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THE FIRM AND ITS ENVIRONMENT

THE FIRM AND ITS ENVIRONMENT. ENVIRONMENT. The sum of all the elements and forces present in the firm’s immediate and remote surroundings which have a potential impact on its ability to achieve its objectives. Global Env”t. Country Env’t. Firm. Industry Env’t.

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THE FIRM AND ITS ENVIRONMENT

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  1. THE FIRM AND ITS ENVIRONMENT

  2. ENVIRONMENT The sum of all the elements and forces present in the firm’s immediate and remote surroundings which have a potential impact on its ability to achieve its objectives

  3. Global Env”t Country Env’t Firm Industry Env’t

  4. ASPECTS OF THE FIRM’S ENVIRONMENT 1. Economic Aspects 2. Legal-Political Aspects 3. Technological Aspects 4. Social-cultural and Demographics Aspects

  5. 1. Economic Aspects • Ex. • Rate of growth of the economy • consumer spending • inflation rate • It affects the firm in both the: • revenue side - affects the level of demand and prices of its products • cost side - affects the availability and prices of its inputs

  6. 2. Legal - Political Aspects - this includes laws, ordinances, and regulations • Ex. • Wage and employment laws • regulations on advertising • waste disposal • taxation • franchise and permits • price controls

  7. 3. Technological Aspects The existence of new products and new methods can threaten the pre-existing products sold by the firm or can improve their method of production resulting to better products

  8. 4. Socio-cultural and Demographics Aspects • Ex. • Education, lifestyles, tastes and preferences, and age profile of the market • size and geographic distribution of the population - affect what kinds of products and services to be offered by the firm and the methods of selling them

  9. - can also affect the internal of the firm The workers and managers education, lifestyle , and outlook will affect the type of incentives to be deviced by the firm and the kind of internal environment the firm must provide in order to attract and motivate employees

  10. THE INDUSTRY ENVIROMENT • The industry environment is considered as the firm’s immediate environment. It comprises of: • the customers • the competitors • the suppliers

  11. 1. CUSTOMERS • The firm must consider: • who the customers are • what are their buying preferences and habit are • where they are located

  12. 2. COMPETITORS The firm should consider what structure of industry they are into: Monopoly, Oligopoly, Pure Competition

  13. 3. SUPPLIERS The firm should consider what is their relationship to suppliers

  14. buyers suppliers In this case where there are few large buyers and the many small suppliers, buyers dictate price

  15. buyers suppliers On the other and, if there are many small buyers and few large suppliers, suppliers dictate price

  16. Global Env”t Country Env’t Firm Industry Env’t Economic aspects Technological aspects Legal-political aspects Socio-cultural and demographics aspect

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