Saint Anthony Academy

Batuan, Bohol, Philippines

Member: Bohol Association of Catholic Schools ( BACS)
Catholic Education Association of the Philippines (CEAP)
ORGANIZATION AND MANAGEMENT 12
ACTIVITY NO. 4
(Week 4)
Topic: Environmental Scanning: SWOT and PEST Analysis
Competencies:*Identify various forces/elements of the firm’s environment.
*Summarize these forces using the PEST and SWOT analyses.
Objectives: *Define environmental scanning.
*Identify the various forces if the firm’s environment.
*Discuss SWOT and PEST analysis.
Concept Notes:
MAJOR PROBLEMS FACED BY BUSINESSES
Based on extensive research and a series of interviews with top management of different companies all
over the world, here are some of the most significant problems that companies face today.
Uncertainty
Uncertainty strikes fear in company executive because its effect can result in staggering costs.
Uncontrollable external factors like political, economic, technological, and social forces are always at work.
Unexpected future events can derail a company off the business track if the management is not prepared with a
contingency plan. The common reaction to uncertainty is to stick with manageable short-term goals. However,
this may prove to be less rewarding since it can offset the potential profitability that a long term-goal may
provide.
Globalization
Globalization is a concern for top company executives because of the changes it brings. These changes
may require costly adjustments to cope with the changes of serving new markets and new trends. Companies may
need to offer new products and services to better serve new markets. Globalization also results in stiff competition
among companies since the business operating shift to the international scene. As such, managers have to deal
with cultural differences and varying government rules and regulations which can complicate trade and
commerce. All of these changes have to be embraced by companies since globalization will continually make
international operations more challenging than ever.
Innovation
Companies should build a more innovative culture in their respective organization. Some of the large
companies are afraid that innovation will result in relaxation of protocols and practices which leads to lose of
control. Top company executives fear that giving employees more freedom to develop new products or service
without supervision from management may cause them to prioritize individual goals than company objectives.
For “healthy” innovation to happen, there should be balance between how much freedom should be given to
employees and the level of control exercised by managers to implement their authority and impose discipline
among employees.
Government policies
Companies should adhere to the new government regulations and policies on environmental, financial,
marketing, and other aspects of business. Such policies may complicate decisions of top executives but managers
should continually improve their skills to address the effects of these policies.
Technology
Technological advancements happen fast and companies have to cope by investing in new technologies to
take advantage of their benefits before they become obsolete. The competitive business environment requires
companies to stay informed about changes and make appropriate adjustments in their operations. Investing in new
technology enables a company to take advantage of the next technological developments and smoothly transition
to future innovations.
Diversity
Diversity adds value to products and services since different ideas and perspective are utilize in the
process. However, this poses a challenge for companies to bring together a diverse group of employees and work
for a single goal. Thus, managers need to make the proper adjustments in their communication with employees,
suppliers, customers, investors, and business partners.
Complexity
Globalization and information technology have led to the emergence of a complex business environment.
Business transactions have become more complex because of the diverse culture of people across the countries.
Managers are challenged to develop management protocols that minimize the complexity of different tasks.
Information overload
Innovation in information technology have led to fast-paced communication and the availability of a large
amount of information on the internet. How to deal with the vast information available online is something that
busines executives should consider. Effective information management is a good investment since the result can
provide valuable insights especially for marketing and strategic business planning.
THE ENVIRONMENT OF THE FIRM
The business firm’s environment refers to the conditions and elements that define its operations and
determine its success. There are two types of the firm’s environment. These are the internal and external
environment.
External Environment

Microenvironment
Macroenvironment
 Customers
 General
 Suppliers
environment of
 Regulatory agencies the firm
 Competitors

The Firm

The internet environment consists of elements that have a direct impact on the business operations.
These include the employees, the board of directors, and the managers. The elements of the internal environment
are directly controlled and can be freely modified by the firm itself.
The external environment consists of factors that have indirect but significant influence on the
operations of business. These factors, however, cannot be controlled by the firm. There are two types of external
environment:
1. Microenvironment is also known as the “operating environment”. It consists of the customers, suppliers,
Internal
regulatory agencies, and competitors. Environment
The factors in this environment have a direct relevance to the
business operations but are uncontrollable to a certain
 Employees extent.
2. Macroenvironment is also known as the “general environment”. It consists of the economical, political,
 ofBoard
social, legal, and technical environment of organization. The factors in this environment are
the business
beyond the control of the firm but are important determinants
directors of success.

ENVIRONMENTAL SCANNING  Managers

Environmental scanning is the actual monitoring and evaluation of information from the external and
internal environment of a business organization. This information is then provided to the key people to guide the
organization in its business operations and in preparing for target market operations. There are three models of
environmental scanning as follows:
1. Ad hoc environmental scanning is not often done and is usually applicable only during a crisis
situation. The firm does ad hoc scanning to determine whether a problem is either external or internal.
2. Regular scanning is usually done at least once a year or at regular intervals.
3. Continuous scanning refers to the continuous collection of data on a broad range of environmental
factors. It is also referred to as continuous learning done to monitor the components of an
organization’s interval environment.

STRATEGIC PLANNING: SWOT AND PEST ANALYSES

To adequately deal with the forces of the external environment, managers, and decision-makers apply
certain techniques in gathering and analyzing information and subsequently conducting strategic planning.
Strategic planning techniques such as the SWOT analysis and PEST analysis consider the element of a firm’s
internal and external environments in formulating business plans and decisions. SWOT analysis is primarily used
to analyze the microenvironment, while PEST analysis is conducted to address the firm’s macroenvironment.
SWOT ANALYSIS
SWOT analysis is a technique that identifies the Strengths and Weaknesses of a company, as well as the
Opportunities and Threats it faces. In conducting this analysis, it is imperative to note that strengths and
weaknesses are pare of the company’s internal environment, while opportunities and treats are part of its external
environment.
Strengths include the company’s attributes that give a competitive edge over others. The strengths of a
company contribute to its good performance and positive reputation in the business scene. Strength may include
being a market leader, having a good brand image, providing quality products and services, and having good
reputation in the business. Other strengths include good credit standing, competent and highly skilled staff,
excellent distribution channels, outstanding communication and network systems, and a good number of patents.
On the other hand, weaknesses are the attributes of a company that needs to be improve or changed.
These attributes may hinder the company’s growth and performance. Examples of weaknesses are lack of access
to technology, limited distribution channels, poor location, lack of facilities and equipment, and poor
transportation system.
Opportunities are factors or events that can give a positive impact to the company if properly addressed.
Opportunities come in different forms new markets, potential profits, additional sources of raw materials,
increased purchasing power of consumers, better location, and new users or customers.
Threats are external factors which may negatively impact the company. These are trends, changes, or
movement over which company has no control but should be addressed to maintain its status in business. Some
examples are increase in the price of resources, entry of new computers, and high inflation rates.

PEST ANALYSIS
PEST Analysis is a method used on analyzing the Political, Economic, Social, and Technological forces
affecting the company. This technique focus on the factors that define the macroenvironment of the business.
Political factors
Political factors include laws, regulations, and restriction, that may intervene or affect the company’s
business course. Significant political factors include tax policies, labor laws, environmental laws, trade
restrictions, and tariffs.
Businesses must comply with rules and regulations imposed by the government, and compliance requires
manager to adjust their operation accordingly. Companies are required by the government to comply with the
Minimum Wage Law in determining the wages of their employees. Businesses also have to comply with the
required legal documents, pay fees and secure permits before they begin their operations, Another significant
factor business are zoning restrictions. For instance, the Makati Business District does not allow their facilities
and plants in designated industrial areas away from the metropolis, such as in Canlubang, Laguna, Additional,
factories in Laguna Lake Development Authority to avoid emission of pollutants into the lake.
Economics factor
Economic factor directly affect the capability of business to generate profits. These include economics
growth, interest rates, exchange rates, and inflation rate. For example, a high inflation rate affects the acquisition
of raw material of restaurant. Therefore, if one of the restaurant’s prime commodities are burger, an increase in
the price of beef may cause the restaurant to increase its price. The increased price, in turn, will affect consumer
preference and may result in decreased sales.
The increase in the prices of raw materials and basic commodities is also an important factor that affects
business, The price of oil in the world market affects the prices of basic goods in the local market. Increased oil
price also result in increased cost of transporting goods such as vegetables and fruits from the farms to the urban
areas.
Social factors
Social factors include demographic aspects such as age, group affiliation, religion, civil, status, and the
economic status of consumers, Companies focus on information regarding their target market, particularly its
buying habits, attitudes, ethics, personalities, and values.
Firm usually shape their product or service based on their target market. Companies that sell instant
noodle target consumer who are always on the go or have limited time to prepare home-cooked meals. Services
such as laundry shops cater to the people who are unable to do their own laundry or who have no helpers to do
their laundry for them.
Analyzing social factors can also help a company implement change and improvement in its operation,
product, and services, A company selling diapers, for example, may conduct research focusing on the birth rate
within their target area and the financial capabilities of their customer. They may consider looking at the
frequency of using diapers, and the stores where they usually buy diapers. Using these information, the company
may formulate a plan such as introduction a new line of the cheaper diaper that target customer have limited
budget. They can also improve their distribution channel to ensure that their product is available in all stores in
their area.
Technological factors
Technological factors include research and development activities automation, licensing, patenting,
technological shifts, and outsourcing decision. An important technological factor at present is the Internet, which
has greatly improved the way business function are done. Social media has introduced new venues for promotion
and marketing product and services. Purchasing, delivery, promotion, and customer services have been
revolutionized by technology. Production operation have greatly improved through automation. Companies,
therefore, need to keep track of the latest technologies and determine ways that these can aid in their business
process.
Since the PEST analysist exclusively focuses on the macroenvironmental of the firm, it can guide
managers to identify the reason why their business is growing or failing within a certain environmental. It also
helps the company identify new direction for growth and expansion. A major limitation, though, with PEST
analysis is that it does not consider the internal element of the company.

The Benefits of Strategic Planning Using SWOT and PEST Analyses

SWOT analysis and PEST analysis help companies in formulation strategies and aligning their vision and
mission to the general direction of the business environment where they operate. One major similarity between
the two techniques is their focus on aspects of the external environment. SWOT analysis focuses on the external
environmental through the threats and opportunities, while all aspect of PEST analysis consider the external
environment of the business firm. It is recommended that the information gained from PEST analysis be used in
identifying the opportunities and threats in SWOT analysis.

SWOT Analysis vs PEST Analysis

Strengths Political

Weaknesses Economic

Opportunity
Social

Threats Technological
 ORGANIZATION AND MANAGEMENT 12

Name:___________________________ Year & Section:___________________________

Date:______________________________ Score: __________________
Teacher: Ms. Anabel A. Bahinting, LPT
ACTIVITY NO. 4
A. Direction: Match the conditions with the kind of environment it is associated with and the type of factor
it is classified as in SWOT analysis. Number 1 is done for you. (40 pts)
CONDITIONS ENVIRONMENT SWOT
(external or internal) (strengths, weaknesses,
opportunities, and threats)
1. High inflation External Threat
2. Lack of Management skills of
middle managers

3. Good corporate integrity

4. Eco-friendly products

5. More sources of raw materials

6. Lack of advertisement and

other forms of promotion

7. New competitions

8. Poor brand image

9. Unpredictable weather
conditions

10. Poor customer service

B. Direction: Answer the following questions (10 pts):

1. What is the difference between the microenvironment and macroenvironment?
2. What similarities can you find between SWOT and PEST analysis?