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Why Is It Important Yo Study and Understand External Environment of an Organization

Essay by   •  July 13, 2015  •  Essay  •  339 Words (2 Pages)  •  1,518 Views

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External environment is often described as ouside factors that has an impact on organizations. The factors that may affect organizations are the economy, politics, social affairs, threats from competitors etc. External environmental factors have a potential influence on businesses as most of these factors are unpredictable, therefore it may create both risk or opportunities for an organization.

Moreover when considering economy as an environmental factor it is important for organizations to watch over interest, exchange and inflation rates, these factors may have an impact on how the business operates. Also social influences such as population of certain areas can be used to determine the demand for one company over other companies.

Additionally it is important to study and understand external environment of an organization because these factors are constantly changing therefore an organization should be alert and prepared at all costs. One of these unpredictable changes are in the consumer market. In this current era consumer market is rapidly changing and this is due to the fact that customers develop new requirements and they want new technologies and products therefore organizations need to plan changes tgat woukd meet customers satisfaction. A crucial change that need to be taken to consideration is new competitors in the market, businesses are put under risk if new businesses starts to flourish. All these changes must be forseen or thoroughly understood by an organization so thay it can propose and introduce new ideas and plans to stay in the market and become successful.

Overall external environmental factors can become beneficial or in many cases stand as a threat to organizations. So the importance of understanding these factors is vital for an organization in surviving and overcoming these situations. A major factor is public opinions about an organization, this may contribute in having a negative or a positive outcome for the business. It is important for all organizations to consider it's own external environment, as it has major impact in either destroying or potentially boosting its profits.

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