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QN: Explain the significance of external environment in managing Kenyan organizations.
The external environment of an organization is those factors outside the company that affect the company's ability to function. An organization has little on no control over its environment but needs to constantly monitor and adapt to these external changes, a proactive or reactive response leads to significantly different outcome.
External environment can be viewed in two ways:
The Macro environment is a set of broad dimensions and forces in an organization’s surroundings that impact everyone, including the organization. They include:
• Economic conditions include interest rates, inflation rates, changes in
disposable income, stock market fluctuations, and the general business cycle.
• Political/legal conditions include the general political stability of countries in
which an organization does business and the specific attitudes that elected
officials have toward business.
• Socio-cultural conditions include the changing expectations of society.
Societal values, customs, and tastes can change.
• Demographic conditions, including physical characteristics of a population
(e.g., gender, age, level of education, geographic location).
• Technological conditions, which have changed more rapidly than any other
element of the general environment.
The Task environment is composed of specific groups and organizations that directly affect the firm.
• Competitors that seek the same customers or resources as the organization.
• Customers who acquire and use an organization’s products or resources.
• Suppliers that provide resources to the organization.
• Regulators (government agencies, interest groups, unions, and communities) that control, legislate, or influence the organization’s policies and practices.
A company must be cognizant of these changes, flexible, and willing to respond to them in an appropriate way.
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