CH04-TheExternalEnviroment - Chapter 4 The External...

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Chapter 4: The External Environment The Environmental Domain Organizational environment 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. An organization’s domain 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 sectors or subdivisions of the external environment that contains similar elements. Task Environment 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. - Industry sector o Competitors, industry size and competitiveness, related industries - Raw materials sector o Suppliers, manufactures, real estate, services - Human resources sector o Labor market, employment agencies, universities, training schools, employees in other companies, unionization - Financial resources sector o Stock market, banks, credit unions, private investors - Market sector o Customers, clients, potential users of products and services - Technology sector o Techniques of production, science, computers, information technology, e-commerce - Economic conditions sector o Recession, unemployment rate, inflation rate, rate of investment, economics, growth - Government sector o City, provincial, federal laws and regulations, taxes, services, court system, political processes - Sociocultural sector o Age, values, beliefs, education, religion, work ethic, consumer and green movements - International sector o Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rate. General Environment 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 eventually.
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International Context The growing importance of the international sector means that the environment for all organizations is becoming extremely complex and extremely competitive. Environmental Uncertainty Two essential ways the environment influences organizations 1. The need for information about the environment 2. The need for resources from the environment Uncertainty means that decision makers do not have sufficient information about environmental factors, and they have a difficult time predicting external changes. Uncertainty increases the risk of failure for organizational responses and makes it difficult to compute costs and probabilities associated with decision alternatives. Simple-Complex Dimension
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CH04-TheExternalEnviroment - Chapter 4 The External...

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