Lesson 2 (September 5-9) - H.E.

BUSINESS
ENVIRONMENT
AND BUSINESS
6.53
IDEAS
Prepared by:
Ms. Cristine Joy M. Vergara
Teacher
BUSINESS ENVIRONMENT AND
MARKET
The study of the business
environment in a particular
location has far-reaching and
long-term effects on a small or
micro enterprise’s viability. In
fact, business ideas and
opportunities are partly shaped
or determined by the business
location.
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BUSINESS ENVIRONMENT AND
MARKET
Unless it is possible
to migrate to more
favorable locations, the
ideas and opportunities for
business will oftentimes be
delimited to the
surrounding areas.
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The business environment consists of both the tangible
and intangible factors that affect either the external or
internal business operations.
They may include the land area available

for economic zones, the physical layout
and barriers such as rivers, parks or lakes,
and building obstructions as well as the
transportation network; all of which are
considered tangible factors.
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They also include the demography of clients and
suppliers, the competitors in the locale/area and the
available technology for production.
The intangible factors, on the other

hand, include the sub-culture, industry
trends, economic and government
activity, or the political situations in
the area.
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NATURAL AND PHYSICAL ENVIRONMENT
This concerns the physical location of a
business store. The natural environment also pertains
to the natural and man-made structures that may
enhance the beauty of the location, such as a park or a
seafront view, or serve as barriers to the location, such
as a dump site or high-rise structures that obstruct a
view.
The living condition in an area also serves as a

standard for the ambiance you want to create for your
store.
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NATURAL AND PHYSICAL ENVIRONMENT
 There is also a phenomenon referred to as clustering,
where a particular type of product is offered within
the same area. For instance, most guitar shops are
clustered along the intersection of V. Mapa and
Aurora Avenue in Metro Manila; Filipino craft stores
crowd the area under the Quiapo Bridge; or car
accessories are found in Banawe area.
 The key word to have in mind when scanning the

physical environment is the visibility of your
intended store to the potential clients.
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DEMOGRAPHY
This pertains to the number of people living in the area, their
age, gender, socio-economic status, family size, religion and even
growth trends.
These are invaluable information that can help entrepreneurs in

matching their product to the target market, in deciding for the
marketing strategy, pricing and product packaging among others.
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CULTURE
Culture or sub-culture, being the totality of
the way of life, ideas and customs of a set of people
or society, primarily influence the types of products
that are acceptable to a particular locality.
 For example, the influence of the Japanese culture

gave rise to minimalist designs. A sub-culture also
shapes the ‘emotional’ environment of an area.
 For instance, the feeling of ‘fear’ for a specific

location may serve as a barrier for a business; a place
where one does not feel safe because of the
prevalence of crime will discourage entrepreneurs.
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CULTURE
Changes in the lifestyle, which is
brought about by changes in the
population demography and the
economy, also affect a business. These
lifestyle changes may be the increase
of women’s participation in the world
of work, change in buying patterns and
shift in tastes.
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GOVERNMENT REGULATIONS
The laws and policies of the national and local government
units also influence the business operations.
GOVERNMENT REGULATIONS
Some examples of policies that directly
affect entrepreneurs are the following:
 Imposition or removal of taxes for

products
 The establishment of economic zones
and assistance in product labeling and
packaging of products.
In addition, improvement of
facilities and roads improve transportation
network that facilitates transfer of products
from one area to another or promotes
accessibility for consumers.
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ECONOMY
This pertains to the A country’s economy Even small scale entrepreneurs

influences both the must learn to study economic
management of indicators to improve business
entrepreneurs and
resources and study of consumers as it relates to
forecasts, such as when to buy
the system of certain materials and supplies,
the financial matters of when to open a store or
production, business like taxes and introduce new products based
distribution, and interest rates and to the on consumer spending, or when
consumption of goods quality of life, cost of to hire employees.
utilities and services, among
and services. others.
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ECONOMY
Some examples of economic indicators include the
following:
(a) Gross Domestic Product (GDP) which

increases when a country’s economy is doing
good;
(b) Unemployment rate which indicates that more

unemployed people usually signal an economy
getting worse; and
(c) Price Indexes and Inflation rates which

determine the buying power of consumers.
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TECHNOLOGY
Technological changes are inventions based on the
application of science that create new product or process
improvements. Some examples of technological changes are
mobile tools that enable online connection, new business tools for
analysis and database, social networks and modern, digital
equipment.
These advances in technology result to efficiency and
productivity at a lesser cost. It can be observed that sending
message through e-mail provides a cheaper and faster means
compared to hand-delivered mails (snail mails).
An entrepreneur can benefit from technological changes by
identifying the appropriate technological solution available in the
area or locale.
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At this point, it must be quite clear why an
environment scanning of an area considered as business
site is helpful for the entrepreneur. In fact, the impact of the
factors in the business environment does not only include
the business operation but is even relevant at the start of
the venture – during the business idea generation and
opportunity identification stage.
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ARE THERE ANY
QUESTIONS?
“The most important thing
is to never stop
questioning.”
- Albert Einstein
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BUSINESS

They may include the land area available

The intangible factors, on the other

The living condition in an area also serves as a

 The key word to have in mind when scanning the

These are invaluable information that can help entrepreneurs in

 For example, the influence of the Japanese culture

 For instance, the feeling of ‘fear’ for a specific

 Imposition or removal of taxes for

This pertains to the A country’s economy Even small scale entrepreneurs

(a) Gross Domestic Product (GDP) which

(b) Unemployment rate which indicates that more

(c) Price Indexes and Inflation rates which

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