MGT111.pdf

Table of Contents
MODULE 1
Chapter 1. FUNDAMENTALS OF MANAGEMENT
1.1 Definition of Management…………………………………………….1
1.2 Managerial Functions…………………………………………………….2
1.3 Management Theories…………………………………………………..2-5
Assessment Activities…………………………………………………………..6-7
MODULE 2
Chapter 2. FUNCTIONS, ROLES, AND SKILLS OF A MANAGER
2.1 Levels of Management…………………………………………………..8-9
2.2 Management Roles………………………………………………………..9
2.3 Management Skills…………………………………………………………9-10
Assessment Activities…………………………………………………………..11
MODULE 3
Chapter 3. THE ORGANIZATION AND ITS ENVIRONMENT
3.1 Organizational Environment………………………………………….12
3.2 Micro and Macro Environment……………………………………..12-13
3.3 PEST and SWOT Analysis……………………………………………….13-19
Assessment Activities………………………………………………………….20
MODULE 4
Chapter 4. FORMS AND ECONOMIC ROLES OF BUSINESS ORGANIZATIONS
4.1 Definition of a Business…………………………………………………21
4.2 Types of Business Organizations……………………………………21-22
4.3 Forms of Business Organizations…………………………………..22-24
4.4 Economic Roles of Busines Organizations……………………..24-25
4.5 Economic Growth and Economic Development…………….25
Assessment Activities………………………………………………………….27
MODULE 5
Chapter 5. PLANNING
5.1 Planning and Its Nature…………………………………………………28-29
5.2 Levels of Planning………………………………………………………….29
5.3 Types of Planning…………………………………………………………..29-30
5.4 Tools for Planning……………………………………………………………………..30-31
5.5 Five Process Steps of Organizational Planning…………………………..31-32
Assessment Activities………………………………………………………..…………….34
MODULE 6
Chapter 6. ORGANIZING
6.1 Organizing and its Nature……………………………………………………..……35-36
6.2 Organization Structures……………………………………………………………..36-38
Assessment Activities……………………………………………………….……………...39
Organization and Management Project………………………………..……………………40-41
MODULE 7
Organization and Management 1st
Semester Examination

ASIAN INSTITUTE OF COMPUTER STUDIES (AICS)
1
While some aspect of business has the same specific duties, management is much
more complex. It requires responsibility and efficient use of resources, combined
with the guidance of people to fulfill, and achieve specific organizational objectives
through economical and effective planning regulation.
Cost is a primary concern for consumers, so managers must never fail to address
this to be competitive. The balance to gain profit and remain affordable to clients
is compulsory for business organizations.
Innovation is the introduction of new products and services. With latest
technologies and wide access to different social media platforms, this competitive
advantage aspect is growing at a dizzying pace. Managers should keep abreast of
the latest technologies as innovation is expected to intensify with globalization.
Quality is defined as the ability of a product or service to meet customer needs
(Heizer, 2008). Because quality is an aspect that serves client’s desires, it mut be
managed well.
Service is an intrinsic requirement for all customers, as they need to have ‘what
they want when they need it.’ Most of us have our own experience of moving out
of long queues in service establishments to go elsewhere. Managers know that it
is a loss of income for their business.
Speed appears to be the buzz word of this millennium. Fast-food outlets, internet
search engines, and automated teller machines are among the more familiar
developments. Customer expect to experience a product or service at a swift rate,
so management must address their needs at a comparative or even faster pace.
CHAPTER 1. FUNDAMENTALS OF MANAGEMENT
1.1. Definition of Management
KEY QUESTIONS
• As a student, how would you best
apply the managerial functions in
classroom management?
• How do the theories of
management differ from each
other?
Management is the process of reaching organizational goals by working with
and through people and other organizational resources and has the following
characteristics:
• It is a process or series of continuous and related activities.
• It involves and concentrates on reaching organizational goals.
• It strives for organizational goals by working with and through people
and other organizational resources.
At the end of this module, you are expected to:
• Explain the definition of management,
• Identify the functions of management, and
• Apply the different theories of management into real-life situations.
1
st
QUARTER
MODULE
1
WEEK
_____

2
Management involves far more than just telling others what to do. Sometimes we
think we can our bosses’ jobs, but behind closed doors, they spend a good deal of
their time planning and organizing, so that they can effectively carry out the
functions of leading and controlling.
PLANNING
This involves choosing tasks that must be performed to attain
organizational goals, to outline how the tasks must be performed
and to indicate when they should be performed.
Planning activity focuses on attaining goals and managers outline exactly what
organizations should do to be successful. It is also concerned with the success of
the organization in the short term as well as in the long term.
ORGANIZING
Organizing involves the act of assigning the tasks developed in the
planning stages to various individuals or groups to create a
mechanism to put plans into action.
People within the organization are given work assignments that contribute to the
goals of the company to make the outputs of each individual contribute to division
and organizational success.
INFLUENCING
Influencing is also known as motivating, leading or directing by
guiding the activities of organization members towards
the fulfillment of the goals. The purpose of influencing is to increase productivity
in human-oriented work situations to generate higher levels of production over the
long term than do task -oriented work situations.
CONTROLLING
Controlling is both a managerial function and a continuous process
where the manager performs the following roles:
• gathers information that measures performance;
• compares present performance to pre-established
performance norms; and
• determines the next action plan and modifications for
meeting the desired performance parameters.
STAFFING
Some modern management experts also include the function of
staffing as an important management practice. Without human
resources, no organization can get off the ground, let alone do
business and make profits. Staffing is an important function because:
• It puts the right man in the job,
• It is an on-going activity as employees keep leaving and joining the
company, they also retire from time to time leaving empty places in various
positions,
• Efficiency is a prime focus of this function as managing people is the
toughest job there is, everything must be accounted for, leaves, payments,
benefits, medical allowances, social security accounting, and much more.
Early civilization shows the rise of management and industry. It began since the
period man saw the need to live in groups. Men are chosen to organize and lead
masses. The introduction of writing also opened a door to early trading and
bartering. Later on, inventions were made. The birth of industrial revolution
1.2. Managerial Functions
The four basic management functions that make up the management process
are described in the following sections:
• Planning
• Organizing
• Influencing
• Controlling
1.3. Theories of Management

3
brought a drastic change. Suddenly, the need to develop a more holistic and formal
management theory became a necessity.
Since the eighteenth century, the rise of the industry revolution has been evolving
to a variety of contemporary management theory including the pre-scientific,
classical, behavioral, quantitative, and new theories. Each theory is inclusive with
a view on specific time frames to meet the specific phenomenon and existing
management needs.
1. Pre-scientific Management Periods
Industrial revolution began in the 18th
century, when agricultural societies
become more industrialized and urban. This revolution is known for putting on
a significant impact on management as a whole. It changed how businesses, as
well as individuals, raised capitals; organize labor and production of goods.
Entrepreneurs had access to all the factors of production such as land, labor,
and capital. Theirs was to make an effort to combine these factors to achieve
a targeted goal successfully.
Here are some notable management pioneers who contributed during this
quarter of the history. They were able introduce useful ideas and approaches
to give management a precise and universally acceptable direction.
Charles Babbage (1729-1871)
Babbage is known as the patron saint of operations research
and management science. He is an author of several books,
one of which has been most successful, On the Economy of
Machinery and Manufacturers, which described the tools and
machinery used in English factories. It discussed the economic
principles of manufacturing and analyzed operations; the skills used and
suggested improved practices.
He believed in the benefits of division of labor and was an advocate of profit
sharing. He developed a method of observing manufacturing that is the same
approached utilized today by operation analysts and consultants analyzing
manufacturing operations.
Robert Owen (1771-1858)
Owen was a successful Scottish entrepreneur who sowed the
first seeds of concern for the workers. He was repulsed by the
working conditions and poor treatment of the workers in the
factories in his homeland. Owen became a reformer.
He reduced the use of child labor and used moral persuasion rather than corporal
punishment in his factories. He chided his fellow factory owners for treating the
equipment better than they treated their workers.
2. Classical Theories
(A) Scientific Management
While the early management era focused heavily on the division of labor and
welfare of workers, combined with little advances in technology, the scientific
management era began with engineers applying systematic management
practices to management problems.
Frederick W. Taylor (1856-1915)
Probably the most famous management pioneer of all is
Frederick W. Taylor, the father of scientific management.
Taylor believed management’s responsibility was in
knowing what you want workers to do and then seeing
that they do it in the best and cheapest way. He developed
many new concepts such as functional authority. In other words, Taylor
proposed that all authority was based on knowledge, not position. In 1911,
Taylor published Principles of Scientific Management.
(B) Administrative View
Two contributors to the administrative theory of management are Henri Fayol
and Max Weber. Both wrote during the scientific management era in America,
but neither was accorded to full measure of his contribution until some
decades after his death.

4
Henri Fayol (1841-1925)
Fayol identified the major elements or functions of managements
as planning, organization, command, coordination, and control.
Planning and organization received the majority of his attention in
his writings. Fayol believed that management could be taught, that
managerial ability was sorely needed as one moved up the ladder,
and that management was a separate activity applicable to all types of
undertakings.
Max Weber (1864-1920)
The work of Max Weber runs chronologically parallel to that of
Fayol and Taylor. Weber used the concept of “Bureaucracy” as an
ideal organizational arrangement for the administration of large-
scale organizations. His work was not translated into English not
until 1947.
Weber's concept of the best administrative system was actually
similar to Taylor's. Some of Weber's essential elements included division of labor,
and chain of command. He also believed that selection should be based on
technical qualifications, officials'/managers' appointments should be based on
qualifications, managers should not be owners, and impersonal and uniform rules
should be applied.
3. Behavioral Theories
(A) Hawthorne Experiment
This is a well-known study which revealed that Classical Theory is mainly
focused on the organization and staff with mechanical perspective
concentrated on the point of view of human nature, importance of individual
attitudes and behaviors, methods for managers to motivate employees for
improving productivity.
(B) Interpersonal Perspective
This was proposed by Maslow and McGregor that provided a basic foundation
of the behavioral view on human relations and was further derived from the
Hawthorne experimental results showing that the productivity of employees
is affected by the interaction and affective atmosphere of the management
that leads to better performance.
4. Quantitative Theory
Unlike scientific management that uses systematic approach in solving
management problems, quantitative theory establishes relationships amongst
quantifiable variables (i.e., financial management, inventory valuation, inventory
control, production scheduling, human resource planning, etc.) of decision-making
situations and facilitates disciplined thinking. Decisions are based on data and logic
rather than intuition and judgment.
New Theories
(A) Systems Management Theory
Systems management offers an alternative approach to the planning and
management of organizations. The systems management theory proposes that
businesses, like the human body, consists of multiple components that work
harmoniously so that the larger system can function optimally. According to
the theory, the success of an organization depends on several key elements:
synergy, interdependence, and interrelations between various subsystems.
This theory gives emphasis on considering employees as one of the most
important components of a company. Managers, on the other hand, are
required to evaluate patterns and events in their companies so as to determine
the best management approach. In this way, they are able to collaborate on
different programs so that they can work as a collective whole rather than as
isolated units.
(B) Contingency Management Theory
Most of the theories stated above manifest solutions to the problems of the
management. It clearly shows steps and processes on how to deal with the
complications on hand. In contingency management theory, academic industry
focuses on the adaptation to the environmental change and believes that there
is no “universal solution” for the management to solve such conditions since all

5
of management challenges depend on varying circumstances. It further
stresses that the current time would always be a timely situation for the
management to handle individual and managerial differences.
REFERENCES
Books
Management: Leading & Collaborating in a Competitive World, Ninth
Edition, Bateman & Snell (2011) retrieved from
http://docshare02.docshare.tips/files/26976/269764847.pdf
Organization and Management Activity Sheets (First Quarter),
Department of Education (June, 2016) retrieved from
https://depedtambayan.org/complete-cg-dll-tg-lm-and-lesson-guides-for-
senior-high-school/
Organization and Management: Concepts, Caselets, and Exercises,
Garalde-Oraljo, V., Frias, S. (2016)
Electronic Sources
Four Functions of Management: Planning, Organizing, Leading &
Controlling. (2012, August 1) retrieved from
https://study.com/academy/lesson/four-functions-of-management-
planning-organizing-leading-controlling.html
Functions of Management - Planning, Organizing, Staffing and More.
Belyh, A. (2019, September 24) retrieved from
https://www.cleverism.com/functions-of-management-planning-
organizing-staffing/
Industrial Revolution retrieved from
https://www.history.com/topics/industrial-revolution
Pioneers of Management, Wagner-Marsh, F. Revised by Lanier, P.,
https://www.referenceforbusiness.com/management/Or-Pr/Pioneers-of-
Management.html
Principles of Management - The Early Origins of Management -
https://opentextbc.ca/principlesofmanagementopenstax/chapter/the-
early-origins-of-management/
Quantitative Theory of Management: Branches, Evaluation and
Limitations, Tanuja, A. retrieved from
https://www.businessmanagementideas.com/management/quantitative-
theory-of-management-branches-evaluation-and-limitations/4715
The Evolution of Management Thought and the Evolution of
Management Theories, Kukreja, S.,
https://www.managementstudyhq.com/evolution-management-thought-
theories.html

6
Directions. In each number, identify what management function is being
described. Organize the descriptions under the category they belong.
1. It involves putting the right man in the job.
2. It is all about motivating, leading, or directing by guiding the activities of
organization members towards the fulfillment of the goals.
3. Gathering information that measures performance.
4. Accounting for leaves, payments, benefits, medical allowances, social
security accounting, and much more.
5. It involves choosing tasks that must be performed to attain organizational
goals.
6. The act of assigning the tasks developed in the planning stages to various
individuals or groups to create a mechanism to put plans into action.
7. Comparing the present performance to pre-established performance
norms.
8. Focusing with the success of the organization not only in the short term
but as well as in the long term.
9. Its sole purpose is to increase productivity in human-oriented work
situations to generate higher levels of production over the long term than
do task -oriented work situations.
10. Giving of work assignments that contribute to the goals of the company to
make the outputs of each individual contribute to division and
organizational success
Planning
Organizing
Influencing
Controlling
Staffing
Activity 1: The System

7
Directions. Using Venn diagram, state the similarities and differences of notable
persons during the classical theories era, namely: Frederick Taylor, Henry Fayol,
and Max Weber.
Activity 1: Uniqueness
Frederick Taylor
Henry Fayol Max Weber

8
On their book Management: Leading and Collaborating in a Competitive World,
Ninth Edition, Bateman and Snell (2008) enumerate the three levels of
management and their functions:
1. Top-Level Managers
Top-level managers are the senior executives of an organization. They are
responsible for its overall management. They are often referred to as strategic
managers, and are supposed to focus on long-term issues and emphasize the
survival, growth, and overall effectiveness of the organization.
Top managers are concerned not only with the organization as a whole but
also with the interaction between the organization and its external
environment.
2. Middle-Level Managers
As the name implies, middle-level managers are located just below top-
level managers and above frontline managers. While top-level managers
are referred to as strategic managers, middle-level managers are known as
tactical managers. Since the top-level managers develop the organization’s
general goals and plans, middle-level managers are responsible for
translating these general goals and plans into more specific objectives and
activities.
The middle-level managers serve as a bridge that connects the gap
between the higher and lower levels. They take corporate objectives and
break them down into business unit targets; put together separate
business unit plans from the units below them for higher-level corporate
review; and serve as linchpins of internal communication, interpreting and
broadcasting top management’s priorities downward and channeling and
translating information from the front lines upward.
3. Frontline Managers
Frontline managers are considered as operational managers, they are
lower-level managers who supervise the operations of the organization.
These managers often have titles such as supervisor or sales manager. They
2.1 Levels of Management
Top-Level
Managers
Middle-Level
Managers
Frontline
Managers
• Identify the three levels of management and their functions,
• Differentiate the roles from skills of a manager, and
• Explain the importance of each management skills.
CHAPTER 2. FUNCTIONS, ROLES AND SKILLS OF A MANAGER
1
st
QUARTER
MODULE
2
WEEK
_____ KEY QUESTIONS
• What level of management
do you think has the most
vital and critical function?
• How do management roles
differ from management
skills?

9
are directly involved with non-management employees, implementing the
specific plans developed with middle managers. Their role in the
organization is critical because operational managers are the link between
management and non-management personnel.
Frontline managers are not only being directed and controlled from above,
they are expected to be innovative and entrepreneurial, managing for
growth and new business development. In some outstanding
organizations, they are given freedom, incentives, and support to find ways
in successfully implementing operations of the company.
Management Roles
A role is defined as an organized set of behaviors belonging to an
identifiable office or position (Sarbin and Allen, 1968). Thus, actors, managers, and
others play roles that are predetermined, although individuals may interpret them
in different ways.
On his book, The Nature of Managerial Work, Henry Mintzberg divided the
set of 10 managerial roles into 3 groups namely: Interpersonal, Informational, and
Decisional.
Interpersonal
Roles
Leader: Staffing, training, and motivating people.
Figurehead: Performing symbolic duties (ceremonies and
serving other social and legal demands).
Liaison: Maintaining a network of outside contacts who provide
information and favors.
Informational
Roles
Monitor: Seeking and receiving information to develop a
thorough understanding of the organization and its
environment; serving as the “nerve center” of communication.
Disseminator: Transmitting information from source to source,
sometimes interpreting and integrating diverse perspectives.
Spokesperson: Speaking on behalf of the organization about
plans, policies, actions, and results.
Decisional
Roles
Entrepreneur: Searching for new business opportunities and
initiating new projects to create change.
Disturbance Handler: Taking corrective action during crises and
other conflicts.
Resource Allocator: Providing funds and other resources to
units or people; includes making or approving significant
organizational decisions.
Negotiator: Engaging in negotiations with parties outside the
organization as well as inside (e.g., resource exchanges).
Source: Adapted from H. Mintzberg, The Nature of Managerial Work
Management Skills
Understanding the functions and roles of a manager still does not ensure
success. They need a variety of skills to be able to perform well. Skill is an ability
and capacity acquired through deliberate systematic, and sustained effort to
smoothly and adaptively carryout complex activities or job functions. Although
managers need many individual skills, there are three essential categories:
technical skills, interpersonal and communication skills, and conceptual and
decision skills.
Source: Managerial Skills – 3 types of management Skills you will need
2.2 Management Roles 2. 3 Management Skills

10
Technical Skills comprise the knowledge and capabilities to perform specialized
tasks related to a specific field. Management often needs to have technical skills in
order to communicate effectively with the line workers and coordinate effort. It
We should also know that technical skills are not related only for machines,
production tools or other equipment, but also they are skills that will be required
to increase sales, design different types of products and services, market the
products and services, etc.
Technical skills are most important for first-level managers (frontline managers).
When it comes to the top-level managers, these skills are not something with high-
significance level. As we go through a hierarchy from the bottom to higher levels,
the technical skills lose their importance.
Interpersonal and Communication Skills (Human Skills) illustrates the manager’s
ability to work with people. This is considered as one of the most critical
management tasks, and managers spend the great majority of their time
interacting with people. Without people, there will not be a need for the existence
of management and managers.
Managers must develop their abilities to lead, motivate, and communicate
effectively with those around them. Your human skills often make the difference
in how high you go. That is why this skill is essential for all hierarchical levels in the
company.
Conceptual and Decision Skills involve the ability to identify and resolve problems
for the benefit of the organization and everyone concerned. Managers use these
skills when they consider the overall objectives and strategy of the firm, the
interactions among different parts of the organization, and the role of the business
in its external environment. This is essential as you acquire greater responsibility,
vital for top-level managers, less critical for mid-level and frontline managers.
REFERENCES
Books
Management: Leading & Collaborating in a Competitive World, Ninth
Edition, Bateman & Snell (2011) retrieved from
http://docshare02.docshare.tips/files/26976/269764847.pdf
Organization and Management Activity Sheets (First Quarter),
Department of Education (June, 2016) retrieved from
https://depedtambayan.org/complete-cg-dll-tg-lm-and-lesson-guides-for-
senior-high-school/
Organization and Management: Concepts, Caselets, and Exercises,
Garalde-Oraljo, V., Frias, S. (2016)
Electronic Sources
Managerial Skills - 3 Types of Skills Each Manager Will Need, Dragan, S.
retrieved from
https://www.entrepreneurshipinabox.com/202/managerial-skills/
Skill. BusinessDictionary.com. Retrieved July 19, 2020, from
BusinessDictionary.com website:
http://www.businessdictionary.com/definition/skill.html
The Nature of Managerial Work Mintzberg, H., (1973) retrieved from
http://hib510week9.pbworks.com/f/The+Nature+of+Managerial+Work,+
Mintzberg+1973.pdf
What are Management Theories -
https://corporatefinanceinstitute.com/resources/careers/soft-
skills/management-theories/
What Are Technical Skills in Management? - Definition & Examples.
(2015, January 14). Retrieved from
https://study.com/academy/lesson/what-are-technical-skills-in-
management-definition-examples-quiz.html.

11
Directions. Identify what is asked based on the given definition. Refer to Module 2
to look for answers. Write your answers on the space provided before each
number.
__________1. They are considered as operational managers, they are lower-level
managers who supervise the operations of the organization.
__________2. It illustrates the manager’s ability to work with people.
__________3. This is under the decisional role, providing funds and other
resources to units or people; includes making or approving significant
organizational decisions.
__________4. Skills that are not related only for machines, production tools or
other equipment, but also they are skills that will be required to increase sales,
design different types of products and services, market the products and services,
etc.
__________5. Under the interpersonal roles, maintaining a network of outside
contacts who provide information and favors.
__________6. They are often referred to as strategic managers and are supposed
to focus on long-term issues and emphasize the survival, growth, and overall
effectiveness of the organization.
__________7. Under informational roles, speaking on behalf of the organization
about plans, policies, actions, and results.
__________8. This involves the ability to identify and resolve problems for the
benefit of the organization and everyone concerned.
__________9. They are responsible for translating the general goals and plans into
more specific objectives and activities.
__________10. Under interpersonal roles, this involves performing symbolic duties
(ceremonies and serving other social and legal demands).
Directions. Fill the flow chart below with the cycle of functions of the three levels
of management. View lesson 2.1 for reference.
Activity 1: Who am I?
Activity 2: The Cycle
Top-Level
Managers
Middle-Level
Managers
Frontline
Managers

12
Organizational environment is the combination of external and internal factors and
forces which affect the organization’s ability to establish a relationship and serve
its customers.
1. Internal Environment
The internal environment is company-specific and includes all the forces and
factors inside the organization which affect market operations. It encompasses
the climate, culture, machines/equipment, work and work processes,
members, management, and management practices.
In other words, the internal environment refers to the culture, members,
events, and factors within an organization that has the ability to influence the
decisions of the organization, especially the behavior of its human resource.
2. External Environment
The external environment includes all the outside factors or influences that
impact the operation of business. The business must act or react to keep up its
flow of operations. The external environment can be broken down into two
types: the micro-environment and the macro-environment.
Business activities are directly affected by the micro-environment while macro-
environment leaves an indirect impact on all businesses on a large scale.
a) Micro-environment
The micro-environment consists of the factors that directly impact the
operations of the company. It includes different forces that are specific to a
particular business and are capable to influence daily operations and
Internal
Environment
Micro
Environment
Macro
Environment
3.1 Organizational Environment
• Familiarize the components of marketing environment,
• Analyze various forces/elements influencing local and international businesses using PEST and
SWOT strategies, and
• Communicate and utilize environmental analysis models in relation to present issues.
CHAPTER 3. THE ORGANIZATION AND ITS ENVIRONMENT
1
st
QUARTER
MODULE
3
WEEK
_____ KEY QUESTIONS
• How can we assess the factors
affecting the organization?
• How do we use PEST and
SWOT analysis in developing
strategies to achieve our
business goals?
3.2 Micro and Macro Environment

13
performance of the business for a shorter period. These forces or factors include
suppliers, shareholders, customers, employees, competitors, media, etc.
Suppliers provide resources to businesses like raw material,
machinery or equipment, etc. Their actions can impact on the
organization’s strategy as they provide necessary inputs for
production. In the absence of timely and adequate services, the
production process may delay that result in more production time
and fewer sales.
Customers being the king of any business are the final receivers of
the products or services. They are central to any organization as
they contribute to generating revenue by attracting more
customers. So the marketing strategy of an organization is
required to be focused on the existing customer retention and
attracting potential customers by satisfying their needs and preferences.
Competitors or rivals of businesses can directly affect business
strategies. So, it is very much required to conduct a competitive
analysis of competitors to a competitive advantage that includes
the knowledge of their USP (Unique Selling Point) of product and
service offered. Also, a business can remain in a competitive
position by offering products or services better than competitors.
Employees. Organizations can achieve objectives through skilled
employees who are also experts in their areas. By hiring the right
employees and providing adequate training and development
opportunities to them, organization can ensure access.
Shareholders are those who invest their money in a company and
also own shares of it. By doing so, they attain ownership of the
company. Ultimately, they are eligible for return of investment on
their share. This makes organizations liable forward benefits to
them from profits. Organizations also pay dividends to keep the
interest of shareholders. So, to make the right balance between the stakes of the
shareholders and own interest is an essential aspect of organization.
Media channels also play an important role in the way
organizations market themselves. Media has become the
necessity of any business for promotional activities of its
products and services. So, organizations are required to
maintain a healthy relation and status with the media
people. The company’s negative image in the media may
result in heavy losses. That is why organizations now have separate PR (Public
Relations) department to handle media-related activities.
b) Macro-environment
The macro-environment of an organization is related to its general and external
environment that impacts the working style, decision-making process,
strategy, and performance of the business. The macro-environment is a
dynamic environment that has a changing tendency. It has external factors that
an organization cannot control.
Since organizations cannot directly control the macro-environment, what they
need is to manage it in a way that benefits them. The macro-environment study
is termed as PEST, which lists the Political, Economic, Sociological, and
Technological variables in the said environment. Some references may include
Environment (Ecology and Physical Forces) and Legal Factors which sums up to
PESTEL.
Economic
Sociological
Legal
Factors
Political
Technological
Environment
3.3 PEST and SWOT Analysis

14
A PESTEL analysis (formerly known as PEST analysis), is a framework or tool used
to analyze and monitor the macro-environmental factors that may have profound
impact on an organization’s performance.
1. Political
The first element of PESTEL analysis is a study of political factors. Political
factors influence organizations in many ways, such that it creates advantages
and opportunities for organizations. By contrast, they can put obligations and
duties on organizations.
All the influences that a government has on the organization could be classified
here. This can include:
• Government Policy
• Political Stability or Instability
• Corruption
• Foreign Trade Policy
• Tax Policy
• Labor Law
• Environmental Law, and
• Trade Restrictions
Non-conformance with legislative obligations can lead to sanctions such as
fines, adverse publicity, or even imprisonment. Ineffective voluntary codes and
practices will often lead to governments introducing legislation to regulate
activities covered by the codes and practices.
2. Economic
Economic factors are determinants of a certain economy’s performance. All
businesses and organizations are affected by national and global economic
factors. National (and global) interest rates and fiscal policy is set around
economic conditions. The climate of the economy dictates how the consumers,
suppliers, and other organizational stakeholders such as suppliers and
creditors behave within a society. A slump economy will have high
unemployment, low spending power and low stakeholder confidence.
However, a growing economy will have low unemployment, high spending
power and high stakeholder confidence.
A successful organization will respond to economic conditions and stakeholder
behavior. Furthermore, organizations will need to review the impact economic
conditions are having on their competitors and respond accordingly.
3. Social
The dimension of the general environment represents the demographic
characteristics, norms, customs, and values of the population within which
organization operates. This includes population trends such as population
growth rate, age distribution, career attitudes, safety emphasis, health
consciousness, lifestyle attitudes and cultural barriers. These factors are
especially important for marketers when targeting certain customers.
Organizations must be able to offer products and services that aim to
complement and benefit people’s lifestyle and behavior. If organizations do
not respond to changes in society, they will lose market share and demand for
their products and services.
4. Technological
These factors pertain to innovations and technology that may affect the
operations of the industry and the market favorably or unfavorably.
Technological advances have greatly changed the manner in which businesses
operate. Organizations use technology in many ways, they have:
• Technology infrastructure such as the internet and other information
exchange systems include telephone and conference calling.
• Technology systems incorporating a multitude of software which help
them manage their business.
• Technology hardware such as mobile phones, computers,
photocopiers, and fax machines which transmit and record
information.

15
The modern technology has a created a society which expects instant results.
This technological revolution increased the rate at which information is
exchanged between stakeholders. A faster exchange of information can
benefit businesses as they are able to react quickly at changes within their
operating environment.
However, an ability to react quickly also creates extra
pressure as businesses are expected to deliver on their
promises within ever decreasing time scales. For example,
consumer can shop 24 hours a day from wherever they
want and however they want via apps on their
smartphones, laptops, and tablets.
5. Environmental
Environmental factors have come to the forefront only relatively recently. They
have become important due to the scarcity of raw materials, pollution targets
and carbon footprint targets set by governments. These factors include
ecological and environmental aspects such as weather, climate, environmental
offsets and climate change which may especially affect industries such as
tourism, farming, agriculture, and insurance. Furthermore, growing awareness
of the potential impacts of climate change is affecting how companies operate
and the products they offer. This has led to many companies getting more and
more involved in practices such as corporate responsibility (CSR) and
sustainability.
6. Legal Factors
Although these factors may have some overlap with the political factors, they
include more specific laws such as discrimination laws, antitrust laws,
employment laws, consumer protection laws, copyright and patent laws, and
health and safety laws. Companies need to know what is legal in order to trade
successfully and ethically. If an organization trades globally this become tricky
since each country has its own set of rules and regulations.
This module covers only some examples of general external factors that
organizations may want to take into account. There are probably more factors that
could influence a certain business, and it varies from one industry to another, and
of course, from nation to nation.
In summary, here are the PESTEL factors:
P E S
• Government
stability/instability
• Corruption level
• Tax policies
• Freedom of press
• Government
regulation and
deregulation
• Special tariffs
• Political action
committees
• Government
involvement in trade
unions and
agreements
• Competition
regulation
• Voter participation
rates
• Amount of
government protests
• Defense expenditures
• Level of government
subsidies
• Bilateral relationships
• Import-export
regulation/restrictions
• Trade control
• Growth rate
• Interest rate
• Inflation rate
• Exchange rate
• Availability of credit
• Level of disposable
income
• Propensity of people
to spend
• Federal government
budget deficits
• Gross domestic
product trend
• Unemployment
trend
• Stock market trends
• Price fluctuations
• Population size and
growth rate
• Birth rates
• Death rates
• Number of marriages
• Number of divorces
• Immigration and
emigration rates
• Life expectancy rates
• Age distribution
• Wealth distribution
• Social classes
• Per capita income
• Family size and structure
• Lifestyles
• Health consciousness
• Average disposable
income
• Attitude towards
government
• Attitude towards work
• Buying habits
• Ethical concerns
• Cultural norms and values
• Sex roles and distribution
• Religion and beliefs
• Racial equality

16
• Lobbying activities
• Size of government
budgets
• Use of birth control
• Education level
• Minorities
• Crime levels
• Attitudes towards saving
• Attitude towards
investing
• Attitudes towards
retirement
• Attitudes towards leisure
time
product quality
customer service
• Attitudes towards foreign
people
T E L
• Technology incentives
• Automation
• R&D activity
• Technological change
• Access to new
technology
• Level of innovation
• Technological
awareness
• Internet
infrastructure
• Communication
infrastructure
• Life cycle of
technology
• Weather
• Climate
• Environmental
policies
• Climate change
• Pressures from
NGO’s
• Natural disasters
• Air and water
pollution
• Recycling standards
green products
• Support for
renewable energy
• Discrimination laws
• Antitrust laws
• Employment laws
• Consumer protection
laws
• Copyright and patent
laws
• Health and safety laws
• Education laws
• Consumer protection
laws
• Data protection laws
SWOT Analysis
While PEST (or PESTEL) analysis focuses on the factors on external environment
that affect the organization, SWOT (Strength, Weaknesses, Opportunities, and
Threats) Analysis focuses on both internal and external factors. This method was
created in the 1960s by Albert Humphrey of the Stanford Research Institute, during
a study conducted to identify why corporate planning consistently failed. Since its
creation, Swot has become one of the most useful tools for business owners to
start and grow their companies.
This analysis is a framework used to evaluate a company’s competitive position and
to develop strategic planning. It is designed to facilitate a realistic and fact-based
analysis from identifying the organization’s strengths, weaknesses, opportunities
and threats. The primary objective of a SWOT analysis is to help organizations
develop a full awareness of all the factors involved in making a business decision,
that is why organizations must use it as a guide rather than a prescription.
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
SWOT
Analysis

17
1. Strengths
Strengths describe what an organization excels at and what separates it from
the competition: a strong brand, loyal customer base, a strong balance sheet,
unique technology and so on. Any aspect of your organization is only a strength
if it brings you a clear advantage. For example, if all your competitors provide
high-quality products, then a high-quality production is not a strength in your
market: it is a necessity.
2. Weaknesses
Weaknesses stop an organization from performing at its optimum level. They
are the areas where your organization needs to improve to remain
competitive: a weak-brand, higher-than-average turnover, high levels of debt,
an inadequate supply chain, or lack of capital.
Weaknesses, like strengths, are inherent features of an organization, so focus
on your people, resources, systems, and procedures. Think about what you
could improve, and the sorts of practices you should avoid.
3. Opportunities
Opportunities refer to favorable external factors that could give an
organization a competitive advantage. These are openings or chances for
something positive to happen, but you will need to claim them for yourself.
Opportunities arise from situations outside your organization and require an
eye to what might happen in the future. They might arise as developments in
the market you serve, or in the technology you use. Being able to spot and
exploit opportunities can make a huge difference to your organization’s ability
to compete and take the lead in your market.
4. Threats
Threats refer to the factors that have the potential to harm an organization. It
includes anything that can negatively affect your business from the outside,
such as supply chain problems, shift in market requirements, or a shortage of
recruits. It is vital to anticipate threats and to take action against them before
you become a victim of them and growth stalls.
Always consider what your competitors are doing, and whether you should be
changing your organization’s emphasis to meet the challenge. But, remember
that what they are doing might not be the right thing for you to do, and avoid
copying them without knowing how it will improve your position.
When to Use a SWOT Analysis
An organization must perform a SWOT analysis before they commit to any sort of
company action, whether they are exploring new initiatives, revamping internal
policies, considering opportunities to pivot or altering a plan mid-way through its
execution.
Though the head of the organization should certainly be involved in creating a
SWOT analysis, it is often helpful to include other team members in the process.
The collective knowledge of a team will allow an organization to analyze their
business from all sides.
How to do a SWOT Analysis
1. Decide on the objective of your SWOT analysis. To get the most out of
your SWOT analysis, you should have a question or objective in mind from
the start. For example, you could use a SWOT analysis to help you decide
if you should introduce a new product or service or change your processes.
2. Research your business, industry, and market. Before you begin the SWOT
analysis, you need to do some research to understand your business,
industry, and market. Get a range of perspective by talking to your staff,

18
business partners and clients. Also conduct some market research and find
out about your competitors.
3. Construct a SWOT analysis matrix. You can also download a SWOT analysis
template online. Below is an example of how it is supposed to look like:
Strengths
What do you do well?
What unique resources can you draw on?
What do others see as your strength?
Weaknesses
What could you improve?
Where do you have fewer resources than others?
What are others likely to see as weaknesses?
Opportunities
What opportunities are open to you?
What trends could you take advantage of?
Threats
What threats could harm you?
What is your competition doing?
What threats do your weaknesses expose to you?
SWOT Analysis Template
When there is a matrix present, you can now list your business’ strengths and
weaknesses, as well as the opportunities and threats to your business.
4. Establish priorities from the SWOT. When you have completed the steps
above, you now have an overall picture of how your business is running
and what issues you need to address. You can then work out what issues
are the most important and what can be dealt with later.
5. Develop a strategy to address issues in the SWOT. Review your prioritized
list by asking:
• How can we use our strength to take advantage of the
opportunities identified?
• How can we use these strengths to overcome the threats
identified?
• What do we need to do to overcome the identified weaknesses in
order to take advantage of the opportunities?
• How will we minimize our weaknesses to overcome the identified
threats?
Once you have answered these questions and finalized your lists, you can now use
the SWOT analysis to develop strategies for achieving your business goals.
The following is an example of a SWOT analysis conducted by a business trying to
decide if they should introduce a new product to their range.
Strengths Weaknesses
• Excellent sales staff with
strong knowledge of existing
products
• Good relationship with
customers
• Good internal
communications
• High traffic location
• Successful marketing
strategies
• Reputation for innovation
• Currently struggling to meet
deadlines – too much work?
• High rental costs
• Market research data may be
out of date
• Cash flow problems
• Holding too much stock
• Poor record keeping
Opportunities Threats
• Similar products on the
market are not as reliable or
are more expensive
• Loyal customers
• Product could be on the
market for Christmas
• Customer demand – have
asked sales staff for similar
product
• Competitors have a similar
product
• Competitors have launched a
new advertising campaign
• Competitor opening shop
nearby
• Downturn in economy may
mean people are spending
less

19
In this above example, each category of this SWOT analysis can be expanded. The
business can then assess the results to decide if they can use their strengths to take
advantage of the opportunities and introduce the new product. After assessing the
results, they may decide that the weaknesses and threats need to be addressed
before they can make any changes to their existing product line.
REFERENCES
Books
The Organization and its Environment, Chapter 2 pp. 18-26, Organization
and Management: Concepts, Caselets, and Exercises, Garalde-Oraljo, V.,
Frias, S. (2016)
Electronic Sources
Conducting a SWOT analysis retrieved from
https://www.business.qld.gov.au/starting-business/planning/market-
customer-research/swot-analysis/conducting
Difference Between Micro and Macro Environment retrieved from
https://studiousguy.com/difference-between-micro-and-macro-
environment/
Internal and External Environment Factors that Influences Organizational
Decision Making retrieved from
https://www.iedunote.com/organizational-environment-elements
Internal Environment retrieved from
https://businessjargons.com/internal-environment.html
Marketing Environment: Explanation, Components, and Importance.
Pahwa, A. (2019, August 17) retrieved from
https://www.feedough.com/marketing-environment/
Relationships between PEST and SWOT. Kokemuller, N. (2019, January
11) retrieved from https://smallbusiness.chron.com/relationships-
between-pest-swot-10083.htm
Scanning the Environment: PESTEL Analysis (2016, September 18)
retrieved from https://www.business-to-you.com/scanning-the-
environment-pestel-analysis/
Strength, Weakness, Opportunity and Threat (SWOT) Analysis, Grant, M.
(2020, February 24) retrieved from
https://www.investopedia.com/terms/s/swot.asp
SWOT Analysis How to Develop a Strategy for Success retrieved from
https://www.mindtools.com/pages/article/newTMC_05.htm
SWOT Analysis: What It Is and When to Use It, Schooley, S. (2019, June
23) retrieved from https://www.businessnewsdaily.com/4245-swot-
analysis.html
The Macro Environment and PEST Analysis (2020, March 13) retrieved
from https://www.learnmarketing.net/pestanalysis.htm
What is an External Environment in Business? - Definition, Types &
Factors. (2016, May 11). Retrieved from
https://study.com/academy/lesson/what-is-an-external-environment-in-
business-definition-types-factors.html.

20
Directions. Below are some external factors which affect and influence the
organization. By using the PESTEL analysis, identify if the given is Political,
Economic, Sociological, Technological, Environmental, or Legal Factor. Write your
answer on the space provided before each number.
__________1. Attitudes towards product quality.
__________2. Voter participation rates.
__________3. Anti-trust Laws.
__________4. Natural Disasters
__________5. Access to new technology.
__________6. Size of government budgets.
__________7. Education level.
__________8. Consumer protection laws.
__________9. Attitude towards retirement.
__________10. Immigration and emigration rates.
__________11. Inflation rate.
__________12. Stock market trends.
__________13. Level of government subsidies.
__________14. Environmental Policies.
__________15. Pressures from NGOs.
__________16. Attitude towards foreign people.
__________17. Copyright and patent laws.
__________18. Attitude towards green products.
__________19. Life cycle of technology.
__________20. Recycling standards.
Directions. Complete the given instruction below on a separate short bond paper.
Pass it along this activity sheet.
1. Choose a reputable firm or organization. (Famous fast-food chain or mobile
phone distributor, or even small businesses that you are familiar with).
2. Elicit strengths and weaknesses statements about the chosen firm, and list
these in the SWOT matrix template. Repeat the focus on internal resources
and your perception on manpower, money, or resources of the chosen
enterprise.
3. Analyze the matrix upon completion.
4. List areas where the chosen enterprise can improve and work better on.
Activity 1: Factor Organizer Activity 2: SWOTting

21
What is a Business?
A business is an organization or an enterprising entity that uses economic
resources to provide goods or services to customers in exchange for money or
other goods or services. Businesses can be for-profit entities, or they can be non-
profit organizations that operate to fulfill a charitable mission or social cause.
While business organizations can be classified into different types, there are also
various forms of businesses, it ranges in scale from a sole proprietorship to an
international corporation. Each one requires some form of investment and of
course customers to whom their output can be sold on a consistent basis to make
a profit.
Types of Business Organizations
1. Service Business – as the name implies, this type of business does not
provide tangible products but instead offers professional skills, expertise,
advice, and other similar products. Examples of service type of business are
repair shops, tutorial centers, locksmiths, spa and massage salon,
seamstress/tailors, banks and accounting firms, etc.
a) Service Business – businesses that charge for labor or other
services provided to government, to consumers, and to other
businesses. Entertainers and make-up artists are service business.
b) Financial Business – this includes banks and other organizations
that generate profits through investment and management of
capital.
c) Transportation Business – this include businesses or individuals
that deliver good to their destinations for a fee. Grabfood and J&T
Express are examples of transportation business.
d) Utilities – produce public services such as electricity or sewage
treatment, and is usually under a government.
2. Merchandising Business – this type of business buys products at wholesale
price and sells them at a retail price. They are known as ‘buy and sell’
business. They make profit by selling the products at prices higher than
their purchase costs. They sell their products without changing its form.
Examples are grocery stores, convenience stores, and other resellers. As of
today, online buy and sell shops are also booming.
3. Manufacturing Businesses – on the contrary of merchandising business,
manufacturing business buys products with the purpose of using them as
materials in making a new product. With this, there is a transformation of
products purchased. A manufacturing business combines raw materials,
4.1 Definition of a Business
• Differentiate the types of business organizations,
• Illustrate the forms of business organizations and its advantages and disadvantages,
• Identify the roles of business organizations on economic development, and
• Evaluate economic growth and economic development.
CHAPTER 4. FORMS AND ECONOMIC ROLES OF BUSINESS ORGANIZATIONS
1
st
QUARTER
MODULE
4
WEEK
_____ KEY QUESTIONS
• How do business’ types and
forms differ from each other?
• What are the impacts of
business in one’s country and
in the world’s economy
development?
4.2 Types of Business Organizations

22
labor, and overhead costs in its productions process. The manufactured
goods will then be sold to customers.
a) Agriculture and Mining Business – produce raw materials sch as
plants and minerals.
b) Manufacturers – this includes factories the produce products
either from raw materials or from component parts, then sell
their products at a profit. For example, car, clothing, or pipes.
c) Real-estate Business – sell, rent and develop properties including
land, residential homes and other buildings.
Hybrid Business are companies that may be classified in more than one-type of
business. For example, a restaurant, combines ingredients in making a fine meal
(manufacturing), sells a cold bottle of wine (merchandising), and fills customers’
orders (service).
Basic Forms of Businesses
1. Sole Proprietorship – this is a from of business that is owned by only one
person. Majority of small businesses start out as sole proprietorships. Take
for example a bakery owner who started his business and after a year
expanded it and opened a new branch bakery.
Sole proprietorships own all the assets of the business and the profits
generated by it. They also assume complete responsibility for any of its
liabilities or debts. That is why creditors of the business may go after the
personal assets of the owner if the business cannot pay them.
Advantages of a Sole Proprietorship
• It is of course the easiest and least expensive form of ownership to
organize.
• Sole proprietors are in complete control, and within the
parameters of the law, may make decisions as they see fit.
• Profits from the business flow-through directly to the owner’s
personal tax return.
• The business is easy to dissolve, if desired.
Disadvantages of a Sole Proprietorship
• Sole proprietors have unlimited liability and are legally
responsible for all debts against the business. Their business and
personal assets are at risk.
• May be at a disadvantage in raising funds and are often limited to
using funds from personal saving or consumer loans.
• May have a hard time attracting high-caliber employees, or those
that are motivated by the opportunity to own a part of the
business.
• Some employee benefits such as owner’s medical insurance
premiums are not directly deductible from business income (only
partially as an adjustment to income).
2. Partnership – a partnership is a business owned by two or more persons
who contribute resources into the entity. Like proprietorships, the law
does not distinguish between the business and its owners. The partners
should have a legal agreement that sets forth how decisions will be made,
profits will be shared, disputes will be resolved, how future partners will
be admitted to the partnership, how partners can be bought out, or what
steps will be taken to dissolve the partnership when needed. It is realistic
that some partnership splits up even when a business is just getting started
or when at under a crisis.
Advantages of a Partnership
• Partnerships are relatively easy to establish; however time should
be invested in developing the partnership agreement.
• With more than one owner, the ability to raise funds may be
increased.
• The profits from the business flow directly through the partners’
personal tax return.
• Prospective employees may be attracted to the business if given
the incentive to become a partner.
4.3 Forms of Business Organizations

23
• The business usually will benefit from partners who have
complementary skills.
Disadvantages of a Partnership
• Partners are jointly and individually liable for the actions of the
other partners.
• Profits must be shared with others.
• Since decisions are shared disagreements can occur.
• Some employee benefits are not deductible from business income
on tax returns.
• That partnership may have a limited life; it may end upon the
withdrawal of death of a partner.
Types of Partnership that should be considered:
a) General Partnership – partners divide responsibility for
management and liability, as well as the shares of profit or loss
according to their internal agreement. Equal shares are assumed
unless there is a written agreement that states differently.
b) Limited Partnership and Partnership with Limited Liability –
‘limited’ means that most of the partners have limited liability (to
the extent of their investment) as well as limited input regarding
management decision, which generally encourages investors for
short term projects, or for investing in capital assets. This form of
ownership is not often used for operating retail or service
businesses. Forming a limited partnership is more complex and
formal than that of a general parentship.
c) Joint Venture – acts like a general partnership but is clearly for a
limited period of time or a single project. If the partners in a joint
venture repeat the activity, they will be recognized as an ongoing
partnership and will have to file as such and distribute
accumulated partnership assets upon dissolution of the entity.
3. Corporations – a corporation is a business in which a group of people acts
together as a single entity; most commonly, owners of a corporation are
shareholders who exchange consideration for the corporation’s common
stock. The shareholders elect a board of directors to oversee the major
policies and decisions. It is considered by the law to be a unique entity,
separate and apart from those who own it. A corporation can be taxed; it
can be sued; it can enter into contractual agreements. The corporation has
a life of its own and does not dissolve when the ownership changes.
Advantages of a Corporation
• Shareholders have limited liability for the corporation’s debts or
judgments against the corporation.
• Generally, shareholders can only be held accountable for their
investment in stock of the company. (Note however, the officers
can be held personally liable for their actions, such as the failure to
withhold and pay employment taxes)
• Corporations can raise additional funds through the sale of stock.
• A Corporation may deduct the cost of benefits it provides officers
and employees.
• Can elect S Corporation status if certain requirements are met. This
election enables company to be taxed similar to a partnership.
Disadvantages of a Corporation
• The process of incorporation requires more time and money than
other forms of organization.
• Corporations are monitored by federal, state and some local
agencies, and as a result may have more paperwork to comply with
regulations.
• Incorporating may result in higher overall taxes. Dividends paid to
shareholders are not deductible from business income; thus this
income can be taxed twice.

24
4. Cooperatives
A cooperative (co-op) is a business organization owned by a group of
individuals and is operated for their mutual benefit. Their difference from
a corporation is that the persons making up of the group are called
members, not shareholders, and they share the decision-making authority.
Cooperatives may be incorporated or unincorporated.
Advantages of a Cooperative Organization
• Generally inexpensive to register.
• A cooperative organization is owned and controlled by its
members.
• Members have an equal vote at general meeting regardless of their
level of investment or involvement. One member, one vote.
• All members must be active in the cooperative.
• This type of organization has a limited liability.
• Profit distribution (surplus earnings) to members is carried on in
proportion to the use of service: surplus may be allocated in shares
or cash.
Disadvantages of a Cooperative Organization
• A cooperative organization entails longer decision-making process.
• It requires members to participate for success.
• It has less incentive, and there is also a possibility of development
of conflict between members.
• As co-cooperatives are formed to provide a service to members
rather than a return of investment, it may be difficult o attract
potential members seeking a financial return.
• There is usually limited distribution of profits to members and
some co-cooperatives may prohibit the distribution of any surplus.
• Members providing greater involvement or investment than
others will still only get one vote.
• Extension record keeping is necessary in this form of organization.
In any market economy, business plays a huge role. Business is the engine of an
economy. Business provides jobs that allow people to make money and good and
services for others to purchase. Sometimes this include selling directly to the
consumer, on other times, business can sell to other business, such as when
wholesalers sell goods out of a warehouse to grocery stores. All these businesses
operate under the law of supply and demand where businesses compete by a
combination of offering superior products and lower prices. Economies can exist
without businesses, but they are not nearly as strong.
The success of business as a whole directly affects the world’s economy. Businesses
are designed to serve a particular need that people have, and provide trusted
goods and services related to that need. When consumer confidence or trust dips
in business, it is not just sales that are negatively affected. The mistrust has a ripple
effect and can result in a decline in a country’s general economy, weakening the
strength of its currency and buying power.
As business plays a huge role in the world’s economy, it is of course vital to a
country’s economy. Success of businesses can drive the success of an entire
country, including through contributions to the gross domestic product, or GDP of
a nation, which affects their world standing. A country that supports businesses
with goods and demands results to benefits. From creating jobs that results in
money being put back into the community to taxes that help the government to
provide maintenance and improvements to the country’s infrastructure, or in many
other ways that are helpful for its citizen, there are a lot of ways that business’
success translates to economic development.
To provide the products and services the citizens and residents need; business also
allow exporting goods and services. This opens a door for education and training
for citizens, creating healthy business competition and provide additional methods
of strengthening economic development.
4.4 Economic Roles of Business Organizations

25
Though there are small businesses that we think are not contributing enough for
the development of the economy, they still boost economic revenue but on smaller
scale. To all intents and purposes, many nationally known brands today got their
start as a very small businesses that run out of someone’s home or garage (just like
Amazon). Remember that small businesses do not always stay small. These small
scales businesses ought to have future impact in their country and in the world.
Economic Development can be defined as a process that influences growth and
restructuring of an economy to enhance the economic well-being of a community.
Economic growth and economic development may be connected to each other,
but they sure are different from one another. While economic growth implies
economic development, it typically refers to an increase in Gross Domestic Product
(GDP), while economic development refers to a structural transformation, mostly
of the economy, not only focusing on its mere GDP.
W.W. Rostow, an American economist, penned his classic ‘Stages of Economic
Growth’ in 1960, which presented five steps through which all countries must pass
to become developed: 1) Traditional Society, 2) Preconditions to take-off, 3) take-
off, 4) Drive to maturity and 5) Age of high mass consumption. The model asserted
that all countries exist somewhere on this linear spectrum, and climb upward
through each stage in the development process:
• Traditional Society – this stage is characterized by a subsistent,
agricultural-based economy with extensive labor and low levels of trading
and a population that does not have a perspective on the world and
technology.
• Pre-conditions to Take-off – here, a society begins to develop
manufacturing and a more national/international─ as opposed to regional─
outlook.
• Take-off – Rostow describes this stage as a shirt period of intensive growth,
in which industrialization begins to occur, and workers and institutions
become concentrated around a new industry.
• Drive to Maturity – this stage takes place over a long period of time, as
standards of living rise, the use of technology increases, and the national
economy grows and diversifies.
• Age of High Mass Consumption – at the time of writing, Rostow believed
that Western countries, most notably the United States, occupied this last
“developed” stage. Here, a country’s economy flourishes in a capitalist
system, characterized by mass production and consumerism.
REFERENCES
Books
Role of Business in the Economy, Chapter 8.2 pp. 97, Organization and
Management: Concepts, Caselets, and Exercises, Garalde-Oraljo, V., Frias,
S. (2016)
Electronic Sources
105 Service Businesses to Start Today. Guen S., retrieved from
https://www.entrepreneur.com/article/80684
Business, Hayes, A., (2020, July 4) retrieved from
https://www.investopedia.com/terms/b/business.asp
Economic Development, Smyth, D., (2019, March 24) retrieved from
https://bizfluent.com/facts-5982585-definition-small-scale-
enterprise.html
Forms of Business Organization, retrieved from
https://www.baltimoresourcelink.com/startup/register-license-your-
business/forms-of-business-organization
4.5 Economic Growth and Economic Development

26
Rostow's Stages of Growth Development Model, Jacobs, J., (2020,
February 11) retrieved from https://www.thoughtco.com/rostows-
stages-of-growth-development-model-1434564
The Role of Business in Social and Economic Development. Lorey, B.,
retrieved from
https://www.academia.edu/36905139/The_Role_of_Business_in_Social_
and_Economic_Development
Types and Forms of Business retrieved from
https://www.accountingverse.com/accounting-basics/types-of-
businesses.html
"What is the role of business in the economy?" eNotes Editorial, 2 Sep.
2019, https://www.enotes.com/homework-help/what-role-business-
economy-716463. Accessed 24 July 2020

27
Directions. Below is table of types of business. Fill each column with five examples
of types of business that exists inside and outside your community (whether it is a
small business you know or a big corporation). Each example is worth one point.
Service
Business
Merchandising
Business
Manufacturing
Business
Directions. Suppose you are starting a business. Among the forms of business,
what would you rather choose: sole proprietorship, partnership, corporation, or a
cooperative? Explain your answer through an essay that has a minimum of 10
sentences. Observe proper margin and indention, it should also have an
introduction, body, and conclusion. You may use the back portion of this activity
sheet for this activity. (30 points)
Rubric for Grading:
DESCRIPTION/INDICATION
CRITERIA 10 7 5 3
Content The insights
were discussed
clearly and
concisely.
The insights
were discussed
clearly but the
output is too
wordy.
The insights are
unclear, and the
output is too
wordy.
The insights are
irrelevant to the
given concept.
Grammar and
Vocabulary
The insights
were explained
using proper
grammar and
correct spelling
of words.
The insights
were explained
using correct
spelling of
words. However,
there are some
errors in
grammar.
There are
minimal errors
in grammar and
spelling of
words.
Th output has
too many errors
in grammar and
spelling.
Mechanics The task
outcome
showed that the
student followed
all the
instructions
correctly.
The task
outcome
showed that the
student followed
most of the
instruction
correctly.
The task
outcome
showed that the
student did not
follow the
instructions
correctly. Some
parts are either
missing or
unclear.
The task
outcome
showed that the
student did not
follow any
instruction
correctly.
Activity 1: Fill me! Activity 2: Starting a Business

28
As discussed in the first chapter, the first essential of managerial functions is
planning. Planning, by nature, is important since it is the conscious, systematic
process of making decisions about goals and activities that an organization will
pursue in the future. All the projects, campaigns, and activities of the organization
will start in the planning. It is the process by which managers establish goals and
define methods by which these goals are to be attained.
Management has to plan for long-range and short-range future direction by looking
ahead the future, by estimating and evaluating the future behavior of the relevant
environment and by determining the enterprise’s own desired role.
Planning differs widely than decision-making. While decisions can be made without
planning, planning cannot be done without making decisions.
The nature of planning can be defined as follows:
• Planning is goal-oriented – plans arise from objectives. Objectives provide
guidelines for planning.
• It is a primary function – planning provides the basis foundation from which
all future management functions arise.
• It is persuasive – it is required at all levels of management. It is not an
exclusive function of any management level or department. Managers
must plan for every change that occurs in an organization. However, the
scope of planning differs at all levels among different department.
• It is a mental activity – planning is a mental process involving─ imagination,
foresightedness, and sound judgment. Plans are based on careful analysis
of internal and external factors influencing business activities. It is carried
out in a logical and systematic manner.
• It is a continuous process – it is an on-going process of adapting the
organization with the changes in business environment. Since a business
exist in a dynamic environment, it is necessary to continuously plan based
on changing business needs and situations.
• It involves choice – it is essentially a choice among various alternative
course of action. A manager has to select the best alternative after careful
analysis and evaluation.
• It is forward-looking – planning means looking ahead and preparing for the
future. It involves analysis of the future needs and requirements of the
business and preparing for it.
• It is flexible – planning is based on future forecast of events and situations.
Since future is uncertain plans are flexible enough to adapt with future
change of events.
• It is an integrated process – plans are structured in a systematic and logical
sequence where each plan or step is highly-interdependent and mutually
supportive.
5.1 Planning and its Nature
• Discuss the nature of planning,
• Evaluate the levels and types of planning,
• Comprehend the cycle of planning, and
• Apply appropriate planning techniques and tools in business decision-making.
CHAPTER 5. PLANNING
1
st
QUARTER
MODULE
5
WEEK
_____ KEY QUESTIONS
• What is the significance of
planning in the organization?
• What are the levels of
planning for?
• How does the cycle of
planning flow?

29
• It includes effective and efficient dimensions – plans aim at optimum
utilization of resources to be efficient and are based on pre-determined
objectives to measure effectiveness of the plan.
Planning is carried out in three distinct levels namely: corporate, business, and
functional levels. While some organizations focus on one level, ensuring the
alignment of plans on all the levels and unity in the methods of achieving the plans
made is a must.
Ineffective strategies and cross-purpose functions are attributes of lack of
alignment of departments in an organization. All the three levels of planning may
be unique both in terms of application and objectives, but some organizations
really do fail in creating their differences.
The three levels of planning are:
1. Corporate Level – corporate planning is creating a strategy for the overall
wellness of the organization. This level of planning is usually referred to as
the grand strategy, for it constitutes that level of decision-making which
dictates the activities of all the other levels. This is where a top-level
manager provides an explicit mission and vision which is duly needed in the
organization towards accomplishing the set goals and objectives. The plans
made on this level must be based in the long-term view.
2. Business Level – also known as ‘division level’ since it involves the
competitiveness of the organization with other organizations. It deals with
only one business, compared to the corporate level which covers all the
parts of the company. At this level, the management is concerned with
determining the consumer’s needs, and on how they should adjust the plan
to ensure that the division satisfy these needs. The company assigns two
or more managers to be in this level.
3. Functional Level – often referred to as the ‘department level’, this is where
the organization is concerned with marketing, production, human
resources, etc. The functional level of a business organization is charged
with the responsibility of ensuring that each and every single aspect of the
organization is run in the most professional manner. The managers in this
level ensures that though each department may act on their own in terms
of what type of job they have to perform, they still meet the company’s
goals.
•This type of planning typically describes the day-to-day running of
the company. Operational plans are often described as single use
plans or on-going plans. single use plans are created for events and
activities with single occurrence such as single marketing campaign).
On-going plans include policies for approaching problems, rules for
specific regulatios and procedures for a step-by-step process for
accomplishing particular objectives.
Operational Planning
•Strategic planning includes a high-level overview of the entire
business. It is the foundational basis of the organization and will
dictate long-term decisions. This includes the important components
such as vision, mission and values. It involves analyzing the strengths
and weaknesses of the organization, as well as its opportunities and
threats.
•It is a kind of planning that offers guidance to organizations on how
to proceed accordingly with their operations, allocate resources, and
meet target goals.
Strategical Planning
5.2 Levels of Planning
5.3 Types of Planning

30
Often discussed in tools for planning are models that measure the internal and
external environments. These models create forward-looking projections based on
past and present data; therefore, they are useful only once enough data have been
collected. Because of this, tools for planning largely focus on generating enough
data to construct valid recommendations.
Before diverting attention to the tools used for planning, let us look first on several
business resources for creating a plan which include the following:
• Industry experts: Whether internal employees or external consultants, a
few individuals with extensive experience in a given industry are valuable
resources in the planning process. These industry experts can move
beyond the PESTEL and Porter’s Five Forces frameworks, making intuitive
leaps as to the trajectory of the industry.
• Consultants: Consultants are commonly brought in during strategy
formulation and for a variety of other reasons. Most important of these
would be providing an objective lens for internal affairs. It is difficult to see
the whole house from inside the house, and upper management can utilize
an external opinion to ensure they are seeing operations clearly and
objectively.
• Inclusion of stakeholders: Upper management will want as much
information as possible from everyone involved. Some examples include
consumer surveys on satisfaction, supplier projections for costs over a
given time frame, consumer inputs on needs still unfilled, and shareholder
•Tactical planning supports strategic planning. It includes tactics that
the organization plans to use to achieve what is outlined in the
strategic plan. Often, the scope is less than one year and breaks
down the strategic plan into actionable chunks. It differs from
operational planning in such way that tactical plans ask specific
questions about what needs to happen to accomplish a strategic
goal while operational planning ask how the organization will
generally do something to accomplish the company's mission.
Tactical Planning
•contingency plans are often referred to as 'Plan B' because these
are made when something unexpected happens or when something
needs to be changed.
• contingency planning can be helpful in circumstances that call for a
change. Although managers should anticipate changes when
engaged in any of the primary types of planning, contingency
planning is essential when changes cannot be foreseen.
Contingency Planning
Industry Experts
Consultants
Stakeholders
5.4 Tools for Planning

31
views. The inclusion of stakeholders offers a variety of tools, each of which
may or may not be a useful input depending on the context of the plan.
Strategists have developed a large array of tools useful in the assessment of
strategic planning, all of which provide unique insights into the feasibility and
profitability of a given operational project. Identifying these tools, and selecting
which are most appropriate for determining the effectiveness or efficiency of a
project, is a central responsibility of a strategic-management team.
Listed below are the main tools available for consideration along with a brief
description of how each tool is useful.
Forecasting – is the most common strategic tool and should be considered
whenever projects are being designed. Forecasting, simply put, is projecting the
future of a project by leveraging all the available knowledge to generate likelihood
of success.
Scenario Planning – is an interesting tool with which strategists constructs various
scenarios to test out potential trajectories of specific operational plans.
Benchmarking – can be done qualitatively or quantitatively, and it is comparative
approach to strategy. Benchmarking usually requires the identification of a close
competitor with similar strategic prerogatives so that the strategist can compare
and contrast the two companies’ strength and weaknesses, identifying strategies
for improvements or competitive advantages.
Participatory and Contingency Planning – as stated above, contingency planning
can be described as the back-up plan, while participatory planning is a primary plan.
An excellent tool for strategists pursuing a particularly risky venture is to develop
the primary objectives and strategy while simultaneously constructing a
contingency plan that will limit the negative effects of failure. This offsets risk
through finding various ways to achieve value regardless of the success of the
overall venture. This requires creativity and a degree of adaptability.
Goal Setting – similar to MBO and SMART(which will be discussed later on), is a
simple method for strategists to establish and enforce specific goals within the
organization or strategic business unit (SBU). Goal setting creates incentives for
employees by identifying achievable end results, which drives the direction of the
company towards commonly establish goals. This theory was developed by Edwin
A. Locke in the 1960s and is considered an ‘open’ theory, which implies that new
thoughts and developments may be layered on top of the original goal-setting
framework.
Management by Objectives - MBO is the process of defining, disseminating, and
implementing the objectives that an organization has identified as strategic.
Objectives provide factual and achievable strategies that align with employee and
manager goals in order to ensure that all participants are on the same page. It is
also useful to set goals and a timeline to assess progress and ensure that each
individual is achieving their segment of the plan.
SMART Goals - the SMART model aims to design goals that are specific,
measurable, achievable, realistic, and time-targeted (SMART). This model identifies
specific goals, measures inputs and outputs, ensures that the goals are attainable
and relevant to the mission of the company, and constructs a timeline.
Though there are many other potential tools for strategists, these seven provide a
strong framework for further development of strategic methodologies.
Incorporating concepts such as forecasting and benchmarking in conjunction with
larger corporate strategy frameworks such as SMART goals and MBO will equip
strategists with a strong short-term and long-term approach.
The organizational planning process includes five phases, that ideally, form a cycle.
Strategic, tactical, operational, and contingency planning fall within these five
stages.
5.5 Five Process Steps of Organizational Planning

32
Step 1: Strategic Plans
Steps in this initial stage include:
• Review your mission, vision, and values.
• Gather data about your company, like performance-indicating metrics
from your sales department.
• Perform a SWOT analysis: take stock of your company’s strengths,
weaknesses, opportunities, and threats.
• Set big-picture goals that align with company mission, vision, and values.
Step 2: Translate the Strategic Plan into Tactical Steps
At this point, it is time to create tactical plans. Bring in middle managers to help do
the following.
• Define short-term goals─ quarterly goals are common, that support the
strategic plan for each department, such as setting a quota for the sales
team so the company can meet its strategic revenue goal.
• Develop processes for reviewing goal achievement to make sure strategic
and tactical goals are being met, like running a CRM report every quarter
and submitting it to the Chief Revenue Officer to check that the sales
department is hitting its quota.
• Develop contingency plans, like what to do in case the sales team’s CRM
malfunctions or there is a data breach.
Step 3: Plan Daily Operations
Operational plans, or the processes that determine how individual employees
spend their day, are largely the responsibility of middle managers and the
employees that report to them.
Managers may choose to set some plans, such as work schedules, themselves.
On the other hand, individual tasks that make up a sales plan may require the
input of the entire team. This stage should also include setting goals and targets
that individual employees should hit during a set period.
Step 4: Execute Plans
It is now time to put plans into action. Theoretically, activities carried out on a
day-to-day basis (defined by the operational plan) should help reach tactical
goals, which in turn supports the overall strategic plan.
Step 5: Monitor Progress and Adjust Plans
No plan is complete without periods of reflection and adjustment. At the end
of each quarter or the short-term goal period, middle managers should review
whether or not they hit the benchmarks established in step two the submit
data-backed reports to top-level managers.
REFERENCES
Electronic Sources
Business Management: 4 Types of Planning (2017, July 7) retrieved from
https://online.alvernia.edu/articles/types-of-planning/
Organizational Planning Guide: Types of Plans, Steps, and Examples
(2020, April 27) retrieved from
1. Develop
Strategic Plan
2. Translate
into Tactical
Plans
3. Create
Operational
Plans
4. Execute
Plans
5. Monitor
Progress and
Adjust

33
https://pingboard.com/blog/organizational-planning-guide-types-of-
plans-steps-and-examples/?rel=author
Planning - Nature, Elements, Process, Approach, Importance retrieved
from https://bbamantra.com/planning-elements-process-approach/#
Planning Tools, retrieved from
https://courses.lumenlearning.com/boundless-
management/chapter/planning-tools/
The Planning Process, Overviews of Inputs to Strategic Planning retrieved
from https://courses.lumenlearning.com/boundless-
management/chapter/the-planning-process
Three Levels of Organizational Planning. (2016, February 17). Retrieved
from https://study.com/academy/lesson/three-levels-of-organizational-
planning.html.
"Types and levels of planning in organizations." IvyPanda, 6 May 2019,
ivypanda.com/essays/types-and-levels-of-planning-in-organizations/.
Accessed 27 July 2020.
What is Planning and its Nature, Importance, and Types retrieved from
https://www.iedunote.com/planning-nature-importance-types

34
Directions. Consider that you aim to be in the honor list this semester. Using the
five process steps of organizational planning, strategize a plan for this personal
goal. List the things you plan to do on the space provided per given step.
“BE AN HONOR STUDENT THIS SEMESTER”
Directions. Now, the plans you made above may result with either: (a) Yes, you did
become an honor student or (b) No, you did not achieve your personal goal.
Formulate a contingency plan just in case you did not become an honor student
and is still planning to achieve your personal goal the next semester.
“MY PLAN B”
Develop a Strategic Plan
Step 1
•
•
•
Translate into Tactical Plans
Step 2
•
•
•
Create Operational Plans
Step 3
•
•
•
Activity 1: Road to Success Activity 2: Plan B

35
The previous lesson discussed planning, and once the plan has been made, the
management can proceed to organizing.
Being the next vital duty, organizing involves assigning tasks, grouping tasks into
departments, delegating authority, and allocating resources across the
organization. During the organizing process, managers coordinate employees,
resources, policies, and procedures to facilitate the goals identified in the plan.
That is why it is considered highly complex since it involves systematic review of
human resources, finances available, and priorities.
Before any plan can be implemented, managers ought to organize the assets of the
business to execute the plan efficiently and effectively. Since many of the assets
are the organization’s ‘employees’, understanding specialization and the division
of work is the key to this effort just like the emphasis of Henry Fayol on the classical
theories of management.
The nature of organizing are as follows:
1. Division of Work
Considered as the basis of the organization for there can
be no organization without division of work. Under
division of work the entire business is divided into many
departments. The work of every department is further
subdivided into sub-works. In this way, each individual has to do the same
work repeatedly which gradually makes that person an expert.
2. Coordination
Though the tasks are assigned to different persons and
every task differs from one to another, the aim of all
these persons is one: and that is to attain the objectives
of the organization. Organization ensures that the work
of all the person depends on each other’s work even
though it happens to be different. The work of one person starts from
where the work of another person ends. The non-completion of the work
of one person affects the work of everybody. Therefore, everybody
completes his work in time and does not hinder the work of others.
Establishing coordination among different works and departments is a
nature of an organization.
3. Plurality of Persons
Organization is a group of people who assemble to
fulfill a common purpose. A single individual cannot
create an organization.
4. Common Objectives
There are various parts of an organization with different functions to
perform but all move in the direction of achieving a general objective.
6.1 Organizing and its Nature
• Understand and discuss the fundamentals of organizing function in business organizations,
• Analyze the nature of organizations, and
• Evaluate the types of organization structures and how it differs from one another.
CHAPTER 6. ORGANIZING
1
st
QUARTER
MODULE
6
WEEK
_____ KEY QUESTIONS
• What do you think is the main
feature of organizing?
• How does the structure of an
organization affect its success
as a whole?

36
5. Well-defined Authority and Responsibility
As the tasks are now assigned to every post, each will
now be aware of the specified authority and
responsibility it holds. Every individual working in the
organization is given some authority for the efficient
work performance and it is also decided simultaneously as to what will be
the responsibility of that individual in case of unsatisfactory work
performance.
6. Organizing is a Structure of Relationship
Relationship between persons on different posts in the
organization is decided. It is decided who will be the
superior and somebody’s subordinate. The person
working on the top-level post has no superior and the
person working on the lower level post has no
subordinate.
7. Organizing is a Machine of Management
Organizing is considered as a machine of management
because the efficiency of all the functions depends on
an effective organization. In the absence of organizing,
no function can be performed in a planned manner. If
the division of work is not done properly or posts are
not created correctly, the whole system of
management collapses.
8. Organizing is a Universal and Dynamic Process
Organizing is needed both in business and non-business
organizations. Not only this, organizing will be needed
where two or more than two people work jointly.
Therefore, it has the quality if universality. It is a dynamic
process because it is related to people and the
knowledge and experience of the people undergo a change. The impact of
this change affects the various functions of the organization. Thus,
organizing is not a process that can be decided for all times to come but it
undergoes changes according to needs.
Organizations are set up in a specific and special way to accomplish different goals,
and its structure can either help or hinder its progress toward accomplishing these
goals.
An organization’s structure is typically represented by an organization chart (often
called simply as ‘org chart’); a diagram showing the interrelationships of its
positions. This chart highlights the chain of command, or the authority
relationships among people working at different levels. It also shows the number
of layers between the top and lowest managerial levels. Organizational structure
also dictates the span of control or the number of subordinates a supervisor has.
An organization with few layers has a wide span of control, with each manager
overseeing a large number of subordinates, with a narrow span of control, only a
limited number of subordinates report to each manager. The structure of an
organization determines how the organization will operate and perform.
6.2 Organization Structures
Matrix
Structure
Divisional
Structure
Functional
Structure

37
Functional Structure
Functional Structure is set up so that each portion of the organization is grouped
according to its purpose or by areas of specialty (such as IT, finance, operations,
and marketing). These functional areas are sometimes referred to as ‘silos’─
entities that are vertical and disconnected from one another.
Functional departments are said to offer greater operational efficiency because
employees with shared skills and knowledge are grouped together according to the
work they do. Each group of specialists can therefore operate independently, with
management acting as the point of cross-communication between functional
areas. Sometimes this causes the drawback of a functional structure, coordination
and communication between departments can be restricted by the organizational
boundaries of having the various departments working separately.
Example of a Functional Structure Organization Chart
Divisional Structure
This is common among large companies with many business units. With this
structure, each organizational function has its own division. Each division can
correspond to products or geographies of the organization. Each contains all the
necessary resources and functions within it to support that particular product line
or geography.
Product and geographic divisional structures may be characterized as follows:
• Product Departmentalization – a divisional structure organized by a
product departmentalization means that various activities related to the
product or service are under the authority of one manager. A good
example of this Johnson & Johnson. With lots of product and lines of
business, the company structures itself, so each business unit operates as
its own company with its own president.
• Geographic Departmentalization – geographic departmentalization
involves grouping activities based on geography, such as an Asia/Pacific or
Latin American division. Geographic departmentalization is particularly
important if tastes and brand responses differ across regions, as it allows
flexibility in product offerings and marketing strategies (an approach
known as localization).
Example of Divisional Structure Organization Chart
President
R&D Finance Manufacturing Marketing
President
Division 1
(Electronics)
Manufacturing
Finance
Marketing
Division 2
(Biotechnology)
Manufacturing
Finance
Marketing
Division 3
(Consumer
Products)
Manufacturing
Finance
Marketing

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