OBJECTIVE:

IDENTIFY VARIOUS FORCES/ ELEMENT

OF THE FIRM’S ENVIRONMENT.
 EXHIBIT HM–4

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– the sum of all the elements and
forces present in its immediate and
remote surroundings which have a
potential impact on its ability to
achieve its objectives.
 Internally, an organization can be
viewed as a resource conversion machine
that takes inputs (labor, money, materials
and equipment) from the external
environment (i.e., the outside world),
converts them into useful products, goods,
and services, and makes them available to
customers as outputs.
nment. It consists of all the outside institutions and forces that have an actual or potential interest or impact on the organization's ability to achieve

 The second level of the management system

involves the organization's external
environment. It consists of all the outside
institutions and forces that have an actual or
potential interest or impact on the
organization's ability to achieve its
objectives: competitive, economic,
technological, political, legal, demographic,
cultural, and ecosystem.
 PEST analysis stands for "Political, Economic, Social, and
Technological analysis“

 Framework of macro-environmental factors used in the

environmental scanning component of strategic
management.

 Some analysts added Legal and rearranged the mnemonic to

SLEPT, inserting Environmental factors expanded it to
PESTEL or PESTLE, which is popular in the UK.

10/25/22 9
The model has recently been further extended to
STEEPLE and STEEPLED, adding education and
demographic factors.

It is a part of the external analysis when conducting a

strategic analysis or doing market research, and gives
an overview of the different macro environmental
factors that the company has to take into
consideration.

It is a useful strategic tool for understanding market

growth or decline, business position, potential and
direction for operations.
 It has decided to venture
into the market of
cosmetics with the launch
Globus Inc. of a new brand of
is a leading cosmetics ‘Glaze’ in the
manufacturer market.
of baby
products.

However, before Globus can actually

make the final decision of venturing
into a new market, it needs to find
out the things that are working in its
favor and the aspects that can lead to
the failure of its new venture.
 It has decided to venture
into the market of
cosmetics with the launch
Globus Inc. of a new brand of
is a leading cosmetics ‘Glaze’ in the
manufacturer What do yo
u think Glob market.
of baby should do to us
products. analyze this
situation?

However, before Globus can actually

make the final decision of venturing
into a new market, it needs to find
out the things that are working in its
favor and the aspects that can lead to
the failure of its new venture.
 Carrying out a SWOT
Analysis will help Globus
understand the company’s
Globus can do strengths, weaknesses,
a SWOT opportunities and threats.
Analysis of its
position in the
market.

SWOT Analysis would help Globus

understand its strengths that would be
helpful in the new venture, its
weaknesses that need to be overcome
to be successful in launching the new
products, the opportunities that it has
at hand to succeed in the new venture
and the threats that it perceives to the
success in the new venture.
 Introduction

Carrying out a SWOT

Analysis will help Globus
Hence, you can see that an
Globus canSdo
organizationaunderstand
l the company’s
WOT Analysis can be a ver strengths, weaknesses,
a SWOT y u se fu l tool foropportunities
a
company’s development to and threats.
Analysis of its succeed in any
position in the venture.
market.

SWOT Analysis would help Globus

understand its strengths that would be
helpful in the new venture, its
a n iz a t io nal
weaknesses that need
s lo ok a t org
to be overcome
il.
tu
Lesuccessful
to be in launching
s is i n d e
the tanew
W
products, O
theT A naly
opportunities that it has
S
at hand to succeed in the new venture
and the threats that it perceives to the
success in the new venture.
 What is SWOT Analysis?
SWOT Analysis is a technique founded by Albert Humphrey who led a
research project at Stanford University in the 1960s and 1970s.

The acronym ‘SWOT’ stands for:

 SWOT Analysis

S W O T

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 What is SWOT Analysis?

Acronym for Strengths,

Strengths Weaknesses, Opportunities,
and Threats.
Technique is credited to
Albert Humphrey who led a
research project at Stanford
University in the 1960s and
1970s. tool used to
Planning

Oppurtunity
SWOT Weaknes
understand Strengths,
Weaknesses, Opportunities, &

Analysis s Threats involved in a project /

business.
Used as framework for
organizing and using data
and information gained from
situation analysis of internal
and external environment.
Technique that enables a
Threats group / individual to move from
everyday problems / traditional
strategies to a fresh
perspective.

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Strengths

S W Strengths are:
•Characteristics of the business or team that
give it an advantage over others in the
O T industry.
•Positive, tangible and intangible attributes,
internal to an organization.
•Beneficial aspects of the organization or
the capabilities of an organization, which
includes human competencies, process
capabilities, financial resources, products
and services, customer goodwill and brand
loyalty.
What is SWOT Analysis?

WEAKNESSES

Characteristics that place the firm at a

disadvantage relative to others.

Detract the organization from its

ability to attain the core goal and
influence its growth.
Weaknesses are the factors which
do not meet the standards we feel
they should meet. However,
weaknesses are controllable. They
must be minimized and eliminated.

Examples - Limited financial

resources, Weak spending on R & D,
Very narrow product line, Limited
distribution, Higher costs, Out-of-date
products / technology, Weak market
image, Poor marketing skills, Limited
management skills, Under-trained
employees.

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What is SWOT Analysis?

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

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SWOT What is SWOT
ANALYSIS Analysis?
- THREAT

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

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Aim of SWOT Analysis?

HARMFUL
L
HELPFU To help decision makers share and
compare ideas.

To bring a clearer common purpose

and understanding of factors for
success.

S W To organize the important factors

linked to success and failure in the
business world.

To analyze issues that have led

to failure in the past.

O T To provide linearity to the

decision making process
allowing complex ideas to be
presented systematically.

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Who needs SWOT Analysis?
SWOT Analysis is also
required for / during...
Changing Jobs
Product Launch

Decision
Making

Personal Development
Planning
Competitor
Evaluation
Product
Evaluation
Strategic
Planning Brainstorming
Workshop Meetings
Sessions

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 Tip
Matching and converting is one way of utilizing SWOT.

‘Matching’ is used to find

competitive advantages by
matching the strengths to ‘Converting’ is to apply
opportunities. conversion strategies to
convert weaknesses or
threats into strengths or
opportunities.
Finding new markets is an
example of a conversion
strategy.
Moreover, if the threats or
weaknesses cannot be
converted, then an
organization should try to
minimize or avoid them.
 Steps of SWOT Analysis

Perform SWOT Analysis & Document:

This step includes the following:
Analyze Internal &
External Environment 1.Establish the objectives
2.Select contributors
Perform SWOT Analysis 3.Allocate research & information gathering
& Document tasks
4.Create a workshop environment

Prepare Action Plans 5.List SWOT Analysis

6.Evaluate listed ideas against Objectives
7.Carry your findings forward
Let us look at each in detail.
Effective SWOT Analysis

Searching Extensively for Competitors:

• It is critical for conducting an effective SWOT Analysis
that you do not overlook any competitor, both current as
well as future competitors.
• You should consider all competitors including the
following:
o Product competitors
o Generic competitors
o Total budget competitors
Tips & Exercise
EXAMPLE

Mc Donald’s SWOT Analysis

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Tips & Exercise
Mc Donald’s
SWOT Analysis INTERNAL

STRENGTHS WEAKNESSES

• Ranks very high on the Fortune Magazine's • Failing pizza test market thus limiting the
most admired list ability to compete with pizza providers.
• Community oriented • High training costs due to high turnover.
• Global operations all over the world • Minimal concentration on organic foods.
• Cultural diversity in the foods • Not much variation in seasonal products .
• Excellent location • Quality concerns due to franchised operations.
• Assembly line operations. • Focus on burgers / fried foods not on healthier
• Use of top quality products options for their customers.

OPPORTUNITIES THREATS
• Opening more joint ventures. • Marketing strategies that entice people from
• Being more responsive to healthier options. small children to adults.
• Advertising wifi services in the branches. • Lawsuits for offering unhealthy foods.
• Expanding on the advertising on being • Contamination risks that include the threat of
more socially responsible e-coli containments.
• Expansions of business into newly developed • The vast amount of fast food restaurants that

parts of the world. are open as competition.

• Open products up to • Focus on healthier dieting by consumers.
allergen free options • Down turn in economy affecting the ability to
such as peanut free. EXTERNAL
eat
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that much.
 OBJECTIVE:
Describe the local and
international business
environment of a firm
What is the role of business in
the environment, and how the
environment affects the firm
 Business is hugely important in a country’s
economy because it is the main economic
engine for the country.
 Businesses are a very important part of the
circular flow of any market economy.  They buy
resources from households in the resource
market and sell to households in the product
market.  This makes them indispensable to the
economy.
Businesses also allow the economy to work
more efficiently. 
When businesses compete with one
another, they improve their efficiency and
help the economy grow. 
They also help the economy growth through
innovations of various sorts.  No market
economy can thrive without businesses
 Domestic business: a business that
acquires all its resources and sells its
products or services within a single
country.

 International business: a business

that is primarily based in a single
country but acquires some
meaningful share of its resources or
revenues (or both) from other
countries.

33
 Multinational business: one that has a
worldwide marketplace from which it
buys raw materials, borrows money,
and manufactures its products and to
which it subsequently sells its products.

 Global business: a business that

transcend national boundaries and is
not committed to a single home
country.

34
 Exporting: making a product in the firm’s domestic
marketplace and selling it in another country.
 Importing: bringing a good, service, or capital into the
home country from abroad.
 Licensing: an arrangement whereby a firm allows
another company to use its brand name, trademark,
technology, patent, copyright, or other assets in
exchange for a royalty based on sales.

35
 Strategic alliance: a cooperative
arrangement between two or more
firms for mutual gain.

 Joint venture: a special type of

strategic alliance in which the partners
share ownership of a new enterprise.

36
 Direct investment: when a firm headquartered
in one country builds or purchases operating
facilities or subsidiaries in a foreign country.

37
1. What is the role of the firm’s
environment in the life of the
student?
2. What contributions student
may extend to help our
environment healthy?
Describes the following business:
1. Domestic business
2 Multinational business
3. Global business

Rubrics:
Content 5
Org. 5
Relevance 5
15
What are the legal forms of
business
 Government stability is important to
managers seeking international
opportunities. No business wants to set up
shop in a foreign market only to see its
investment disappear in the face of
government nationalization or civil unrest.

41
 Government stability is important to
managers seeking international
opportunities.
 No business wants to set up shop in a foreign
market only to see its investment disappear
in the face of government nationalization or
civil unrest.

43
 The definition of economic development
given by Michael Todaro
 is an increase in living standards,
improvement in self-esteem needs and
freedom from oppression as well as a greater
choice. 
 The most accurate method of measuring
development is theHuman Development Index
 which takes into account the literacy rates &
life expectancy which affect productivity and
could lead to Economic Growth.
 It also leads to the creation of more
opportunities in the sectors of education,
healthcare, employment and the conservation
of the environment.It implies an increase in
the per capita income of every citizen.
SingleProprietorship
Partnership
Corporation
Cooperatives
Differentiate the legal forms of
business
A sole proprietorship is owned and run
by one individual who receives all
profits and has unlimited responsibility
for all losses and debts.
/
  Filing taxes as a sole proprietorship is
relatively easier than that of a corporation.
 Sole proprietorships typically require less 
capital to set up and have easier payroll
requirements.
 Sole proprietorships are not as heavily
regulated as other forms of organizations.

 The owner of a sole proprietorship is solely liable
for all debts and actions of the company.
 All personal wealth is linked to the business.
 Financial statements are not required in a sole
proprietorship as are typically required of
a corporation, meaning a lack of financial control is
very probable.
 It is difficult to find outside investors to fund sole
proprietorships, meaning growth potential is very
limited beyond a certain point.
 A partnership, of which various forms exist, is an
arrangement where parties agree to cooperate
to advance their mutual interests.
The three typical classifications of for
profit partnerships are:
 general partnerships,
 limited partnerships, and 
 limited liability partnerships.
 A general partnership exists when partners divide responsibility
for management and liability as well as the shares of profit
or loss according to their internal agreement.
 A limited partnership is a form of partnership similar to a
general partnership, except that in addition to one or more
general partners (GPs), there are one or more limited
partners (LPs). General Partners carry more liability, and in
cases of financial loss, the GPs will be liable.
 A limited liability partnership (LLP) is a partnership in which
some or all partners (depending on the jurisdiction) have
limited liability. In an LLP, one partner is not responsible or liable
for another partner's misconduct or negligence.
 Partnerships are relatively easy to establish.
 With more than one owner, the ability to raise funds may
be increased.
 The profits from the business flow directly through to the
partners' personal tax returns.
 The most obvious advantages to a partnership are the
ease in which they may be established, the combination of
a wider pool of skills and knowledge, and the increased
ability to raise more funds with more partners.partner.
 The business usually will benefit from partners who have
complementary skills.
 As an artificial being created by operation of
law.
 As artificial being, its powers, attributes and
properties are limited to those expressly
authorized by law or incident to its existence.
 Has separate juridical personality
 Is an association of persons who have
voluntarily joined together to achieve a
common end through the formation of a
democratically controlled organization,
making equitable contributions to the capital
required and accepting a fair share of the
risks and benefits for the understanding in
which the members actively participate.
 Thank You!

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