Lesson 2: Organization Environment Flashcards
open systems and thus affected by interactions of elements and forces in its
environment
Organizations
It refers to the totality of all the elements and forces present in its immediate and
remote surroundings which have a potential impact on the firm’s ability to achieve its
objectives.
Environment
It is composed of all outside factors or influences that impact the
operation of business. It is composed of the general environment and the task environment.
External environment
The technological environment covers the current state of
knowledge of products and services. New technologies create new products and provide
better ways of managing and communicating. Developments in technology can rapidly
change an industry. Thus, any player would like to be at a lead must be quick in
innovating and adopting technologies to improve product and service offerings.
However, technology entails costs. Likewise not all technologies can be readily available
or accessible.
Technological Dimension
The general economic environment describes the general
economic health of the country which serves as our bases for forecasts. The usual metrics
we can look at to describe the economic environment include the consumer purchasing
power, interest rates, unemployment rate, inflation and income levels. For importers and
exporters, exchange rate would also have impact on their operations. High
unemployment implies less purchasing power of consumers and pool of potential
employees. High interest rates are usually associated with high risk in investment.
Inflation trends affect prices of goods and services. These indicators will have impact
both at the cost and profit side of the organization’s financial standing.
Economic Dimension
The prevailing legal / political surroundings may also
influence the performance of the organization. Policies/rules imposed by law may
negatively or positively affect organization’s operations by presenting strategic
constraints and opportunities. Likewise, the stability of the political climate will also
affect the usual business operations. This element includes regulations, policies and
legislations. For example, the ban imposed on cutting trees brought threat to furniture
or wooden crafts manufacturers. Whereas tax holidays will encourage businesses to
invest while providing employment to local constituents. Political instability drives
away investors and insurgencies can affect the usual market transactions due to security
issues.
Legal/Political Dimension
Demographics as well as sociocultural profile also plays a
significant influence on how organizations operate. This covers attitudes, values, norms,
beliefs, behavior and associated demographic trends. We can’t expect to profit in selling
meat in a Muslim community. Yappies (also known as young professionals) have their
own preferences in terms of product features. The educational profile of population will also determine the human resource pool as well as preferences of consumers. There is an
increasing pressure with regards gender equality and cultural diversity in some places.
Company marketing strategies make take these into consideration in making decisions
in terms of branding and promotions.
Sociocultural Dimension
With the opening of barriers, competition has become global. Developments
outside the home country have potential impacts on the operations of an organization.
The crude oil price increase for instance from petroleum producing nations will have
bearing on how local companies operate. The globalization of value chains of
agricultural commodities may affect local smallholder agripreneurs. Supply and
demand conditions in competing countries imply the potential to export local produce to
international market or import cheaper commodities that producing them locally.
Regional economic blocks such as AFTA, ASEAN, APEC etc. were created to facilitate
integration in terms of trade. The ASEAN for example instituted in 2015 opened trade
among South East Asian countri3es intends to mobilize free movement of resources and
capital among member states.
Global
There are now other pressing elements such the natural environment due to
recognized disruptions and depletion of the natural physical environment. Philippines
for instance being located near the Pacific Ocean and thus, highly susceptible to
typhoons and strong rains.
Natural
Also part of the external environment is the microenvironment, also referred to as the?
market or
task environment
It is composed of actors namely the customers, competitors and suppliers
and their associated dynamics.
Task/Industry Environment
Those who purchase the products or avail
services of the business.
Customers
Players producing similar goods and services and targeting the same
market segments are?
Competitors
They may be other organizations who provide or
sell raw materials and supplies for the operations of the business.
Suppliers
They represent
people in the environment who can be hired to work for the organization.
Labor market
