-operative.
 Members have an equal vote at general meetings regardless of
their level of investment or involvement.
 Other than directors, members can be aged under 18 years. These
members cannot stand for office and don’t have voting rights
Disadvantages of a corporation
 As co-operatives are formed to provide a service to members
rather than a return on investment, it may be difficult to attract
potential members seeking a financial return.
 There is usually limited distribution of profits to members and
some co-operatives may prohibit the distribution of any surplus.
 Members providing greater involvement or investment than
others will still only get one vote.
 Requires ongoing education programs for members.