Types of Environment
The environment can be classified as an internal & external environment. The environment analysis includes the study of all these dimensions & their interplay as well as impact.
- INTERNAL ENVIRONMENT can be viewed from different dimensions like a customer, supplier, labor, competition, community, human resource.
| TABLE 1: FACTORS IN THE INTERNAL ENVIRONMENT AND THEIR AFFECT ON THE BUSINESS/ORGANIZATION | |||
| Factor | Influence on the organization | ||
| Human Resource | 1. The knowledge, experience, and capability of an organization’s workforce are a determining factor of success. For this reason, organizations pay particular attention to the recruitment of the staff and also to engage in the training of the staff and volunteers, to build the organization’s capability. 2. In pursuing both recruitment and training strategies, an organization is often limited by its financial strength.3. Nevertheless, training of staff is an essential aspect of good business management, and even in difficult financial circumstances is an achievable strategy. | ||
| Organizational Culture | 1. The culture within the organization is a very important factor in business success.2. The attitudes of staff and volunteers, and their ability to “go the extra mile” makes a very significant difference. 3. Negative attitudes can severely impact on the organization’s ability to implement strategies for development despite however thorough the planning processes.4. Positive attitudes of staff and volunteers will not only make the management task easier but also will be noticed and appreciated by customers of the business or members of the organization. | ||
| Organization Structure | 1. Businesses and organizations may be impeded by their structure, constitution and/or forms of governance.2. Organizational structure is essentially the way that the work needed to carry out the mission of the organization is divided among its workforce. 3. In a non-profit organization, the organization will include the management board or committee (i.e. President, Secretary, Treasurer and Ordinary Committee Members), the salaried staff of the organization and all the volunteers that have roles as coordinators of various business functions (e.g. Event Coordinator, Promotions Coordinator, and Coaching Coordinator).4. When an organization is a for-profit business that operates in a very competitive environment, its organizational structure may help or hinder the ability of the organization to react to change. For example, when the organization structure has many levels of management, decision making can be slow as information is carried up and down the hierarchy. For this reason, “flatter” organization structures are often preferred i.e. people who work “at the coal face” and one level of management above. 5. Volunteers are a normal part of the non-profit organization but not the profit-business. Although it is often hard to find volunteers, the organization structure of the non-profit organization can be very flexible by appointing volunteers as needed. |
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| Management | 1. The capability of the management team and the leadership styles employed by managers will also have a major impact on the morale of staff (and volunteers in a non-profit organization) and organization culture. 2. More contemporary forms of management involve workers in decision making processes and trusting that, although managers and workers have different viewpoints, they largely benefit by working together to achieve the business objectives. | ||
| Assets | 1The internal environment of the organization can be made richer or poorer by its assets. For example, the organization’s premises can be pleasant and uplifting, or demure and depressing. 2. The availability of equipment is another asset that can significantly impact on the internal environment. If the equipment is in short supply or not of the expected standard, then staff may be hindered in the performance of their duties, or if the equipment is used by customers then customer satisfaction will fall. | ||
| Financial Strength | 1. Financial strength is a factor in its own right that influences the internal environment of the organization. 2. Despite however good other internal factors may be, it is very difficult for an organization that is too short of cash to implement strategies within the strategic plan. 3. If the organization struggles financially this can impact staff morale as budgets need to be excessively tight. | ||
EXTERNAL ENVIRONMENT
| TABLE 1: FACTORS IN THE EXTERNAL ENVIRONMENT AND THEIR AFFECT ON THE BUSINESS/ORGANIZATION | |
| Factor | Influence on the organization |
| Economic conditions | 1. Prevailing economic conditions of the nation will affect the spending patterns of citizens. Increases in interest rates and/or a high level of unemployment will depress consumption of non-essential goods and services. For example. When people experience financial hardship, they will spend much less on sport and recreation, holidays, new cars and luxury goods.2. Economic conditions are global as well as national, and when there is a global finance
2. ial crisis as in 2007, changes in the external environment can be dramatic.3. Economic policies such as industrial, monetary and fiscal policies .4. Economic indices like national income, distribution of income, rate, and growth of GNR, per capita income, disposable personal income, rate of saving and investment, the value of export and imports, the balance of payments, etc. 6. Infrastructural factors such as financial institutions, banks, modes of transportations, communication facilities, energy sources, etc. 7. Liberalization of the economy had a mixed effect industries in India. While most of the companies have benefited in terms of the resulting freedom to alter product mix and capacities, there have been some adverse effects too. |
| Market(competition) | 1. The strength of business competition is a constantly changing factor in the external business environment.2. Not only will competitors come and go, but they will also change marketing strategies, product lines, and prices. Often such changes are not heralded and business managers must be alert as to what competitors are doing. |
| Technology | 1. Technological change has been rapid in the last 50 years and is a factor in the external environment that constantly exerts pressure on the business or organization. 2. If businesses do not adapt sufficiently quickly to technological change, they risk losing market share. 3. It’s not just that technological change affects the design of products, but even the delivery of services can change. |
| Climate change | 1. Climate change is an insidious (dangerous) threat because the pace of change may be recognizable only if considered on a decade-by-decade basis.2. The effect of climate change will not fall equally on all nations and all businesses. 3. Businesses that depend directly on a good supply of water e.g. agriculture, field sports will be adversely affected if climate change results in reduced rainfall. However, the flow-on effects of drought will eventually work their way through to all businesses in the affected community. |
| Legal | 1. Taxation is one of the most obvious changes in the law through legislation. 2. Sometimes taxation changes occur overnight with little warning and sometimes there is plenty of time for the business to prepare.3. Other law changes that commonly affect business include Workplace Health and Safety, Industrial Relations, Consumer Protection, and Environmental Law. 3. Industrial policy and licensing 4. Monopolies and restrictive trade practices 5. Legislation related to company operation 6. Capital issues control over stock exchange 7. Import and export control and control over foreign exchange 8. Control over foreign investment and collaboration 9. Control over distribution and pricing of commodities, 10. Control over the development and regulation of industries 11. Control through consumer protection 12. Control of environmental position |
| Media | 1. The media is undergoing rapid and significant change. The main driver of this change is a technology and the rise of the internet. Newspapers once carried many pages of job adverts but now this business is conducted by online recruitment companies such as Seek. |
| Political | 1. Like law, changes in government policy can be well notified and discussed, or without warning. 2. As an example of how government policy affects, is that many organizations depend on government financial assistance. When there is a change of government, such funding assistance can disappear in a short space of time. 3. Political philosophy, government‘s role in business, its policies and inventions in economic and business development.4. Businessmen are conscious of the political environment that their organizations face. Most governmental decisions related to the business are based on political considerations in line with political philosophy followed by the ruling party at the center and the state levels. |
| Demographic | 1. There is constant change in the make-up of the population. Some of these changes include an increasing proportion of elderly citizens, an increasing number of two-income families, the age at which people marry is increasing, increasing ethnic diversity, and suburbs which were once dominated by young families now have few. 2. These demographic changes can have a significant effect locally. For example, a sports club that once prospered can begin to decline as the local area has fewer and fewer children. 3. Family structure and change in it, attitude towards and within the family and family values 4. Role of women in society, the position of children and adolescents in family and society.
5. Educational levels, awareness, and consciousness of rights work ethics of members in society |