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Organizations do not exist in a vacuum. They are constantly being affected by external forces which determine an organizations effectiveness and performance. Therefore, it is imperative for the management of any organization to examine components of their firms external and internal environments to understand the dynamic and far- reaching changes that are occurring. This presentation focuses on the environmental factors that companies need to analyze for developing strategic options.

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(Macro environment)

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Internal Environment Task Environment General Environment Political / legal Economic Socio-cultural Technological Political / legal Economic Socio-cultural Technological Customers Labour Competition Suppliers Customers Labour Competition Suppliers Employees Management Culture Employees Management Culture

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We can conceptualize the organization as having two layers: 1. The general environment 2. The task environment

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The general environment or macro- environment is all those forces affecting the organization indirectly. These external forces are: Political / legal Economic Technological Socio-cultural

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The general environment is inclusive of government regulations, laws, policies and activities designed to influence organizational performance in an indirect way.

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Technological environment includes changes in technology that affect the way organizations operate and service they provide.

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These forces are most likely to affect an organizations production of goods and services and results in the general state of both domestic and world economy. The components are: Interest rates and inflation Consumer price index Monetary and fiscal policy taxes Unemployment rates Wage rates GDP

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The importance socio cultural factors that companies should analyze are: Age Population density Educational levels Geographical distribution Culture Lifestyles

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The task environment is inclusive of those sectors that have a direct working relationship with the organization. Critical variables in the tasks environment are: Customers Suppliers Labour competition

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Labour markets include the people available for hire. Every organization needs well-trained and qualified workers. Research shows the workers with high level of competencies, knowledge, and training increases the overall performance of the organization.

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Customers are the final purchasers of a good or service. A study of customers will help managers determine what are the customers needs and wants to be satisfied. Analysis of customer profiles allows the organization to develop it organizational strategy and structure in order to deliver a particular good or service that best suits the needs of the customer.

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Suppliers are peoples and organizations who provide raw materials the organization uses to produce its output. A suppliers pricing strategy does affect the organizations level of revenue earned.

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Competitors are other organizations in the same industry or type of business providing goods and services to the same set of customers.

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The internal environment consists of employees, management and the shared organizational culture. Analysis of the internal environment allows top management to assess the strengths and weakness of the organization. This assessment has implications for human resource management policy, procedure, employee training and development.

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The unpredictability of the external environment can render an organization ineffective and consequent demise. Careful environmental scanning by management is significant and has implications for planning. It is at this point that managers are able to set goals and design strategy and justify their decisions for taking what ever they see necessary. Not one can be certain; but it is better to be safe than sorry.

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Boundary Spanning Roles. Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external world. Forecasting & Planning.

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Organic StructureMechanistic Structure 1.Free Flowing; has fewer rules and regulations. 2.Encourages team work 3.Decentralizes decision making to employees dong the work. 1.Rigidly defined tasks; many rules and regulations. 2. Little team work. 3.Centralized decision making.

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Merger & Joint Venture Merger. A combination of two or more organizations into one. Joint Venture. A strategic alliance or program by two or more organizations.

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Advertising and Public Relations Political Activity Trade Association

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Domestic Stage International Stage Multinational Stage The Global Stage

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International Financial Crisis Chinese century Rise of BRICS Consumption Patterns Exchange Rates Global Warming Loses

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Political Risks Clash of the Civilizations GATT WTO New Economic Blocks EU BRICS Shanghai Five ASEAN

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Hofstedes Research Power Distance Uncertainty avoidance Individualism and Collectivism Masculinity/femininity Future orientation

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Outsourcing Exporting Licensing Franchising Direct Investment

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Advantages Can sell more globally Can avoid transport costs Can take advantage of different wage levels Can achieve great economies of scale Have less chance of going bankrupt Can carry out a lot of R & D

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Disadvantages MNCs move their factories to wherever it is profitable MNCs may switch their profits between countries They may force competing firms out of business Some MNCs may exploit workers Some MNCs may interfere in the government of a country