UNIT 2 OUTLINE AND TOPICS

Organization

A group of people working together to accomplish some specific purpose/goals. It is a social

system that is formed to execute well desired goals; they have a proper arrangement to facilitate
efficient internal harmonization and to be able to act in response to the external environment.

Organization as a system Organizational system -‐ consists of an assortment of interacting

mechanism (resources/people) that acquires inputs (goals) from the outside environments,
processes them (structure and processes) and creates an output (Product/services) to be consumed
back by the outside environment (customers).

Business environment - The combination of both external and internal factors that affect a firm’s
operating condition. The business environment can comprise factors such as: suppliers and clients;
its competitors and owners; development in technology; legal, laws and government activities; and
market, economic and social trends.

Internal Environment/Microenvironment

It includes forces affecting operations that are within the control of the company, that is, the
company is able to manipulate these forces towards the firm’s advantage. The internal environment
consists of five (5) equally powerful forces, namely, Management, Marketing, Finance, Production
and Operations, and Human Resources. The situations, factors, events and entities in the business
entity that affects its choices and actions mainly the behavior of the employees.

Factors that are repeatedly considered part of the internal environment incorporate the firm's
leadership styles, mission and vision statement, and its organizational culture. 1.Management-‐ This
pertains to the organizational setup, including goals and objectives, organizational structure,
managerial composition, company philosophy, visions, missions, policies, programs, plans, strategies
and tactics, etc.
Marketing-‐ This includes the marketing program of the company covering the basic marketing mix-‐
product, price, place and promotion. Specific items falling under this force are product quality,
packaging, pricing, strategies, intermediaries used, advertising efforts, public relations, company
image and reputation, distribution channels, “green marketing campaigns”, warehousing, discounts
and other sales promotion tools, market segmentation, and a lot more

Finance-‐ this includes the company’s resources. Items covered under this force are profitability
indices, financial performance, balance sheet and income statement results, and operating
expenses, among others

Production and Operations-‐ This includes all aspects of manufacturing (pertaining to industries) or
operations (for commercial and service enterprises). Specific items falling under this force are quality
and sources of raw materials, machinery and equipment, production efficiency, service reliability,
technical expertise, production credo, scheduling, delivery, sales service, maintenance, factory
location, etc.

Human Resources-‐ This aspect pertains to the people in the organization. Specifically, it includes
motivation, compensation, training and development, promotion, recruitment, selection, placement,
hiring policies and procedures, fringe benefits, performance appraisal, grievance handling
mechanisms, management -‐labor relations, etc.

External environment/Macro-‐environment

It contains of the forces that are away from a company’s control. The macro-‐environment
includes the economic, the socio cultural, the political and legal, the technological, and the natural
environment. This affects entities, events, condition, and factors surrounding an organization that
influence its choices and actions, and find out its opportunities and risks. It is also called operating
environment.

Economic Environment-‐ This environment includes such forces as balance of trade, balance of
payments, foreign exchange, import‐export situations, competitive situation, taxation, energy and oil
prices, employment, GNP, GDP, per capita income, and other measures of economic performance.

Socio Cultural environment-‐ This environment pertains to people and their culture. Examples of
forces under this type of external environment are education, customs and traditions, religious
affiliations, perception, cultural values, demography, ethnic and racial diversity, etc.
Politico Legal environment-‐ Politico pertains to government while legal pertains to law. This
environment includes legislation regulating business, legal restrictions, elections, political stability,
presidency, peace and order situation, armed forces, etc.

Technological environment-‐ This refers to the advancement of science and technology and includes
new inventions or discoveries, technological breakthroughs, research and development, information
technology, scientific experiments, etc.

Natural environment-‐This includes typhoons, earthquakes, the El Niῇo and La Niňa phenomena,
pollution, ozone depletion, deforestation, preservation and extinction of animal species. It is
important for a company to carefully evaluate and understand the aspect of both its internal and
external environments because it can affect their firm and how it should be run.

Business Organization according to its forms

These are the basic forms of business ownership:

Sole Proprietorship – it is a business owned by only a single person. It is easy to set-‐ up and is the
least expensive among all forms of ownership. The owner of the business faces unlimited liability;
meaning, the creditors of the business may run after up to the personal assets of the business owner
if the business cannot pay them. The sole proprietorship form is typically adopted by small business
organization.

Partnership - it is a business entity operated and owned by two or more persons who contribute
possessions into the firm. The partners divide among themselves the profits and loss of the business.
In general partnerships, all partners have limitless liability. In limited partnerships, creditors cannot
run after to the personal assets of the limited partners.

Corporation – it is a business entity that has a separate legal personality from its owners. Ownership
in a stock corporation is represented by shares of stock. The owners (stockholders) benefit from
limited liability but have limited involvement in the company's operations. The board of directors, an
elected group from the stockholders, controls the activities of the corporation.

Cooperative – it is a business organization owned and operated by a group of individuals and is

created for their mutual support and benefit. The persons making up the group are called members.
Cooperatives may be incorporated or unincorporated.

Some examples of cooperatives are: water and electricity (utility) cooperatives, cooperative banking,
credit unions, and housing cooperatives.

SWOT Analysis
 SWOT analysis matrix is a structured assessment tool used to evaluate an organization, industry,
a place or even a person in terms of a set of priorities like strengths, weaknesses, opportunities and
threats. (Albert Humphrey 1960).

SWOT is a basic, analytical framework that determines what a firm can and cannot do, as well
as its potential opportunities and threats. A SWOT analysis takes information from an environmental
analysis and separates it into internal factors such as strengths and weaknesses, as well as its
external factors such as opportunities and threats.

Strengths and Weaknesses (Internal environment)

Strengths – Is something that a company is good at doing, features that organizations possess. It
identifies what an organization excels at, allowing decisions on how to achieve a competitive and
significant advantage.

Weaknesses-‐ Are characteristics that a company lacks and put the firms at a disadvantage relative
to other business entities. It stops a business entity from performing at its best level. They have the
potential to reduce progress or to give a competitive advantage to the competitor. A business firm
needs to lessen weaknesses and analyze how they can be enhanced.

Opportunities and Threats (External Environment)

Opportunities – Are possibilities in the external environment that the organizations can utilize to
their advantage. It refers to favorable external factors that a company can use to its benefit. If
successfully utilized, opportunities have the potential to create a competitive advantage.

Threats-‐Are challenges in the external environment that can cause an eminent problems to a
business firms. It refers to aspects that have the potential disadvantage impact to an organization