Organizations do not exist in a vacuum. They are constantly
being affected by external forces which determine an organizations
effectiveness and performance. Therefore, it is imperative for the
management of any organization to examine components of their firms
external and internal environments to understand the dynamic and
far- reaching changes that are occurring. This presentation focuses
on the environmental factors that companies need to analyze for
developing strategic options.
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(Macro environment)
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Internal Environment Task Environment General Environment
Political / legal Economic Socio-cultural Technological Political /
legal Economic Socio-cultural Technological Customers Labour
Competition Suppliers Customers Labour Competition Suppliers
Employees Management Culture Employees Management Culture
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We can conceptualize the organization as having two layers: 1.
The general environment 2. The task environment
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The general environment or macro- environment is all those
forces affecting the organization indirectly. These external forces
are: Political / legal Economic Technological Socio-cultural
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The general environment is inclusive of government regulations,
laws, policies and activities designed to influence organizational
performance in an indirect way.
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Technological environment includes changes in technology that
affect the way organizations operate and service they provide.
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These forces are most likely to affect an organizations
production of goods and services and results in the general state
of both domestic and world economy. The components are: Interest
rates and inflation Consumer price index Monetary and fiscal policy
taxes Unemployment rates Wage rates GDP
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The importance socio cultural factors that companies should
analyze are: Age Population density Educational levels Geographical
distribution Culture Lifestyles
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The task environment is inclusive of those sectors that have a
direct working relationship with the organization. Critical
variables in the tasks environment are: Customers Suppliers Labour
competition
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Labour markets include the people available for hire. Every
organization needs well-trained and qualified workers. Research
shows the workers with high level of competencies, knowledge, and
training increases the overall performance of the
organization.
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Customers are the final purchasers of a good or service. A
study of customers will help managers determine what are the
customers needs and wants to be satisfied. Analysis of customer
profiles allows the organization to develop it organizational
strategy and structure in order to deliver a particular good or
service that best suits the needs of the customer.
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Suppliers are peoples and organizations who provide raw
materials the organization uses to produce its output. A suppliers
pricing strategy does affect the organizations level of revenue
earned.
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Competitors are other organizations in the same industry or
type of business providing goods and services to the same set of
customers.
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The internal environment consists of employees, management and
the shared organizational culture. Analysis of the internal
environment allows top management to assess the strengths and
weakness of the organization. This assessment has implications for
human resource management policy, procedure, employee training and
development.
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The unpredictability of the external environment can render an
organization ineffective and consequent demise. Careful
environmental scanning by management is significant and has
implications for planning. It is at this point that managers are
able to set goals and design strategy and justify their decisions
for taking what ever they see necessary. Not one can be certain;
but it is better to be safe than sorry.
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Boundary Spanning Roles. Roles assumed by people and/or
departments that link and coordinate the organization with key
elements in the external world. Forecasting & Planning.
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Organic StructureMechanistic Structure 1.Free Flowing; has
fewer rules and regulations. 2.Encourages team work 3.Decentralizes
decision making to employees dong the work. 1.Rigidly defined
tasks; many rules and regulations. 2. Little team work.
3.Centralized decision making.
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Merger & Joint Venture Merger. A combination of two or more
organizations into one. Joint Venture. A strategic alliance or
program by two or more organizations.
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Advertising and Public Relations Political Activity Trade
Association
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Domestic Stage International Stage Multinational Stage The
Global Stage
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International Financial Crisis Chinese century Rise of BRICS
Consumption Patterns Exchange Rates Global Warming Loses
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Political Risks Clash of the Civilizations GATT WTO New
Economic Blocks EU BRICS Shanghai Five ASEAN
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Hofstedes Research Power Distance Uncertainty avoidance
Individualism and Collectivism Masculinity/femininity Future
orientation
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Outsourcing Exporting Licensing Franchising Direct
Investment
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Advantages Can sell more globally Can avoid transport costs Can
take advantage of different wage levels Can achieve great economies
of scale Have less chance of going bankrupt Can carry out a lot of
R & D
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Disadvantages MNCs move their factories to wherever it is
profitable MNCs may switch their profits between countries They may
force competing firms out of business Some MNCs may exploit workers
Some MNCs may interfere in the government of a country