Michelle G.

Arenas Block 2
Philippine Business Environment (BM 202A)
Dr. Terry Andaya

Business and its Environment, The Competitive Environment and Supply and Demand
(Reaction Paper)

There is a close and continuous interaction between the business and its environment. This interaction
helps in strengthening the business firm and using its resources more effectively. Business environment is
multifaceted, complex, and dynamic in nature and has a far-reaching impact on the survival and growth of the
business.

The Eight Key Themes will help us understand and analyze the Business Environment. We have
Diversity of Business, Internal or External environment which is applicable both internal and outside
organization, Business Complexity in which business operates and explain the idea of “environmental
uniqueness.” Next is Variety of spatial levels which refers to geographical or territorial unit of analysis that we
use to conceptualize and analyze the business environment, Dynamic environment wherein we live in a fast-
changing world, we have come to expect that the society in which we live and the way we live our lives will
change over time, even within fairly short periods. This is a characteristic feature of modernity. Another one is
Interaction a two-way interaction between business organization and environment. Meaning, business
influence are influence by their environment. Business organization is not passive but shape environmental
factors to their own advantage. One of the examples is advertising. Firms do not simply respond to changes in
lifestyles and consumer behavior that are happening automatically “out there” in society but seek to influence
and even create such changes through persuasive advertising.

Next is the Stakeholders, business decisions have to be made in a context of multiple stakeholder
interests and demands. This is because business decisions can have consequential effects for all members of
society. Lastly, the Values. Sustainable development raises complex ethical issues precisely because the main
contributors to problems of environment and resources are not necessarily those who suffer from them.
Environmental damage today can store up problems for the future and so firms are considered directly ethical
stance in relation to present day equity issues as well as the future impact of decisions taken today.

Business is a mechanism for deciding the allocation of resources available to society between various
possible uses or competing wants or needs, the methods of production and the distribution of output in a
situation of scarcity where not all wants can be satisfied. There are three basic forms of business. Namely: The
Market or known as the Private Sector, which is made of business organization that are owned and controlled
as forms of private property. Second is Government or the Public sector. And lastly, the third sector.
Michelle G. Arenas Block 2
Philippine Business Environment (BM 202A)
Dr. Terry Andaya

Analyzing the Environment

(Reaction Paper)

Environmental management is increasingly important in private, public and voluntary sector

organizations. This may involve developing, implementing, and monitoring environmental strategies, policies
and programs that promote sustainable development.

Everyday our market is changing the way it is. Many new things are developed and in a matter of about
some seconds, the whole scenario stands different in front of us. Among them, there are many things that we
can control and then there are other things that fall beyond our control and those are called systematic
factors. Systematic things happen in the environment we live in, the environment that surrounds us and many
times they greatly influence us.

Businesses are also influenced by the environment that they’re in and all the situational factors that
determine circumstances from day to day. It is because of this, that businesses need to keep a check and
constantly analyze the environment within which they run their trade and within which the market lays.

A detailed analysis of the macro-environment or the environment as a whole is called PESTLE analysis,
which precisely means a bird’s eye view of the PESTLE analysis business conduct. The PESTLE analysis
ascertains for the organization and the strategy builders as to where their market currently stands and where
it will head off in the future.

PESTLE/STEPLE analysis consists of components that influence the business environment and each
letter in the acronym denotes a set of factors that directly or indirectly affect every industry. The letters
denote the following things:

P for Political factors: These factors take into account the political situation of a country and the world
in relation to the country. For example, what sort of government leadership is affecting what decisions of a
country? All the policies, all the taxes laws and every tariff that a government levies over a trade falls under
this category of factors.

E for Economic factors: Economic factors include all the determinants of an economy and its condition.
The inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect
imports and exports, all these determine the direction in which an economy might move, therefore businesses
analyze this factor based on their environment so as to build strategies that fall in line with all the changes
that are about to occur.

S for Social factors: Every country is different and every country has a unique mindset. These mindsets
cast an impact on the businesses and the sales of their products and services; therefore PESTLE analysis
includes these factors as well. The cultural implications, the gender and connected demographics, the social
lifestyles, the domestic structures; all of these are studied by companies to understand the market and the
consumer better.
 T for Technological factors: Technology greatly influence a business, therefore PESTLE analysis is
conducted upon these factors too. Technology changes every minute and therefore companies need to stay
connected along the way and integrate as and when needed.

L for Legal factors: Legislative changes occur from time to time and many of them affect the business
environment. For example, if a regulatory body would set up a regulation for the industries, then that law
would impact all the industries and business that strife in that economy, therefore businesses also analyze the
legal developments happening in their environment.

E for Environmental factors: The location of countries influence on the trades that businesses do.
Adding to that, many climatic changes alter the trade of industries and the way consumers react towards a
certain offering that is launched in the market.

Scarcity, or limited resources, is one of the most basic economic problems we face. We run into scarcity
because while resources are limited, we are a society with unlimited wants. Therefore, we have to choose. We
have to make trade-offs. We have to efficiently allocate resources. We have to do those things because
resources are limited and cannot meet our own unlimited demands.

On of the basic foundations in economics is supply and demand. To understand the analysis of supply
and demand, it is important to look at supply and demand individually. Then consider the factors that shift
supply and demand. Once a basic understanding of shifts in supply and demand is understood, an economist
will bring everything together and consider when supply and demand are in equilibrium.

Supply and demand is perhaps one of the most fundamental concepts of economics and it is the
backbone of a market economy. Demand refers to how much (quantity) of a product or service is desired by
buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the
relationship between price and quantity demanded is known as the demand relationship. Supply represents
how much the market can offer. The quantity supplied refers to the amount of a certain good producers are
willing to supply when receiving a certain price. The correlation between price and how much of a good or
service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply
and demand.

To begin, a free market is a evolutionary system of economics. A free market adapts to a society based
on the society's actions. A free market without regulation is the foundation of this countries economics. With
regulations we eliminate what drives a successful nation, we elminate what we were built on.

Competitor vs Market Power, my understanding is that Economic profits are the difference between a
firm's revenue and opportunity cost. A firm doesn't need to earn any economic profits at all to be willing to
stay in business. Such a firm would still be covering all its opportunity costs, or doing just as well as it could if
it used its resources in their best alternative use.

Nonprofit responsibilities businesses normally take on include social and environmental standards.
From a social perspective, customers, communities, business suppliers and partners and employees are all
stakeholder groups that hold companies to a higher standard. Providing fair and honest marketing and service
to customers, actively participating in communities and philanthropy programs, meeting ethical standards in
supplier and partner interactions and treating employees as a core asset free from discrimination are all
socially responsible activities.
Michelle G. Arenas Block 2
Philippine Business Environment (BM 202A)
Dr. Terry Andaya

Process of Portfolio Analysis, European Union and Evolution of ASEAN Integration

(Reaction Paper)

Portfolio Analysis should be regarded as a disciplined and organized way of thinking about
asset allocation. An important aid to identify its specific competitive role so as to take advantage of
the environmental opportunities and to be on constant look out for strategic windows or market
opportunities.

There are three models of portfolio analysis. First is the Boston Consulting Group, it is
classified into four categories, namely: Star which is applicable in Business with high market share
and high growth rate. Second is the Cash Cow, those businesses with high market share in a low
growth mature business. One example is Red Cross. Thirdly is Question Mark, which is sometimes
called problem children. They are not market leader, they need a lot of investment to tap the high
growth rate. Then lastly is the Cash Cow in which the product is a market leader that generates huge
sums of money. The advantages of Boston Box, it provides an image regarding the manner of
distribution of the businesses undertaken by the company during stages of life’s cycle. The company
may predict how the present portfolio will develop in the future. It also manages to divert the
company’s attention and focus on potential strategies specific to the strategic business units.
Another model is the G.E this refers to long term industry attractiveness and business competitive
strength. The Shell Directional Policy Matrix is another refinement upon the Boston Matrix. Along
the horizontal axis are prospects for sector profitability, and along the vertical axis is a company’s
competitive capability. As with the GE Business Screen the location of a Strategic Business Unit (SBU)
in any cell of the matrix implies different strategic decisions.

•Double or quit – gamble on potential major SBU’s for the future.

•Growth – grow the market by focusing just enough resources here.
•Custodial – just like a cash cow, milk it and do not commit any more resources.
•Cash Generator – Even more like a cash cow, milk here for expansion elsewhere.
•Phased withdrawal – move cash to SBU’s with greater potential.
•Divest – liquidate or move these assets on a fast as you can.

However decisions often span options and in practice the zones are an irregular shape and do
not tend to be accommodated by box shapes. Instead they blend into each other.
Michelle G. Arenas Block 2
Philippine Business Environment (BM 202A)
Dr. Terry Andaya

Process of Portfolio Analysis, European Union and Evolution of ASEAN Integration

(Reaction Paper)