ORG & MAN

FORCES IN THE FIRM’S ENVIRONMENT

Political Forces – pertain to legal regulations, political orientations, government policies, and

compliance procedures of government bodies that affect or control the operations of a firm.

Economic Forces – Affect firms pertain to economic conditions relevant to the business.

Sociocultural Forces – Are people’s characteristics and lifestyles that having effect on the operations of a firm. They pertain to social norms, customs, and values.

Technological Forces – involve the use of varied types of

electronic gadgets and advanced technology.

 Natural Risks 

• Can affect the firm’s environment 

• In the light of adverse impacts of climate change and global warming, business establishments need to assess their exposure to natural risks.

Benchmarking – The process of measuring or comparing one’s own products, services, and practices with those of the recognized industry leaders in order to identify the areas for improvement.

The specific business environment focuses on:

• Stakeholders – are parties likely to be affected by the activities of the organization, while customers are those who patronize the organization’s product and services.

• Suppliers - are those who ensure the organization’s continuous flow of needed and reasonably priced inputs or materials required for producing their goods and rendering their services.

• Pressure groups – are special-interest groups that try to exert influence on the organization’s decisions or actions.

• The organization’s investors or owners provide the company with the financial support it needs.

• Employees – are comprised of those who work for another or for an employer in exchange of salaries/wages or other considerations.

Environmental scanning – is the process of assessing the internal and external operating environment of a firm to analyze its strengths, weaknesses, opportunities, and threats (SWOT Analysis).

The elements of environmental scanning

1. External analysis – examine the opportunities and threats in the firm based on the different forces in the environment (PEST).

2. Internal Analysis – examines the strengths and weaknesses of the conditions inside the firm, such as skills and competencies of employees, capacities of resources, organizational culture, and team spirit.

THE LOCAL AND INTERNATIONAL BUSINESS ENVIRONMENT OF THE FIRM

Externality – A consequence of any economic activity which affects unrelated third parties.

Inflation – an increase in the prices of goods and a decrease in the purchasing value of money.

Quotas – restrictions in international trade by limiting the number of exports or imports in a country for a certain period.

Tariffs – taxes to be paid in a particular import or export transaction

Competitive advantage – pertains to better than rival organizations.

Managers are always confronted with:

1. Environmental uncertainty – pertains to the lack of complete information about the current and future environment of the firm.

2. Environmental complexity – is the presence of numerous factors prevailing in the environment that change over time.

Local business environment – pertains to the specific industry to which the company belongs and directly deals with. It comprises the customers, suppliers, competitors, regulators, and employees.

International business environment – pertains to the business activities performed by companies operating in foreign locations.

Understanding the Local Environment through an Industry Analysis

Industry – is a group of companies offering the same or similar products or services.

Porter’s Five Forces Model:

1. Industry competitors – This focuses on the rivalry between existing firm.

2. Suppliers (or producers) – This focus focuses on the bargaining

power of suppliers or producers.

3. Buyers (or consumers) – This focuses on the bargaining power

of buyers or consumers.

4. Potential entrants – This focuses on the threat of new

entrants.

5. Substitutes – This focuses on the threat of substitute products

or services.

Cultural intelligence – is an individual’s ability to favorably receive and adjust to an unfamiliar way of doing things.

The way people approach and deal with time varies across cultures

Monochronic cultures – refers to cultures wherein people tend to do one thing at a time; also, these cultures emphasize punctuality and sticking to set rules.

Polychronic cultures – are more flexible as regards time; accomplishing many different things at once is also common for these cultures.

Five cultural dimension

1. Power distance – the degree to which a society accepts or rejects the unequal distribution of power among people in organizations and the institutions of society.

2. Uncertainty avoidance – the degree to which society is uncomfortable with risk, change, and situational uncertainty.

3. Individualism-collectivism – the degree to which a society emphasizes individual accomplishment versus collective accomplishment.

4. Masculinity-Femininity – the degree to which a society values assertiveness and feelings of material success versus concern for relationships.

5. Time orientation – the degree to which a society emphasizes short-term thinking versus greater concern for the future or long-term thinking.

Filipino Family values and culture

• Values are the desired principles which guides individual’s characteristics and actions

• These are developed through interaction among family members and community

1. Bayanihan - 

   • A Filipino community spirit and cooperation wherein a group of individuals extends a helping hand without expecting any remuneration. 

   • It is characterized by communal work towards one goal exemplified in carrying a nipa house or pushing a passenger jeepney.

2. Damayan system 

   • sympathy for people who lost their loved ones. In case of death of a certain member of the community, the whole community sympathizes with the bereaved family. 

   • Neighbors, friends, and relatives of the deceased usually give a certain amount of money as their way of showing sympathy.

3. Familism or close family relations 

   • a Filipino trait of giving highest importance to family above other things. 

   • A trait wherein family members should be taken care of and supported regardless of whether he/she did something wrong, a family member must be given attention and should not be abandoned.

4. Fun-loving trait - a trait found in most Filipinos, a trait that makes them unique that even in time of calamities and other challenges in life, they always have something to be happy about, a reason to celebrate.

5. Hospitality - a Filipino trait of being receptive and generous to guests.

6. Compassionate -

   • a Filipino trait of being sympathetic to others even if the person is a stranger. 

   • An example of this is giving alms to beggar. This is observed when we hear Filipinos saying "kawawa naman or nakakaawa naman.

7. Regionalism - a Filipino trait of giving more priority or preference in giving favors to his province mate before others.

8. Friendly - a trait found in most Filipinos; they are sincere, loyal, kind and sociable people.

9. Flexible or magaling makibagay - the ability of Filipinos to ride on or adjust to the norms of other groups to attain smooth and harmonious relationships.

   • Example: OFW

10. Religious - most Filipinos possess strong conformance of their religious belief in action and in words.

11. Respect to elders - a Filipino trait of being courteous both in words and in actions to the people of older people.

12. Remedyo attitude - a Filipino trait of being creative and resourceful; the ability to do things that are next to impossible. 

13. Matiyaga - Filipinos are known for their tenacity and strong determination in every undertaking

14. Utang na loob - a feeling of obligation to repay someone who extended assistance to another which may take place in undetermined time and in whatever way.

Negative Filipino Values

1. Bahala na attitude - a Filipino trait characterized by retreating or withdrawal from certain undertakings and leaving everything to God to interfere and determine the outcome of his deeds.

2. Colonial complex or blue-seal mentality - a Filipino value of showing high admiration and preference to foreign produced goods over local ones.

3. Crab mentality - a Filipino attitude characterized by an attempt to "pull down" someone who has achieved success beyond the others. This is done out of jealousy and insecurity.

4. Euphemism - a FIlipino way of substituting a word or phrase that is thought to be offensive or harsh with a mild and acceptable one in order to not offend or hurt another

in order to not offend or hurt another person.

5. Filipino time - in reality, it means "always late", a Filipino attitude of impreciseness towards time.

6. Gaya-gaya attitude - a Filipino attitude of imitating or copying other culture specifically in mode of dressing, language, fashion or even haircut.

7. Jackpot mentality - a “get rich quick” mentality of some Filipinos who would rather engage in fast ways of acquiring money than through hard work and sacrifice by getting in lottery, joining raffle draws and other

8. Kapalaran values - a Filipino trait of accepting his fate by believing that everything is written in his palm. Such traits contribute to lack of initiative and perseverance among Filipinos 

9. Mañana habit - delaying or setting aside a certain task assigned on the next day

10. Ningas-cogon - being enthusiastic only during the start of new undertaking but ends dismally in accomplishing nothing. A common practice observed in some politicians who are visible only during the start of certain endeavor

11. Oversensitive -  Filipinos have the tendency to be irritated easily or hurt upon hearing some criticism or comment

12. Lack of sportsmanship - not accepting defeat in competitions but rather putting the blame either to their opponents or to the sport officials.

13. Pakikisama 

    • submitting oneself to the will of the group for the sake of camaraderie and unity.

    • Failure to comply with the group demand, the person will be called "walang pakikisama or selfish". 

    • The adherence to group demands have taught our young to engage in bad habits like smoking, alcoholism and even drug addiction.

14. Tsamba lang attitude - simplicity by declaring that his/her accomplishments are results of luck and not from perseverance and ability.

UNDERSTANDING THE INTERNATIONAL ENVIRONMENT THROUGH GLOBAL MOVEMENT

Global Management – refers to the management of business and organizations with operations in more than one country. 

Globalization – pertains to the growing interdependence among people around the world.

Ways to Compete in Local and International Business

Business today compete through four (4) main way

1. Competing by lower cost – involves efforts of a company to lower its production costs to enable it to offer a lower price relative to a competitor.

2. Competing by quality – means offering unique or more desirable features of a product or service.

3. Competing by speed or flexibility – involves faster delivery of the product or service or quickly responding to the needs of customers.

4. Competing by innovation – involves creating new products, new ways, or new features of the products in order to stay ahead of the competition.

How companies expand into international and global business:

1. Exporting and Importing

   • Exporting - involves selling locally made products in foreign countries.

   • Importing - involves buying foreign-made products and selling them in local markets.

2. Licensing and Franchising

   • Licensing – involves a company granting another firm the rights to make or sell the former’s products, for a fee.

   • Franchising - is a form of licensing whereby a company grants another firm the rights to use the former’s brand name and operating methods.

3. Joint ventures and Strategic Alliances

   • Joint ventures - involve pooling of resources among foreign and local coinvestors to operate the business.

   • Strategic Alliances – involve local and foreign firms working together in specific ways that benefit both parties, such as through exchange of knowledge or supply arrangements.

TYPES OF BUSINESS ORGANIZATION

Sole Proprietorship - 72% of business

Advantages of sole proprietorships

• Ease of start up

• Ease of Management

• You keep all profits 

• You do not have to pay any business taxes

• Psychological advantages

• Ease of exit

Economic Weakness of sole proprietorship:

• Unlimited Liability: you have total responsibility for all debts and liabilities of the company

• Difficulty in raising financial capital

• Limited size and efficiency

• Limited managerial experience

• Limited Life

Partnerships      

• General Partnership (most common type) - all partners are responsible for management and the financial responsibilities of the partnership. 

• Limited Partnership - at least one partner is not active in the day to day running of the business. They have limited liability. 

Articles of Partnership - contract between partners spelling out the rules of partnership.

• Dividing profit

• Dividing responsibility

• Admitting new partners

• Buying out partners

Advantages of Partnerships:

• Ease of establishment

• Ease of Management: each partner has different things to offer

• No special business taxes

• Easier to raise financial capital

• Larger than sole proprietorship

• Easier to attract qualified workers

Disadvantages of Partnerships

• Unlimited liability

• Limited partner is only responsible for his initial investment.  He has limited liability.

• Limited Life

• Conflict between partners

Corporations

Incorporate - to form a corporation.

Charter - a document granted by the state giving a corporation the right to do business

Stock - shares of ownership in the corporation

Stockholders (shareholders) - owners of stock.  

Reasons to own stock:

Dividends - share of corporate profits paid to stockholders

Speculation - buy in hope that price of stock will increase.

Advantages of a corporation:

• Ease of raising financial capital (main advantage)

  • Selling stock to investors

  • Selling bonds: a written promise to repay a loan on a specific date

  • Principal - the amount borrowed

  • Interest - the price paid for the use of another’s money

  • Borrowing money from banks.

• Ability to hire 

• Limited liability

• Unlimited life

• Ease of transferring ownership - Buying and selling stock is easy and is done millions of times a day

Disadvantages of a corporation:

• Start up expenses are high.

• Stockholders (owners) have a limited 

• Profits are taxed

• Corporations are subject to more government regulations than sole proprietors or partners

Labor, Professional and Business Organizations 

Labor Unions - organization of workers formed to represent its member’s interests in varying employment matters.  Collective bargaining

Professional Associations - a group of people in a specialized field that work to improve their working conditions. 

Business associations

• Chamber of Commerce - promote economic growth of the community 

• Better Business Bureau - cops for businesses

FORMS OF BUSINESS ORGANIZATION

Organization - a collection of people working together to achieve a common purpose.

Business organization - a collection of people working together to achieve a common purpose in relation to their organization’s mission, vision, goals, and objectives, sharing a common organizational culture.

Organizational culture - the set of beliefs and values shared by organization members which guide them as they work together to achieve their common purpose.