Organizational Environment - Presentation Transcript

DEFINITION
Environment is made up of the administrative, technological, political, economic, socio-
cultural, and stakeholder factors. (Lusthaus, Anderson and Murphy, 1995)

ORGANIZATIONAL ENVIRONMENT
External environment refers to force and institutions outside organization that potentially affect an
organizations performance General and Specific Environment

ORGANIZATIONAL ENVIRONMENT

o Specific Environment that is directly relevant to achievement of an org’s goal

o Customers,competitors,suppliers,pressure groups
o General environment broad external conditions that may affect the org
o Economic conditions, political/legal conditions,socio cultural conditions, demographics,
conditions, technological and Global conditions

• Specific Environment

Customers: It is the customer who absorbs organizational outputs. They represent

potential uncertainty to an organization, their taste can change, and they can become dissatisfied with
organization’s product or service

Competitors: Organizations cannot afford to ignore its competitors. Managers must

be prepared to respond to competitor's policies regarding pricing new products, services offered and other
incentives it is giving to customers

Suppliers: Any party that provides input for the business. E.g. financial institutions
are provider of money; colleges are suppliers of human resources. Managers need to have steady and
reliable flow of inputs to meet the goals

Pressure groups: Managers must recognize the special interest groups that
attempt to influence organization

• General Environment

Economic conditions: It includes the impact of economic factors like Interest rates,
inflation, changes in disposable income and the stage of general business cycle e.g when consumer’s
incomes fall their confidence about job security declines, they will postpone purchasing any thing that is not
necessary

General Environment

Political/legal conditions: Federal, state and local government influence what org can
and cannot do
 Socio-cultural conditions: Managers must adapt their practices to the changing
expectations of the society and their life style

Demographic Conditions: Trends in the physical characteristics of population such

as gender, age, level of education, income, and geographical location

Technological: It is changing the ways the org are operating, so businesses must
address this issue and its impact on performance of org.

• ENVIRONMENTAL UNCERTAINTY

The degree of change and complexity in an org’s environment. Degree of change: If the
components of in an org’s environment changes frequently we call it dynamic environment. If the change is
minimal we call it stable

ENVIRONMENTAL UNCERTAINTY

Environmental complexity:

Number of components in an org’s environment and extent of an org’s

knowledge about its environmental components. Complexity is measured in terms of the knowledge and
an org needs to have about its environment

Fewer competitors, customers, suppliers governmental institutes, less complex environment and thus
less uncertainty

Stakeholder

Any party that is affected by org’s decisions and policies and that can influence
organization

COMPONENTS OF THE ORGANIZATIONAL ENVIRONMENT

RULES ETHOS CAPABILITIES
Administrative/ Legal framework Attitudes toward Ability to develop
Legal enforcement and enforce laws and
policies

Technology Protect intellectual Social attitudes to Product development,

property innovation R&D capability

Political Government type Attitudes toward civil Ability to organize

(democratic, society civil society among
authoritarian) other groups;
knowledge of the
electorate; degree of
transparency

Economic Clarity and Attitudes toward civil Ability to develop

usefulness of society competition policy
 economic rules, framework and
interest rate policies, examine industrial
etc. sectors, societal
databases, levels of
competition, low
transaction costs

Ecological Environmental Attitudes toward the Ability to assess

protection laws environment and its environmental impact
affecting effect on and to adapt
organizations and organizations
individuals, role of
geography

Stakeholder Labor rights, Attitudes toward not- Ability of groups to

occupational safety for-profit, public and influence
rules on competition business sectors

Socio-cultural Religious norms Perception toward Ability to shift social

gender issues and cultural attitudes