LESSON 5

ORGANIZATION ENVIRONMENT
WHAT IS AN ORGANIZATION ENVIRONMENT

“The set of forces and conditions

that operate within and beyond an
Organization’s boundaries but affect
a managers ability to acquire and
utilize resources.”
Internal Environment – influences
strength and weaknesses of the
Organization.

External Environment – creates

opportunities and threats.
Opportunities: openings for managers
to enhance revenues or open markets.
New technologies, new markets and
ideas.

Threats: issues that can harm an

organization.
economic recessions, oil shortages.

Managers must seek opportunities and

avoid threats.
Forces in the Organizational Environment
General
Environment
Technological Sociocultural
Forces Task Forces
Environment
Competitors
Global
Forces Suppliers Customers Economic
Firm Forces
Strategic
allies Regulators

Political & Distributors

Legal Forces Demographic
Forces
 OUR TODAY’S FOCUS

EXTERNAL ENVIRONMENT

• Task Environment.
 TASK ENVIRONMENT

“ The set of forces and conditions that

originates with suppliers, distributors,
customers, competitors, regulators and
strategic allies and affect an Organization’s
ability to obtain inputs and dispose of it’s
outputs because they pressure and influence
managers on a daily basis.”
 SUPPLIERS

Provide organization with inputs.

Managers need to secure reliable input sources.

Suppliers provide raw materials, components,
and even labor. Working with suppliers can be
hard due to shortages, unions, and lack of
substitutes. Suppliers with scarce items can raise
the price and are in a good bargaining position.
Managers often prefer to have many, similar
suppliers of each item.
 DISTRIBUTORS

Organizations that help others to sell goods.

Compaq Computer first used special computer

stores to sell their computers but later sold
through discount stores to reduce costs.

Some distributors like Wal-Mart have strong

bargaining power.

They can threaten not to carry your product.- Wall

Mart.
More powerful in case of low involvement
product.
 CUSTOMERS

People/Organization who buy the goods.

Usually, there are several groups of customers.

• Individual customer – buying a shirt.

• Family – Buying a refrigerator.

• Organization – BEXIMCO purchase computers for

it’s IT dept.

• Govt agency – Buying MIG 29.

• Educational Institution – Hiring guest faculty for

MBA program.
 COMPETITORS

Organizations that produce goods and

services that are similar to a particular
organization’s goods and services.
 FORMS OF COMPETITION
• Brand Competition –Companies offering similar products
and services to the same customer at similar price. TOYOTA
and HONDA are competitor not MERCEDES.

• Industry Competition – All making the same product.

VOLKSWAGEN with all automobile manufacturers.

• Form Competition – All produces product that supply same

service. TOYOTA and HERO HONDA.

• Generic Competition – All competing for the same

consumer’s money. TOSHIBA,HP, NOKIA, ROLEX all are
competitors in that sense.
 OTHER FORMS OF COMPETITION

Rivalry among the Firms – leads to price war.

LUX and AEROMATIC
Potential Competitor – Organization that
presently are not in task environment
but could enter if they choose.
 HOW TO MANAGE COMPETITION

Barriers to Entry – Factors that make it difficult

And costly for organization to enter.

Economies of Scale – Continuous advantages

associated with large operation.

Brand Loyalty – Every time you buy the same

product. The most important advantage an
organization could enjoy. Normally applicable for
high involvement product. SONY TV
 REGULATORS

Units in the Task Environment that have the potential to

control, regulate or influence an Organization’s policies and
practices. BSTI , ISO

Policies for Environmental consciousness.

Rules for Advertising.

 STRATEGIC ALLIES

Two or more organizations working

together in a Joint or similar arrangement.

FORD with Volkswagen in South America

FORD with Nissan in USA
 INDUSTRY LIFE CYCLE

The changes that takes place in an industry as

It grows.
• Birth Stage - uncertain, fluid relations with the
task environmental sources.

• Growth stage – gains customers acceptance.

• Shake out – Near the end of growth stage.

Consumers demand falls, price war starts, many
leave the business.

• Maturity – demand grows slowly or constant. Brand

loyalty occurs, creates high barrier for new entry.

• Decline – demand falls, company produces more

than the demand, can not sustain and decline.
See ………….u……….