Introduction to Management - the External Environment

Topics: Economics, Organizational studies, The Culture Pages: 5 (1010 words) Published: November 3, 2012
The External Environment

The external organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization.

This environment includes competitors, resources, technology, and economic conditions that influence the organization.

The organization external environments are having 2 layers:

• General environment: The outer layer that is widely dispersed and affects organization indirectly. It includes social, demographic, and economic factors that influence all organizations about equally. • Task environment: the layer that influences the organization’s performance and operations directly. It generally includes competitors, suppliers and customers. The organization also has an internal environment, which includes the elements within the organization boundaries. The internal environment is composed of current employees, management, and especially corporate culture, which define employee behavior and how the organization will adapt to external environment.

General Environment

• International
The international dimension of the external environment represents events originating in foreign countries as well as opportunities for American companies in other countries. The international environment provides new competitors, customers, and suppliers and etc.

The global environment represents an ever changing and uneven playing field compared with the domestic environment. Changes in the international domain can abruptly turn the domestic environment upside down.

Managers who are used to thinking only about the domestic environment must learn new rules to cope with goods, services, and ideas circulating around the globe.

• Technological
The technological dimension includes scientific and technological advancements in a specific industry as well as in society at large. In recent year, this dimension has created massive and far-reaching changes for all in industries. For example, fifteen years ago a lot of organization did not use desktop PC. Now, almost entire organization uses it for many purposes.

• Sociocultural
The socio culture dimensions of the general environment represents the demographic characteristics as well as the norms, customs and values of the general population. Important socio cultural characteristic are geographical distribution and population density age and education levels. Today’s demographic profiles are the foundation of tomorrow’s workforce and consumer. Forecasters see increased globalization of both consumer markets and the labor supply with increasing diversity both within organizations and consumer markets.

• Economic
The dimension of the general environment representing the overall economic health of the country or region in which the organization operates.

The economic dimension represents the general economic health of the country or region in which the organization operates. Consumer purchasing power, the unemployment rate, and interest rates are part of an organization’s economic environment. Because organizations today are operating in a global environment the economic dimension has become exceedingly complex and creates enormous uncertainty for managers. The economies of countries are more closely tied together now.

One significant recent trend in the economic environment is the frequency of mergers and acquisitions. For example, Citibank and Travelers merged to form Citigroup. IBM purchased Price Water House Coopers Consulting and Cingular is acquiring AT&T Wireless. In the toy industry the three largest toy makers – Hasbro, Mattel and Tyco – gobbled up at least a dozen smaller competitors within a few years. At the same time however, there is a tremendous vitality in the small business sector of the economy.

Labor market is the people...
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