The document discusses the key factors of the business environment and their impact on businesses. It defines business environment as the aggregate of all conditions, events and influences that surround and affect a business. It notes that while businesses have control over internal operations, external environmental conditions like economic, political, social, technological and competitive factors are generally beyond their control but still influence how they operate. It provides examples of how each factor, such as interest rates, new regulations, consumer trends and new competitors, can present challenges or opportunities for businesses.

1. Philippine Business
Environment
ACTIVITY 2
NINA MAUREEN PANIS
OCTOBER 24, 2020

2. Describe the meaning and
definition of business
environment and its role in
business.

3. “BUSINESS”
• Business is a human activity carried
out by the unified efforts of
different categories of people, to
produce the wealth through
production and distribution of the
goods and services.
• According to Malvin Anshen : “
Business is the way by which men
make their living.”
• According to Bayard O’Wheeler : “
Business is an institution organized
and operated to provide goods and
services to society under the
incentive of private gain.”
“ENVIRONMENT”
• The birth, growth and continuous
development of organization are
influenced by a wide range of
variables like employees,
customers, suppliers, producers,
competition etc.

4. “BUSINESS ENVIRONMENT”
• It refers to those aspects of the surroundings of business
enterprise, which affect or influence its operations and
determine its effectiveness.
• According to Keith Davis: “Business environment is the aggregate
of all conditions, events and influence that surrounds and affects
it.”
• Business Environment is the most important aspect of any
business. The forces which constitute the business environment
are its suppliers, competitors, media, government, customers,
economic conditions, investors and multiple other institutions
working externally.

5. “ROLES OF BUSINESS ENVIRONMENT”
• Knowledge of Information
Every businessman should be aware about the current environment of
the business to change accordingly.
• Basis of Decision
It contains all the information which is needed for taking good decision.
e.g. If a business knows about its competitors, suppliers and customers
they take decision about price, purchase, salary etc. Helpful in making
of policies: For making good business policies one needs to know and
scan business through business environment.

6. • Technological Planning
In today's environment it is really important for the business houses to
keep themselves changing according to the technological changes in
the market.
• Survive in the business
Sometimes industry may face recession. In such condition only those
business will survive who estimate this entire situation in advance
through business environment study.

7. Describe the features of
globalization
and its process.

8. “GLOBALIZATION IN BUSINESS”
• Globalization refers to the changes in the world where we are moving
away from self-contained countries and toward a more integrated
world. Globalization of business is the change in a business from a
company associated with a single country to one that operates in
multiple countries.
• Globalization is a shift toward a more integrated world economy in
which culture, ideas, and beliefs are exchanged in addition to goods,
services, and resources.

9. “FEATURES OF GLOBALIZATION
& ITS PROCESS”
1. Liberalization:
It stands for the freedom of the entrepreneurs to establish any industry or
trade or business venture, within their own countries or abroad.
2. Free trade:
It stands for free flow of trade relations among all the nations. It stands for
keeping business and trade away from excessive and rigid regulatory and
protective rules and regulations.
3. Globalization of Economic Activity:
Economic activities are be governed both by the domestic markets and also
the world market. It stands for the process of integrating the domestic
economies with the world economy.

10. 4. Liberalization of Import-Export System:
It stands for liberalization of the import-export activity involving a free
flow of goods and services across borders.
5. Privatization:
Globalization stands for keeping the state away from ownership of
means of production and distribution and letting the free flow of
industrial, trade and economic activity among the people and their
corporations.
6. Increased Collaborations:
Encouraging the process of collaborations among the entrepreneurs
with a view to secure rapid modernization, development and
technological advancement, is a feature of Globalization.

11. 7. Economic Reforms:
Encouraging fiscal and financial reforms with a view to give strength to
free trade, free enterprise and market forces of the world.
Globalization stands for integration and democratization of the world’s
culture, economy and infrastructure through global investments.

12. “Business Environment
is a set of conditions of
social, legal, economical,
political or institutional
that is uncontrollable in
nature and affects the
functioning of
organization.”
Why? Explain.

13. “Businesses do not operate in a vacuum
but rather in a dynamic environment that
has a direct influence on how they
operate and whether they will achieve
their objectives. This external business
environment is composed of numerous
outside organizations and forces that we
can group into seven key sub
environments, such as : economic,
political and legal, demographic, social,
competitive, global, and technological.
Each of these sectors creates a unique set
of challenges and opportunities for
businesses.”
https://opentextbc.ca/businessopenstax/chapter/understanding-
the-business-environment/

14. • Business owners and managers have a great deal of control over the
internal environment of business, which covers day-to-day decisions.
• They choose the supplies they purchase, which employees they hire, the
products they sell, and where they sell those products. They use their skills
and resources to create goods and services that will satisfy existing and
prospective customers.
• However, the external environmental conditions that affect a business are
generally beyond the control of management and change constantly. To
compete successfully, business owners and managers must continuously
study the environment and adapt their businesses accordingly.
https://opentextbc.ca/businessopenstax/chapter/understanding-the-
business-environment/

15. ECONOMIC INFLUENCES
This category is one of the most important external influences on businesses.
Economic factors are all concerned with the so called ‘levers’ of the
economy. These include:
• Economic Growth
If there is economic growth then more jobs will be created and more tax will
be paid.
• Interest Rates
When interest rates are high, businesses borrow less and invest less.
However they receive more interest on money saved in the bank. When
interest rates are low, businesses may borrow and invest more, but will
receive less interest on money in the bank.

16. • Unemployment
If unemployment is high, then firms have more potential workers to choose from.
More competition for jobs means that it is easier for a business to keep wages
down. If the rate of unemployment is low then businesses will have to offer higher
competitive wages to secure new employees.
• Inflation
When inflation is high, prices rise and customers may stop buying luxury goods
and focus on essentials.
• Exchange rates
Exchange rates can rise or fall. When there is a fall in the pound it has both
positive and negative impacts on businesses. When the exchange rate for the
pound falls it becomes weak. A weak pound makes our goods cheaper to sell
abroad. However if UK firms need to buy in raw materials from abroad then the
weak pound buys less, making the cost of production higher. This extra cost may
be passed on to the customers, resulting in higher

17. • High inflation can have an impact on
businesses that import or export goods
and services. For example, if PH has
higher inflation rates than its trading
partners, PH businesses will become
uncompetitive. As result they are likely
to lose sales and shares in overseas
markets. Also, PH businesses facing
competition from overseas will lose out
because imports become relatively
cheaper. For example, consumers in the
PH may buy foreign goods instead of PH
goods because their prices are rising
less quickly than those in the PH.

18. • Consumers react to inflation as well as businesses. Prolonged
inflation tends to lead to more saving. Inflation unsettles consumers.
They become less willing to borrow money, not knowing what will
happen in the future. The value of savings tends to fall as inflation
erodes their real value. So people react by saving more to make up
savings to their previous real value. “Increased saving means less
spending and so businesses will sell less.” If inflation is very high,
consumers will adopt different spending patterns which may affect
businesses.
https://www.pearsonschoolsandfecolleges.co.uk/secondary/BusinessAndEconomics/16plus/EdexcelAlevelBusi
ness2015/Samples/AS-and-A-level-Business-sample-Units/Sample-Unit-41-Economic-influences.pdf

19. POLITICAL AND LEGAL INFLUENCES
• The political climate of a country is another critical factor for managers to
consider in day-to-day business operations. The amount of government
activity (tax), the types of laws it passes, and the general political
stability of a government are three components of political climate.
• For example, a multinational company such as General Electric will
evaluate the political climate of a country before deciding to locate a plant
there. Is the government stable, or might a coup disrupt the country? How
restrictive are the regulations for foreign businesses, including foreign
ownership of business property and taxation? Import tariffs, quotas, and
export restrictions also must be taken into account.

20. • Governments can raise or
lower corporation tax, which will impact
on profits. They can also affect businesses
by increasing value-added tax on products
or business rates.
• They can bring in new laws like
the National Minimum Wage, which
impacts on profits and employment rights.
Governments can also introduce new
health and safety legislation meaning that
a business has to change the way it works,
for example by training its staff.

21. SOCIAL FACTORS
Social factors—our attitudes, values, ethics, and lifestyles—influence what,
how, where, and when people purchase products or services. They are
difficult to predict, define, and measure because they can be very subjective.
They also change as people move through different life stages. People of all
ages have a broader range of interests, defying traditional consumer profiles.
They also experience a “poverty of time” and seek ways to gain more control
over their time.
• Demographics
Demographic change is most commonly used to reflect changes in
population such as birth rate, life expectancy and levels of immigration.
For example statistical evidence shows that the PH population is ageing.
This demographic information is useful for firms who provide products
and services for older people and is an indicator of the strength of the
“grey pound”.

22. • Lifestyles
Lifestyles are changing too. We are
more health-conscious so healthy foods
and habits are becoming more important to
customers. Food packaging lists
nutritional information. More electronic
products such as pedometers and
fitness trackers are being used.
• Tastes and trends
Tastes and trends are also changing
constantly. For example, loom bands
became the biggest selling toy of 2014 but
fell from popularity the following year.
Fidget spinners grew rapidly in popularity
over a matter of months in 2017.

23. •TECHNOLOGICAL FACTORS
Technological factors refers to the ways new practices and equipment
can affect businesses.
• ICT
ICT can make processes and communication within a business
quicker and more efficient. Firms also need to keep their
software and hardware up to date. If they don’t, they risk being
seen as old fashioned by customers and in danger of becoming
obsolete.

24. •Research and Development
Research and development (R & D) refers to the steps businesses
take in the innovation of new products, systems and services. In
recent years research and development has led to the
introduction of 3D printers, smart phones, tablets and a
multitude of apps.
Innovations can have a major impact on firms and sometimes
can destroy a traditional business. For example Kodak used to
produce and sell 80% of the world’s film for cameras. But the
invention of digital cameras has caused the market for camera
film to shrink dramatically.

25. • Automation
- Automation refers to the introduction of machines to do work
that was previously done by people.
- For example the introduction of self-scan checkouts in
supermarkets means that fewer employees are needed on the
tills. With driverless cars and deliveries by drone on the way,
businesses will need to think about how many people they
employ and which new jobs will be needed to support advances
in technology.
- For example, a growth area of the future is expected to be
nanotechnology – which will see devices, such as electronic
circuits, being built from single atoms and molecules.

26. •E-commerce
More and more firms are online. This widens the number of
customers and lowers the costs of production but it is highly
competitive.

27. ENVIRONMENTAL FACTORS
Environmental factors cover two main aspects:
The physical conditions that a business has to deal with, such as:
• Climate Change
• Weather
The green credentials of global business, including:
• Recycling
• Pollution

28. PHYSICAL
CONDITIONS
GREEN
CREDENTIALS
• The weather can have a major impact on
a firm’s sales. Many products and
services are seasonal and good summers
mean the increase in sales of fizzy drinks
and sun tan lotion.
• Major natural disasters can have
devastating impact on companies. The
car firm Toyota was badly affected by the
tsunami that struck Japan in March 2011.
This, along with the nuclear crisis at
Fukushima, caused massive disruption to
supplies and production. Toyota and
many other leading Japanese firms will
be dealing with the effects for many
years to come.
• Being a ‘green’ firm is also important. Firms
that recycle goods will attract customers who
want to buy from companies that are
environmentally friendly. Firms that work to
minimize their carbon footprint or to cut down
on pollution to rivers and the environment
may also be more attractive to customers who
are interested in the environment.
• Causing environmental damage may have a
negative impact on a business. In 2010, an
explosion on a drilling rig operated by the gas
and petroleum company BP resulted in 210
million gallons of oil being spilled into the Gulf
of Mexico. This caused extensive damage to
the Gulf’s wildlife and marine life and was
disastrous for BP’s public image.

29. COMPETITIVE FACTORS
Competitive factors cover how businesses who offer similar products or
services affect each other.
• IMITATORS
When a successful product is introduced,
rival organizations will often respond
by trying to undercut it by quickly
producing cheaper alternative
versions.

30. • PRICE WARS
Companies may start a price war in order to gain customers and
increase market.
A price war happens when companies compete for customers by
dropping their prices below the rate of their competitors. A price war
can be good for customers as they can get the goods and services they
want at lower prices.
In a price war, prices can drop so low that none of the competing
companies can make much of a profit on the goods.

31. • PRODUCT DIFFERENTIATION
Businesses can become more competitive
by making products that stand out from the
competition in terms of price, quality or
service. This is called product
differentiation. Methods of creating product
differentiation include:
Establishing a strong brand image
(personality) for a good or service.
Making the unique selling point of a good or
service clear. For example, opening a chain
of discount shops with the tagline 'Quality
items under a pound'.
Other competitive factors, such as a product
having a better location, design, appearance
or price than rivals.

32. The end.