Identify the major components of an organization's task environment.
Environmental factors greatly influence an organization's success or failure and are categorized into two main environments: the external and internal environments. The external environment is comprised of the firm's task and general environment. The task environment (industry) includes actual and potential competitors, suppliers, buyers (consumer and distribution networks), complimentary products and service firms (strategic partnerships), and substitute products and service firms.
Explain how each component in the task environment impacts the organization.
An organization's task environment is affected by many forces. According to Michael Porter's five forces model, the firm's profitability and market share is highly influenced by each of the five forces: threat of entry, bargaining power of buyers, threat of substitutes, bargaining power of suppliers, and intensity of rivalry. A competitor's entry into the marketplace can be restricted if entry costs are high and competitors are few. The bargaining power of buyers to demand higher quality and lower prices can exist if there are fewer buyers with the ability to purchase large quantities and low switching costs. Additionally, the threat of substitute products such as in the drink industry, can erode market share and profits, if there lacks consumer brand loyalty. Suppliers can have tremendous power of raising costs, if there are few suppliers. Lastly, factors affecting the intensity of rivalry include: the nature of the product, demand and supply conditions, cost structures, and competitive structures.
Identify the major components of an organization's general environment.
The general environment includes the external forces such as political and legal, macroeconomic, demographic, sociocultural, technological, and internal forces.
Explain how each component in the general environment impacts the organization.
Discuss the nature of change in the external environment.
Unforeseen changes in the external environment such as domestic and international political changes, restrictive law changes, changing social values, economic changes, increase or decrease in competition, and technological advances can significantly impact an organization's profitability.
Outline the main components of the internal environment of an organization and articulate their implications for managerial actions.
The internal environment includes the organization's employees, organizational culture, stock holders, controls and structures, and the tangible and intangible assets. A manager must examine and strategize according to the organization's internal strengths, weaknesses, opportunities, and threats (SWOT analysis) in decision making.
