ANALYSIS OF FIRM’S INDUSTRY / TASK ENVIRONMENT

The TASK ENVIRONMENT consists of those industry factors which are external to the firm but
have a direct and specific impact upon the organization and are in turn affected by the
organization’s operations. The Task Environment of an organization is the environment which
directly affects the organization from attaining its business goals. It is the set of conditions
originating from suppliers, distributors, customers, stock markets and competitors, etc.

Competitors
Competitors generally look for higher margins and for this they provide unique features to their
products, thus try to create differentiation.
Competition is the basic element of a free enterprise system. The interests of both the
organization and the customers are better served when choices in the market are available.
Competition encourages progress and product-developments. It forces organizations to be
more innovative and productive.

Customers
The basic reason for the very existence of any business organization is making profits and the
profits are created by customers. Hence, knowledge about customer’s needs and fulfilling these
needs is an organization’s primary concern.

Suppliers
Since all organizations transform inputs of materials, equipment, energy, capital, and labour
into outputs of products and services, an organization must interact with a network of suppliers
from whom these inputs are obtained. This interaction is mutual and two-way. Just as an
organization is interested that its suppliers maintain the quality of the materials that it buys
from them, the suppliers are equally interested that the buyer organization brings out quality
product.

Regulatory Agencies
Regulatory agencies are created by local, state, and federal government for the purpose of
ensuring that the organizations operate within the enacted laws. These agencies have the
power to enforce laws in their respective fields and also introduce some their requirements
that can be legally enforced. These agencies are basically set up to protect organizations from
unfair competition.
There is another type of regulatory agency which is known as the “interest group”. An interest
group is organized by its members to attempt to influence organizations. Even though these
interest groups lack the official power of government agencies, they can exert considerable
influence on organizations by using the media to call attention to their positions.

Potential Entrants
All organization want to keep their number in the given industry limited. This reduces
competition and increases profitability of these organizations. In some countries, the
government laws and regulations are enacted to protect certain organizations from
competition, domestic, or foreign, either by denying new licenses or by erecting trade barriers.

Substitutes
Technological advances lead to the development of substitutes for existing products which offer
either price or quality or convenience advantages. Firms that ignore the potential threats from
substitutes find themselves losing their market share. Organizations must be continuously
monitoring the environment for development of any substitutes that would pose a threat to
their market share and must continue to improve the quality of their own products so as to be
sufficiently cost effective to compete to such substitutes.

Labour
An organization must create and enhance an image of its environment which is conducive to
attracting skilled and ambitious workers. Furthermore, it is necessary for the organization to
establish such training programs that help in developing future managers and leaders. Human
resources are the most important resources for any organization because without the skilled
people, the sophisticated technology, capital, and materials are of little value.

Owners
Owners or the shareholders (also known as stakeholders) are becoming an element of major
concern for managers in many businesses. Management must continuously monitor the
proposal of holders of large blocks of stock and must provide timely and correct information
regarding the economic health of the organization to all stock holders.
Sources:
Sam Malhotra, shareyouressays.com, accessed 20 September 2019,
<http://www.shareyouressays.com/essays/factors-of-the-task-environment-that-affect-an-
organization-essay/120891>
MBASkool.com, accessed 20 September 2019, <https://www.mbaskool.com/business-
concepts/marketing-and-strategy-terms/7289-task-environment.html>