There are two types of environmental factors, internal and external. External environments are the forces and events outside a company that have the capability to influence or effect it. There are two types of change, which are stable Environments and dynamic environments. In stable, the rate of change is slow and the basic business functions change little over a long period of time. In Dynamic, the rate of change is fast, one can use the Smartphone business as a perfect example. Every year they release a new model with new technology and every year the environment of the market is changing and expanding. One might think that a company is either stable or dynamic, but in actuality, most companies go through periods of both phases. According to punctuated equilibrium theory, companies go through long periods of stability when small change happens, followed by short, complex periods of fundamental change; and finishing with a return to stability. Another characteristic of external environments is resource scarcity which is the abundance or shortage of important resources for an organization. Let’s say I am running a farm and there is a water shortage, this would affect how much I am producing and at what cost I would charge.
Uncertainty is the extent in which managers can understand and predict which environmental factor changes and trends will affect their business. Uncertainty is lowest amongst managers when change and complexity is at the lowest. This would give them the
As for external factors one of the external factors would be perhaps a new law that is given and affects directly or indirectly the business and that business needs to make some changes.
External environmental factors are the macro environment affecting a business; they are factors outside the company and which they have no control over (Kotler & Armstrong, n.d.) these external factors bring about impacts to the company thus a company should always be prepared to react.
External planning factors must be frequently revised so a business can abide by new laws or economic change so it can remain efficient and profitable. It could be demand for a product/service, government policies, change in nature of work, workforce skills, labour market competition and impact of automation. These are out of a business’s direct control so human resources must be able to adjust.
The external environment affects a firm’s strategic actions. Essentially, if a company decision has created a disaster in the environment, they
Market conditions are constantly changing; the market conditions that the firm started with may not be the same market conditions a few months later. This gives business managers the opportunity to keep up with change and continuously improving their skills and assets.
1. What factors contribute to the rapid pace of change in business? Is the pace likely to accelerate or decrease over the next decade? Why? There are four factors that help the change of in business. They are natural resources, capital, human resources, and entrepreneurship. I think this is more likely to accelerate over time because people need these services. As people grow and develop their needs change. As things happen in people’s lives expectantly or expectantly they are more likely to need some type of assistance.
external environmental factors?” is a Force Field Analysis. Developed in 1951 by social psychologist Professor Kurt Lewin, it is based on the premise that successful businesses are constantly adapting to change. The tool is generated by both driving forces, which push for change in an organization, and restraining forces, which act against change. (“Hoang, Paul. Business & Management.”)
These factors influence the internal environment of an organisation and they help in identifying the past and the present of the company, It also provides a frame work for reviewing strategy position and direction of the company.
Companies and industries are constantly impacted by their surroundings. For example, "all companies operate in a macro environment shaped by influences [including threats] emanating from general economic conditions; population demographics; societal values and lifestyles; legislation and regulations; technology; and closer to home the industry and competitive environment in which the company operates
A firms external environment is divided into two composites: the general environment and the industry environment. Fahey (1999) states that the general environment encompasses the broader society that influences an industry and the firms within it. The industry environment is the set of factors that directly influences a firm and its competitive actions and responses (Chen et al. 2010). Identifying opportunities and threats is an important objective of studying the general environment. Opportunities help companies achieve strategic competitiveness whilst threats may hinder a company's efforts to achieve strategic competitiveness (Gilad 2011). A firm will scan, monitor, forecast and assess the seven segments of the general environment to determine their effects on the firm. Firms identify early signals, detect meaning,develop projections, and determine the timing and importance of environmental changes and trends for firms' strategies and their management.
Businesses are constantly being impacted by external factors, many of which are out of their control. These factors include social factors; examples are demographics (population), changes in household &families, education, religions, attitudes to work, attitudes to male and female roles and ethics. There are also political and legal factors which includes legislation, company law, political stability and so on. All these factors have serious impacts on all businesses.
In continuation, Duncan’s framework for assessing environmental uncertainty, which examines the environment from environmental change and complexity perspective, will be used to further analyze the type of external environment and thus methods to overcome and adapt to it. All resources from external environment will be adopted to Fayol’s 4 management functions starting from planning, organizing, leading and controlling. The aftermath of this adoption would result in completing best performance for the organization and thus compete effectively. The model is shown at the figure below:
In business, it is essential to focus on the general environment because it directly corresponds to the organization. The general environment consists of economic conditions, legal-political conditions, sociocultural conditions and technological conditions. The way in which a business interacts with the environment will result in the company’s success or failure. A business must analyze each of these factors, as they all contribute to the overall growth and success of a company. If one of these factors become too regulated or shifted too far in one direction, a business is likely to feel it. There essentially must be a balance in order to keep a business steadily running. Ultimately, the goal is typically to maximize profits, so establishing an understanding of how these factors all play a role in the overall success of a business is critical.
Outside factors can influence the sustainability of a company regardless of the internal structure within the business. Some factors in the general environment that companies should be aware of include demographics, social, economic, political, and others. Understanding how each of these factors can impact the company allows management to make changes within the company for maximum success. At Tesla, the political, economic, and technological factors greatly impact the efficiency of the company.
How can the environment influence the company? How can the current environment influence the company?