INSTITUTE OF MANAGEMENT SCIENCES

UNIVERSITY OF BALOCHISTAN

TOPIC: WHY IS IT IMPORTANT TO STUDY ENVIRONMENT OF

AN ORGANIZATION

SUBMITTED TO: MISS SAMIA MALIK

SUBJECT: MANAGEMENT

SUBMITTED BY: KHALID KHAN

MBA SECTION (A)
1ST SEMESTER
M10

1st Assignment
19 May, 08
 CONTENTS
• ORGANIZATION

• ENVIRONMENT

O EXTERNAL ENVIRONMENT
 GENERAL
• ECONOMIC
• TECHNOLOGICAL
• SOCIO CULTURAL
• POLITICAL & LEGAL
• INTERNATIONAL
 TASK
• COMPETITORS
• CUSTOMERS
• SUPPLIERS
• REGULATORS
• STRATEGIC ALLIES

O INTERNAL ENVIRONMENT
• OWNERS
• BOARD OF DIRECTORS
• EMPLOYEES

• CONCLUSION

1st Assignment
19 May, 08
ORGANIZATION:

An organization is social inventions for accomplishing goals through group effort. In a

common definition this can –take as a group of people working to obtain a certain goal or
Group of people working interdependently toward some purpose. Organizations are not just
buildings or other physical structures. There for organization can be from a schools, colleges,
universities and military.
Business organization is a gathering of people in order to achieve profits as the common goal.
Business organization can be seen in various types and sizes. A business organization can be
from a home base small private company with few employees to multi million dollar
organizations with thousands of employees.

ENVIRONMENT OF ORGANIZATION:

Organizational environment refers to the forces that can make an impact. Forces made up
opportunities and threats. Organizations dose not exist in isolation. It works with the overall
environment.

THE EXTERNAL ENVIRONMENT:

The external environment is everything outside the organization. It consists of all the outside
institutions and forces that have an actual or potential interest or impact on the organization's
ability to achieve its objectives:
Competitive
Technological
Political
Legal

External environment consists of two layers

◊ General Environment
◊ Task Environment

1st Assignment
19 May, 08
GENERAL ENVIRONMENT:

The general environment of an organization is the set of broad dimensions and forces in its
surroundings that create its overall context. Each dimension of the general environment
embodies conditions and events that have the potential to influence the organization in
important ways. These dimensions and forces are not necessarily associated with other
separate organization. The general environment of most organizations has
1. Economic
2. Technological
3. Socio Cultural
4. Political & Legal
5. International

THE ECONOMIC DIMENSION of an organization is general environment is the overall health

of the economic system in which the organization operates. Particularly important economic
factors for business are inflation, interest rates and unemployment, all of which affect
demand for different products.

THE TECHNOLOGICAL DIMENSION of the general environment refers to the methods

available for converting resources into products or services. Although technology is applied
within the organization, the forms and availability of that technology come from the general
environment.

THE SOCIO CULTURAL DIMENSION of the general environment includes the customs,
mores, values and demographic characteristics of the society in which the organization
functions. Socio cultural processes are important because they determine the products,
services and standards of conduct that the society is likely to value.

THE POLITICAL & LEGAL DIMENSION refers to the government regulation of business and
the relationship between business and government, it is important for three basic reasons.
1. The legal system partially defines what an organization can and cannot do
2. Pro-business and anti-business sentiment in government influences business
activities
3. Political stability has ramifications for planning

1st Assignment
19 May, 08
THE INTERNATIONAL DIMENSION refers to the extent to which the organization is affected
by or involved in business in other countries. No company wants to setup business in another
county unless trade relationships with that country are relatively well defined and stable.
The international dimension also has implications for “not for profit organizations”. Let say,
if Peace Corps sends representatives to under-developed countries. Medical breakthroughs
achieved in one country spread rapidly to others, and cultural exchanges of all kinds take
place between countries.

THE TASK ENVIRONMENT:

The task environment consists of specific organizations or groups that influence an

organization. The task environment includes:
1. Competitors
2. Customers
3. Suppliers
4. Regulators
5. Strategic Allies

COMPETITORS of an organization are other organizations that compete with it for resources.
The most obvious resources that competitors compete for are customers. Competition also
occurs between substitute products. Organizations may also compete for different kinds of
resources besides consumer dollars. For instance, tow totally unrelated organizations may
compete to acquire a loan from a bank that has only limited funds to lend.
Information about competitors is often quite easily obtained. Firms can buy their competitors’
product to learn more about their technology and assembly methods. This practice, called
benchmarking, has become an important tool in quality improvement programs in recent
years.

CUSTOMER is the second dimension of the task environment. Common sources of

information about customers include market research, surveys, consumer panels and reports
from sales representatives. Dealing with customers has become increasingly complex in

1st Assignment
19 May, 08
recent years. As the taste of customers changes with time, organizations have to change their
products accordingly.

SUPPLIERS are organizations that provide resources for other organization. Resources are of
different kinds, they may be raw materials, machinery, equipments or even funds. Business
strategy says that a firm should try to avoid depending exclusively on particular suppliers. A
firm that buys all of a certain resource from one supplier may be crippled if the supplier goes
out of business or is faced with a strike.

REGULATORS are units in the task environment that have the potential to control, legislate or
influence an organization’s policies and practices. There are two important kinds of
regulators:
1. Regulatory agencies are created by the government to protect the public from certain
business practices or to protect organizations from one another.
2. Interest group is organized by its members to attempt to influence organizations.

STRATEGIC ALLIES the final dimension of task environment. Strategic allies are that two or
more companies that work together in joint venture or other partnerships. It helps companies
to get expertise from other companies they lack. They also help spread risk. But it is
important to not to reveal the sensitive competitive information.

THE INTERNAL ENVIRONMENT:

Internal environment consist of conditions and forces within the organizations. Importance of
internal environment’s aspects may vary from organization to organization. Internal
environment consists of:
◊ Owners
◊ Board of Directors
◊ Employees

OWNERS of a business are people who have a legal property right to that business. Owners
can be a singe individual, partners, individual investors (stock holders) or other organization.

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19 May, 08
Individuals who own and manage their own businesses are clearly a part of the organization
internal environment. Owners of any entity are responsible for making products, decisions
and profit making. They are the important part of internal environment of an organization as
they are directly involved in the activities.

BOARD OF DIRECTORS are only associated with incorporated businesses. There does not
exists Board of Directors in any organization that is not registered by Company Ordinance
1984. Board of Directors are elected by share holders. They are also share holders having
greater shares. They are charged with over seeing the General Management of the firm to
ensure that is being run in a way that best serves the stock holders’ interest.

EMPLOYEE is a person that works in a firm. Employee is an important part of internal

environment as he has to do all work assigned by the owner. If he understands the internal
environment well can coordinate with manager and can embrace the same values and has
same goal for organization.

Phases of
Change

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19 May, 08
CONCLUSION:

The study of external environment is essential because if an organization is not aware of the
changes occurring outside, it can not cope with the technology advancement and can not
achieve the future position that is ‘Its Goal’.

Internal environment as we discussed contains all the members involved in achieving the goal
of organization. If the internal environment is friendly and can be adopted by all new
members easily it will increase work efficiency and effectiveness.

1st Assignment
19 May, 08