The Environment of

Organizations

 External Environment refers to forces

and institutions outside of the
organization that potentially can affect
the organizations performance
1. The specific environment includes
those external forces that have direct and
immediate impact on managers decisions
and actions and are directly relevant to
the achievement of the organizations
goals

 Customers, suppliers competitors, and

pressure groups
Customers organizations exist to meet
the needs of the customers
Customers absorb the organizations output
They represent potential uncertainty to the
organization (change in the taste or
dissatisfaction with the organizations
products or service)

 Suppliers refer to organizations that

provide materials and equipment
Also refers to providers of financial and
labor inputs (stockholders, banks,
insurance companies, pension funds,
labor unions, colleges and universities,
local labor markets)

 Competitors - managers cannot ignore

the competition
Pricing, new products development,
services offered,

 Pressure groups like environmental and

human rights activist groups, boycotting
or threatening some organizations in
order to influence managements
decisions

2. The General Environment

includes the broad economic,
political/legal, sociocultural,
demographic, technological, natural
environment that may affect the
organization

1. Economic Conditions are those that

influence customer spending, resource
suppliers, and investment capital.
- the overall health of the economy
domestic and global, in terms of
financial markets, inflation, income
levels, and job outlook are important
- these have effect on the spending
patterns and lifestyles of consumers

 Offshoring which involves outsourcing of

work and jobs to lower cost foreign
locations has resulted to loss of many
domestic jobs and has been a source of
political debate and social concern
Onshoring or reshoring Is moving the
jobs back home
Buy local themes activist citizens and
government leaders are claiming that
local economy benefits more in job gains
when people shop in local businesses

 Unbranding when stores owned by

chains are advertised with local
nonbranded names
Amplified focus on local relevance
So that customers will feel an enhanced
sense of community

2. Political/legal conditions - these are

represented by existing and proposed
laws and regulations, government
policies, and the philosophy and
objectives of political parties
- vary from country to country
- occupational safety and health
- product safety act
- EEO

 Labor laws that protect the rights of

employees
Disability act
Maternity and paternity leaves
Child protection law

3. Sociocultural conditions refers to norms,

customs, and demographic of a society or
region, as well as social values like ethics,
human rights, gender roles, and lifestyles
- increasing fear of violence and crime,
more acceptance of gambling and gaming
activities, emphasis on religion and
spiritual activities, pursuit of healthy
lifestyle, increasing dependence on
technology

-demographic conditions encompass

the trends in the physical
characteristics of the population such
as gender, age, level of education,
geographic location, income, family
composition, etc.
- generational cohorts people born
within a few years of one another and
who experience somewhat similar life
events during their formative years

Depression Group (born 1912-1921)

World War II (1922-1927)
Post War (1928-1945)
Baby Boomers (1946-1964)- digital
immigrants
Generation X (1965-1977)
Generation Y (1978-1994)- digital
natives

4. Technological conditions the role of

technology (You Tube, Facebook,
Google, and apps)
- the issue of work-life balance
5.Natural environment conditions
carbon neutral, green and sustainable

- sustainable business firms

operate in ways that both meet the
needs of customers and protect or
advance the well being of the natural
environment
- less waste, less toxic materials,
resource efficiency, energy
efficiency, and renewable energy

Organization-Environment
Relationship
Competitive advantage,
environmental uncertainty, and
quest for organizational effectiveness

 Competitive advantage something

that an organization does extremely
well, is difficult to copy, and gives it an
advantage over competitors in the
marketplace
Can be achieved through costs finding
ways to operate with lower costs than
ones competitors and thus earn profits
with prices that ones competitors have
difficulty matching

- can be achieved through quality

finding ways to create product and
services that are consistently higher
quality for customers than what is
offered by ones competitors
- can be achieved through delivery
finding ways to out perform competitors
by delivering products and services to
customers faster and on time, and by
developing timely new product

- can be achieved through flexibility

finding ways to adjust and tailor
products and services to fit customer
needs in ways that are difficult for ones
competitor to match
Uncertainty, Complexity and Change
Environmental uncertainty a lack of
complete information regarding what exists
in the environment and what developments
may occur

 Organizational Effectiveness
A measure of how well an organization
performs while using resources to
accomplish its mission and objectives
1.Goal approach looks at the output side
and defines organizational effectiveness
in terms of achievement of key
operating objectives such as profits and
market share

2. The systems resource approach looks

at the input side and defines OE in terms
of success in acquiring needed resources
from the organizations environment
3. The internal process approach looks
at the transformation process and defines
OE in terms of how efficiently resources
are utilized to produce goods and
services

4. The strategic management

approach defines OE in terms of the
organizations impact on key
stakeholders and their interests