Management:
The Business Environment of Organizations
To lead an organization efficiently we must know where our company is situated, what are the outside influences and the inside ones.
Outer environment (macro environment)
There are some factors in the lives of organizations that affect them, but they don’t have any control over them (much like in our own life). We can define three major areas, but these are just the large groups, they just give a general outline.
Political-legal environment:
The effects of this are quite visible. Just think of the effect of changing taxes, or raising interest rates. If the legal system, pushed by politics lowers he acceptable emission rates, companies may have to invest in new equipment or close down.
Technological state (R+D):
Technology can bring millions to one company and take millions from another. Organizations on the frontier usually experience a boom, with many following, but some rivals may go bankrupt. A good manager has to be aware of change and embrace technology to gain an edge on competition.
Social-Cultural environment
This is a very important but also very diverse category. Think of a company in China and a company in Hungary. A Hungarian company only has to produce for a potential market of about 10 million. A Chinese company has a potential market of 1.3 billion., which is 130 times as much! That alone is a huge difference, and we haven’t even touched cultural differences. For example in India, McDonalds probably wont sell any hamburgers made from beef because they don’t eat that there. A manager has to keep all these in mind when leading an organization! Inner environment (microenvironment)
This is the environment that an organization can influence. It may not be able to correct all flaws in the microenvironment, but it has a much better control over it than the macro environment.