Leadership and Change in Org

By the word “environment” we understand the surrounding or conditions in which a particular activity is carried on.

And we know that organization is a social entity that has a hierarchical structure where all necessary items are put together and they act within it to reach the collective goal.

Organization or more specific business organization and it activates are always being affected by the environment. In an organization, every action of the management body is influenced by the environment.

External Environment of Organization

In a simple way factor outside or organization are the elements of the external environment. The organization has no control over how the external environment elements will shape up.

The external environment can be subdivided into 2 layers:

 The general environment

The task environment.

General Environment of Organization

The general environment consists of factors that may have an immediate direct effect on operations but nevertheless influences the activities of the firm.

The dimensions of the general environment are broad and non-specific whereas the dimensions of the task environment are composed of the specific organization.

Let’s see the elements or dimensions of the general environment.

Economic Dimension: The economic dimension of an organization is the overall status if the economic system in which the organization operates. The important economic factors for business are inflation, interest rates, and unemployment. These factors of the economy always affect the demand for products. During inflation, the company pays more for its resources and to cover the higher costs for it, they raise commodity prices. When interest rates are high, customers are less willing to borrow money and the company itself must pay more when it borrows. When unemployment is high, the company is able to be very selective about whom it hires, but customers’ buying power is low as fewer people are working.

Technological Dimension

It denotes to the methods available for converting resources into products or services. Managers must be careful about the technological dimension. Investment decision must be accurate in new technologies and they must be adaptable to them.

Socio-cultural dimension

Customs, mores, values and demographic characteristics of the society in which the organization operates are what made up the socio-cultural dimension of the general environment.

The socio-cultural dimension must be well studied by a manager. It indicates the product, services, and standards of conduct that the society is likely to value and appreciate. The standard of business conduct vary from culture to culture and so does the taste and necessity of products and services.

Political-Legal Dimension

The politico-legal dimension of the general environment refers to the government law of business, business-government relationship and the overall political and legal situation of a country. Business laws of a country set the dos and don ts of an organization.

A good business-government relationship is essential to the economy and most importantly for the business. And the overall situation of law implementation and justices in a country indicates that there is a favorable situation in of business in a country.

International Dimension

Virtually every organization is affected by the international dimension. It refers to the degree to which an organization is involved in or affected by businesses in other countries.

Global society concept has brought all the nation together and modern network of communication and transportation technology, almost every part of the world is connected.

Task Environment of Organization

The task environment consists of factors that directly affect and are affected by the organization’s operations. These factors include suppliers, customers, competitors, regulators and so on.

A manager can identify environmental factors of specific interest rather than having to deal with a more abstract dimension of the general environment.

The different elements of the task environment may be discussed as under:

Competitors:

Policies of the organization are often influenced by the competitors.

Competitive marketplace companies are always trying to stay and go further ahead of the competitors. In the current world economy, the competition and competitors in all respects have increased tremendously. The positive effect of this is that the customers always have options and the overall quality of products goes high.

Customers:

“Satisfaction of customer”- the primary goal of every organization. The customer is who pays money for the organization’s product or services. They are the peoples who hand them the profit that the companies are targeting.

Managers should pay close attention to the customers’ dimension of the task environment because its customers purchase that keeps a company alive and sound.

Suppliers:

Suppliers are the providers of production or service materials. Dealing with suppliers is an important task of management.

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