School of Business

Department of Management and International Management

Introduction to Business Management

Chapter 4

External Environment

Fall
2021 - 2022
Course code - Chapter 4
Objective 4.1: the General or Macro
Environment
Key Takeaways:
Identify key elements in the external environment of organizations P87

• Economic conditions
• Legal-political conditions
• Sociocultural conditions
• Technological conditions issues
• Natural environment conditions

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 The External Environment
The general environments of the
organization including:
Economic
health of the economy

Legal-political
philosophy/objectives of political party running the government

Socio-cultural
norms, customs, social values

Technological
development and availability of technology

Natural environment
nature and conditions of environment

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Figure 4.1 Sample elements in the general
environments of organizations

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 The External Environment

Economic conditions
◦ overall health of economy in terms of financial
markets, inflation, income levels, and job outlook
◦ Offshoring – outsourcing of jobs to foreign locations
◦ Reshoring – return of jobs from foreign locations

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 The External Environment

Legal-political conditions
◦ laws and regulations, government policies, and the
objectives of political parties
◦ vary from one country to the next
◦ Internet censorship - deliberate blockage of public
access to information posted on the Internet

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 The External Environment

Sociocultural conditions
◦ diversity issues relating to educational opportunity,
access to technology, housing/job options
◦ norms, human rights, demographics, and societal
values
◦ Generational cohorts -- people born within a few
years of one another and who experience
somewhat similar life events during their formative
years

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 The External Environment

Technological conditions
◦ social media, features and “apps” on smart phones
◦ brings both opportunities and problems

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 The External Environment

Natural environment conditions (p91)

◦ nuclear plant failure, oil spill, hurricane
◦ “carbon neutral,” “green”, “sustainability”
◦ Sustainable business – meets both the needs of
customers and protects the natural environment

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 s;lsdka;dlk;dlk
Summary
• The General Environement of an organization icnclude
five major external conditions that are different in general
from one country to another (p86 till p92).
• Environmental conditions impact the way managers plan ,
organize, lead and control.
• Managers in different types and sizes of organizations
should monitor these organizational conditions and
trends to adapt their organizations accordingly.

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 Planning Ahead — Key Takeaways
Objective 4.2: The Specific or Task Environment ( p92 till p94)

Discuss how organizations pursue value creation

and competitive advantage in a dynamic
environment.

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 Environment and Value Creation(p92)

The specific (task) environment - actual

organizations, groups, and persons with
whom an organization interacts and
conducts business
• Includes important stakeholders such as:

Customers Suppliers Competitors Regulators Owners

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 Environment and Value Creation
Multiple stakeholders in the
environment of an organization

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 Environment and Value Creation(p 93)

Competitive advantage
◦ a core competency that clearly sets an organization
apart from competitors and gives it an advantage
over them in the marketplace
◦ Companies may achieve competitive advantage in
many ways, including:
◦ Costs
◦ quality
◦ delivery
◦ flexibility

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 Environment and Value Creation

Environmental uncertainty (p 93-94)

◦ a lack of complete information regarding what exists
and what developments may occur in the external
environment
Two dimensions of environmental uncertainty:
◦ Degree of complexity
◦ Rate of change

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Figure 4.2 Dimensions of uncertainty
(p93)

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 SSy
Summary
• Stakeholders are the main constituents of the organization Specific/Task environement.

• Each company has its own unique Specific/Task environment.

• Businesses strive to create value and satisfy their stakeholders needs.

• Companies should understand their environment well to purse competitive advantage in the appropriate way.

• Complexity of environment and Rate of Change determine to a large extent the preferred course of action to
do business.

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