A number of themes run through the text and it is useful to draw attention to the seat this point.
Interaction with the environment
Viewed as an open system, the business organisation is in constant interaction with its environment. Changes in the environment can cause changes in inputs, in the transformation process and in outputs and these in turn may engender further changes in the organisation’s environment. The internal and external environments should be seen as inter related and interdependent, not as separate entities.
Interaction between environmental variables
In addition to the interaction between the internal and external environments, the various external influences affecting business organisations are also frequently interrelated. Changes in interest rates, for example, may affect consumer confidence and this can have an important bearing on business activity. Subsequent attempts by government to influence the level of demand could exacerbate the situation and this may lead to changes in general economic conditions, causing further problems for firms. The combined effect of these factors could be to create a turbulent environment which could result in uncertainty in the minds of managers.
Failure to respond to the challenges (or opportunities) presented by such changes could signal the demise of the organisation or at best a significant decline in its potential performance.
The complexity of the environment
The environmental factors identified above are only some of the potential variables faced by all organisations. These external influences are almost infinite in number and variety and no study could hope to consider them all. For students of business and for managers alike, the requirement is to recognize the complexity of the external environment and to pay greater attention to those influences which appear the most pertinent and pressing for the organisation in question, rather than to attempt to consider all possible contingencies.
Environmental volatility and change
The organisation’s external environment is further complicated by the tendency towards environmental change. This volatility may be particularly prevalent in some areas (e.g. technology) or in some markets or in some types of industry or organization. As indicated above, a highly volatile environment causesuncertainty for the organisation (or for its sub-units)and this makes decision making more difficult.
Implicit in the remarks above is the notion that each organization has to some degree a unique environment in which it operates and which will affect it in an unique way. Thus, while it is possible to make generalizations about the impact of the external environment on the firm, it is necessary to recognize the existence of this uniqueness and where appropriate to take into account exceptions to the general rule.
Different spatial levels of analysis
External influences operate at different spatial levels local, regional, national, supranational, international.There are few businesses, if any, today which could justifiably claim to be unaffected by influences outside their immediate market(s).
Two-way flow of influence
As a final point, it is important to recognize that the flow of influence between the organization and its environment operates in both directions. The external environment influences firms, but by the same token firms can influence their environment and this is an acceptable feature of business in a democratic society which is operating through a market-based economic system.
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Business Environment Tutorial
Business Organisations: The External Environment
Business Organizations: The Internal Environment
The Political Environment
The Macroeconomic Environment
The Demographic Environment Of Business
The Resource Context
The Legal Environment
Size Structure Of Firms
Government And Business
The Market System
International Markets And Globalization
Governments And Markets
The Technological Environment: E-business
Corporate Responsibility And The Environment
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