Environment

Anything and everything outside of an organization is called its environment.

Generally organizations have almost no control over environment.

Environment is of 2 types:

1. Specific /Task/ Micro-level: Those external factors which directly affect an organization -- Supplier,
Customer, Competitor, Regulator, Publics

2. General/Macro-level: External factors which affect many organizations at the same time --
Economic, Socio-cultural, Political-Legal, Technological, International

1. Specific Environment

Factors Features Managerial concern

Supplier Input provider Dependable (timely, quality, reasonable price)
Customer Output destination Loyal (satisfaction, repeat, referring)
Competitor Market share determinant Healthy competition (Fair deal, cooperation, alliance)
Regulator Defines business scope; Limits what Comply; Expand decision horizon by interpreting law/
can & cannot be done rules
Publics Surrounding stakeholders affected by Listen; open communication, adjust & accommodate
the organization, Opinion builder as far as possible

2. General Environment:

Economic: GDP, Per capita income, Interest rate, savings propensity, Inflation, Foreign currency reserve &
exchange rate, Taxation, Money supply, capital investment etc

Social: Society, Social relationship, Population distribution / demography, literacy level, life expectancy,
rural-urban migration, Life style changes, food habit etc

Legal-political: Political stability, democratic practice, Law & order situation, public security, Justice etc

Technological: Level of technological development, diffusion and adaptation, Capital-intensive tech vs

labor-intensive tech leading to appropriate technology

International: War and regional conflict, Relationship and dependence on foreign investment, exposure to
international trade, Global market situation, Commodity and energy price & supply fluctuation etc

Culture is the internal environment or ambience of an organization:

“The way we do things around here”: “To know the ropes to step, and the ropes to skip”