External Environment
Chapter 4
The External Environment
The Environmental Domain
Organization Environment is composed of all elements that exist outside the boundary of the organization that have the potential to affect all or part of the organization. Its domain is the chosen field of action. The environment comprises several sectors or subdivisions of the environment that contain similar elements (ie. industry, raw materials, human resources, market, technology, financial resources, economic conditions, government, sociocultural, and international.
• Task Environment – includes sectors with which the organization interacts directly and that have a direct impact on the organization’s ability to achieve its goals. o Industry, raw materials, market sector and hr and international sectors
• General Environment – includes sectors that might not have a direct impact on the daily operation of a firm but will directly influence it. o Government, sociocultural, economic conditions, technology, and financial resources sectors
• International Context o Domestic sectors can be affected by international events
Environmental Uncertainty
Responding to the need for information.
2 Ways the environment influences organizations: (1) the need for information about the environment and (2) the need for resources from the environment. Uncertainty applies to sectors that the organization deals with on a regular basis, the task environment, and this must be analyzed along dimensions of stability and degree of uncertainty.
• Simple Complex Dimension concerns environmental complexity, the heterogeneity, or the number and dissimilarity of external elements relevant to an organization’s operations. o ↑ in external factors and ↑ in # of organizations in that domain = ↑ complexity
• Stable-Unstable Dimension refers to whether elements in the environment are dynamic o If an environmental element remains the same over a period of months/ years = ↑ stability
FRAMEWORK FOR ASSESSING
The External Environment
The Environmental Domain
Organization Environment is composed of all elements that exist outside the boundary of the organization that have the potential to affect all or part of the organization. Its domain is the chosen field of action. The environment comprises several sectors or subdivisions of the environment that contain similar elements (ie. industry, raw materials, human resources, market, technology, financial resources, economic conditions, government, sociocultural, and international.
• Task Environment – includes sectors with which the organization interacts directly and that have a direct impact on the organization’s ability to achieve its goals. o Industry, raw materials, market sector and hr and international sectors
• General Environment – includes sectors that might not have a direct impact on the daily operation of a firm but will directly influence it. o Government, sociocultural, economic conditions, technology, and financial resources sectors
• International Context o Domestic sectors can be affected by international events
Environmental Uncertainty
Responding to the need for information.
2 Ways the environment influences organizations: (1) the need for information about the environment and (2) the need for resources from the environment. Uncertainty applies to sectors that the organization deals with on a regular basis, the task environment, and this must be analyzed along dimensions of stability and degree of uncertainty.
• Simple Complex Dimension concerns environmental complexity, the heterogeneity, or the number and dissimilarity of external elements relevant to an organization’s operations. o ↑ in external factors and ↑ in # of organizations in that domain = ↑ complexity
• Stable-Unstable Dimension refers to whether elements in the environment are dynamic o If an environmental element remains the same over a period of months/ years = ↑ stability
FRAMEWORK FOR ASSESSING