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Chapter Seven: Business and the Environment
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Recommended: Chapter Seven: Business and the Environment
In today’s modern society rapid changes in the External Environmental forces impact organizations creating uncertainty for managers and the need to keep ahead is critical by responding in designing the organization in adapting to the environment and remain in existence. An organization has little or no control over its external environment but needs to constantly monitor and adjust to these changes, a proactive or reactive response lead to significantly different outcomes. The organization external environment can be sub divided into three categories: General, Task and Internal environment, however, the focus will be concentrated on the general and task. The general environment has six dimensions that may not have a direct impact on daily operations of a firm but will indirectly influence it over time. For example, technological, natural, sociocultural, economic, legal-political and international factors that influences all organizations about equally. And the task environment dimensions in which the organization interacts directly and have a direct impact on the organizations ability to achieve its goals, which includes customers, competitors, supplies and labour market. Uncertainty in the external environment influences todays’ organizations though the need for information about the environment and resources from the environment. The concept of uncertainty simply means that decision makers do not have sufficient information about environmental factors and they will have a difficult time understanding and predicting external changes. This can lead to increased risk of failure and difficulty in estimating the cost of various alternatives. The uniqueness of the environment influences uncertainty factors that affect the organiza... ... middle of paper ... ... and different external elements these will have a high degree of uncertainty depending on the nature of the organization business and its size. The simple environment is one that the organization interacts with and is influence by only a few similar external elements which has a low degree of uncertainty. Today’s managers’ decisions will lead the way towards the organization success or failure. Works Cited Daft, R.L. and Marcic, D. (2013) Management: The New Work Place, International, 8th edition Canada South- Western Cengage Learning. https://docs.google.com/document/d/1XnDjG1gtGLJZyOCG4BmFKCmvUsV_rOqIK9fOwGyca6M/edit http://larkin284.blogspot.com/2012/11/what-do-you-think-are-most-important.html http://practical-management.com/Organization-Development/Organization-s-External-Environment.html. www.swlearning.com/management/daft/.../ch04_032402097x.pdf
Tsoukas, H. (1994), “What is management? An outline of a metatheory”, British Journal of Management, vol.5, pg.289-301
Robbins, S.P., & Coulter, M. (2009). Management (10th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Managers face difficulties in trying to understand the encionment. First ¡°the environment¡¯ encapsulates many different influences; the difficulty is making sense of this diversity in a way which can contribute to strategic decision making. The second difficulty is that of uncertainty, managers typically claim that the pace of technological change and the speed of global communications mean more and faster change now than ever before.
Robbins, S. P., & Coulter. M. (2014). Management (12th ed.). Retrieved from: Colorado Technical University eBook Collection database.
A firm?s external environment is divided into three major areas : the general, industry and competitor environments. Below is an elaboration in further detail regarding the firm?s opportunities and threats in these three environments.
Robbins, S. P., & Coulter, M. (2009). Management (10th ed.). Upper Saddle River, NJ: Pearson
Jones, G. R., & George, J. M. (2011). Contemporary management. (7 ed.). New York, NY: McGraw-Hill.
Businesses play a significant role with the economies of all countries, whether developed or developing. It contributes to the welfare of the society through the satisfaction of needs, provides a source of livelihood to millions of people worldwide. Businesses do not operate in vacuums but operate within business environments. The events in the environment of a company have a direct effect on the success or failure of that company. According to Jain, Trehan and Trehan (2009), business environments can be categorized in two: (1) internal business environment; (2) external business environment. Institutions and organizations are usually in a position of controlling their internal business environment. By doing so, they gain the ability of affecting their institutional performance. On the contrary, it is difficult for a business to control the external environment; however, businesses can identify in advance the opportunities and threats presented by the external environment and take decisive actions to ensure its continued success (Jain, Trehan & Trehan, 2009; Goyal & Goyal, 2009).
The article addresses the issue of being successful in a highly uncertain business environment. Some managers prefer to play it safe by adopting a wait-and-see strategy while others may invest in flexibility that allows their companies to adapt quickly as the market evolves. The companies sometimes neglect the fact that having a successful strategy depends on several factors, including their industry position, assets, or their willingness to take a risk in investing in such strategies. The paper introduced some of the tips and terminologies that could help managers facing uncertainty decide on whether to play safe or bet big. The traditional practice is to put a vision of predicted future events
Environmental scanning "is the acquisition and use of information about events, trends, and relationships in an organization's external environment, the knowledge of which would assist management in planning the organization's future course of action." Choo (2001) As explained by Gazzale (2007) all businesses external environment are made up of three facets ": 1) the remote environment (macroeconomic factors including inflation, GDP, interest rates, etc.), 2) the industry environment (barriers to entry, the level of competition within the industry, etc.), and 3) the operating environment (the business's customers, suppliers, and workforce, etc.).
Analysis of the external environment is very important for the development strategy of the organization and a very complex process requiring a process tracking and assessment factors and also the establishment of links between those factors and the strengths and weaknesses as well as opportunities and threats. External environment has its complexity and uncertainty. It is obvious that without knowing the environment the organization can not exist. The organization studies the environment in order to secure a successful progress towards its goals.
Environmental scanning is the process of gathering information about events and their relationships within an organization's internal and external environments. The basic purpose of environmental scanning is to help management determine the future direction of the organization (Barnat, 2004). For a business to succeed, it is important to study the business environment of the firm that consists external and internal influences that affect the firm’s decisions and performance (Grant, 2010). Environmental scanning includes the assessment of Macro and Micro environmental analysis.
Technological change, change in economic climate, natural occurrences and such-like are matters that concern the macro-environment of a business. These external, uncontrollable, influences can and will impact hugely on the success or failure of a business. One of the tools that are applicable in considering these factors is PESTLE. Political; Environmental; Social; Technological; Legal and Economic considerations will need to be engaged in order to prepare the business for macro-environmental influences. For this reason, PESTLE will be the most appropriate tool to use to identify and outline the main macro-environmental factors that may affect my business.
It is apparent that the only thing constant in business is change. Organizational change is often an overwhelming challenge for business leaders, managers and employees alike. The need for change may be the result of market shifts, economic environment, technology advancements or changing work force skill-set demands. Today Organizational change occurs for reasons that originate external to the organization (Chandler, 1996: Hannan & Freeman, 1984), as well as internal to the organization (Baker 1990: Prechel 1994). Thus, External constraints, internal constraints, resource dependency and increasingly growing competitive markets force organizations to change in order to maximize economic potential. Although organizational changes are usually a response in reaction to an event, companies and leaders should still expect to encounter issues. Organizations need to be more proactive and contingent on how to handle the problems that will inevitably come about. This will make the process of organizational change go smoothly as well as reduce resistance through proper management techniques. Resource dependency argues that both environmental and organizational constraints impact organizational change (Pfeffer & Salancik, 2003).
Over the past hundred years management has continuously been evolving. There have been a wide range of approaches in how to deal with management or better yet how to improve management functions in our ever changing environment. From as early as 1100 B.C managers have been struggling with the same issues and problems that manager’s face today. Modern managers use many of the practices, principles, and techniques developed from earlier concepts and experiences.