THE EXTERNAL ENVIRONMENT
A host of external factors influence a firm’s choice of direction and action, ultimately its organizational structure and internal factors. These factors, which constitute the external environment, can be divided into three interrelated subcategories there are as follows: A. REMOTE ENVIROMENT
The remote environment comprises factors that originate beyond and usually irrespective of any single firm’s operating situation: economic, social, political, technological, and ecological factors. That environment presents firm with opportunities, treats, and constraint; but rarely does a single firm exert any meaningful reciprocal influence. 1. Economic Factors
Economics factors concern the nature and direction of the economy in which a firm operates. Because consumption patterns are affected by the relative affluence of various market segment, in strategic planning each firm must consider economic trend in the segment that affect its industry. 2. Social Factors
The social factors that affect a firm involve the beliefs, values, attitudes, opinions, and lifestyles of persons in the firm’s external environment, as developed from cultural, ecological, demographic, religious, educational, and ethics conditioning. Like other forces in the remote environment, social forces are dynamic, with constant change resulting from the efforts of individuals to satisfy their desires and needs by controlling and adapting to environment factors. One of the most profound social changes in recent years has been the entry of large numbers of women into labor market. Second, social change has been the accelerating interest of consumers and employees in quality-of-life issues. Third, social change has been the shift in the age distribution of population. A consequence of the changing age distribution of the population has been a sharp increase in demands made by a growing a number of senior citizens. 3. Political Factors
The direction and stability of political factors in a major consideration for managers on formulating company strategy political factors define the legal regulatory parameters within which firm must be operate. Political constraint are placed on firm through fair trade decisions, antitrust laws, tax programs, minimum wage legislation, population and pricing policies, administrative jawboning, and many more actions aimed at protecting employees, consumers, the general public, and the environment. Technological Fact To avoid obsolescence and promote the innovation, a firm must be aware of technological changes that might influence its industry. Technological forecasting can help protect and improve the probability of firm in the growing industries. It alerts strategic managers to both impeding challenges and promising opportunities. 4. Ecological Factors
The term ecology refers to the relationship between human beings and other living things and the air, soil, and water that support them. Threats to our life-supporting ecology caused principally by human activities in an industrial society are commonly referred to as pollution, such as water and land pollution.
B. INDUSTRY ENVIRONMENT
To establish a strategic agenda for dealing with these contending currents and to grow despite them, a company must understand how they work in its industry and how they affect the company in its particular situation. * How Competitive Force Shape Strategy
The essence of strategy formulating is coping with the competition. In the fight for market share, competition is not manifested only in the other players. Rather, competition in an industry is rooted in its underlying economics, and competitive forces exists that go well beyond the established combatants in a particular industry. * Contending Forces
Every industry has an underlying structure, or a set of fundamental economics and technical characteristics, that gives rise to these competitive forces. A few...
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