THE INDIRECT ACTION ELEMENTS OF

THE EXTERNAL ENVIRONMENT

The Business organization is affected indirectly by elements in

the external environment.

These Elements are the

Following:
Technological Variables

Technology has become widely

recognized as an important
ingredient in the success of
business firms and manager who
dies not consider the technological
variable in his strategy faces risk
of losing out to competitors

What is
Business Firm?

Business Firm
 - the members of a business organization th
at owns or operates one or
more establishments
TECHNOLOGICAL VARIABLES

A business firm, for instance, may use a new invention or

an innovation to increase its market share, or to develop
new market for its product.

Examples of innovation are those happening in the

telecommunications industry.
Economic Variables

The economy is a very important element in

business pursuits. Even if the company has the
edge in technology and financial capability
over its competitors, it may not be so
successful if the economy does not allow it.
 When Managers make business decisions,
economic conditions must be taken into
consideration. This concern will touch on the
health of the economy in terms of inflation,
income levels, gross domestic product,
employment, and job outlook.
Socio-Cultural Variables

Business organizations can only flourish if they

consider society’s customs and values in the
planning and implementation of their activities.
Political-Legal Variables

These consist of laws and regulations

promulgated and implemented at the local,
national, and international levels. Also
included in this element are individuals and
organization that attempt to influence the
political-legal environment.
 International Variables

This element includes changes occurring in

various parts of the world, which may affect
business organizations in various ways and
degrees. For local businesses, what happens
overseas may be of little concern to them,
unless they plan to operate globally.
 MATCHING THE
ORGANIZATION WITH THE
ENVIRONMENT

Why do some organizations thrive in certain

environments where others fail? The answer may
be derived from determining whether the
organization in question is fitted to the environment
where it operates. Not all environments are similar
in terms of business considerations.
 Types of Business Environment

Static – Few forces in the environment are changing to affect business. Among
the notable features of static environments are no new competitors, no new
technological breakthroughs by current competitors, and little activity by public
pressure groups to influence the organization.

Dynamic – When significant number of environmental forces that

affect business are changing. Among the features of a dynamic
environment are rapidly changing government regulations affecting
business , new competitors, difficulties in acquiring raw materials, and
continuously changing socio-cultural aspects of the population.
 Environmental
Uncertainty

This may be defined as a lack of complete

information regarding what exist and
what developments may occur in
environment. This uncertainty makes it
difficult for managers to perform the
following:

1. Analyze constituencies and their needs;

2. Predict future state affairs; and

3. Understand their potential implications for the

organization
 Dimension of Environmental Uncertainty

1. Complexity – This refers to the number of different

factors in the environment such as information, capital,
material, people, and other organizations.

2. Rate of Change in these Factors – These are the factors in

the external environment change from time to time. For
instance, income levels and the number of qualified teachers
may increase or decrease after a few years. Environmental
uncertainty rises as the rate of change increases.