Chapter 4: The External Environment
The Environmental Domain
is defined as all elements that exist outside the boundary of the organization that
have the potential to affect all or part of the organization.
is the chosen field of action. It is the territory an organization stakes out for itself for
its products, services, and markets served.
The environment comprises several
or subdivisions of the external environment that contains similar
The 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. The task environment typically includes the
industry, raw materials, and market sectors, and perhaps the human resources and internal sectors.
Competitors, industry size and competitiveness, related industries
Raw materials sector
Suppliers, manufactures, real estate, services
Human resources sector
Labor market, employment agencies, universities, training schools, employees in other
Financial resources sector
Stock market, banks, credit unions, private investors
Customers, clients, potential users of products and services
Techniques of production, science, computers, information technology, e-commerce
Economic conditions sector
Recession, unemployment rate, inflation rate, rate of investment, economics, growth
City, provincial, federal laws and regulations, taxes, services, court system, political processes
Age, values, beliefs, education, religion, work ethic, consumer and green movements
Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs,
regulations, exchange rate.
The general environment includes those sectors that might have a direct impact on the fairly operations of a
firm but will indirectly influence it. The general environment often includes the government, socio-cultural,
economic conditions, technology, and financial resources sectors. These sectors affect all organizations