The organization and the environment in which it operates in are not closed systems because they influence each other. The organization thus cannot be successful if it is not in step with its environment. The simple fact that the organization interacts with the environment means that the organization is acting in an open system and will be both affected by the environment and also impact on the environment. This means that the organization draws its inputs such as human, financial and informational resources but to mention a few from the environment and distributes its products and services back to environment.

No organization can exist in a vacuum; each is set in a particular country and region to which it is inextricably linked. This exposé will attempt to provide multiple contexts that influence how the organization operates and what it produces. An analysis of the external environment is an attempt to understand the forces outside organizational boundaries that are helping to shape the organization.
Forces outside the institution's walls clearly have considerable bearing on that which transpires within. The external environment can provide both facilitating and inhibiting influences on organizational performance. Multiple influences in the immediate or proximal environment form the boundaries within which an organization is able to function; these influences likewise shape how the organization defines itself and how it articulates what is good and appropriate to achieve.
Key dimensions of the environment that bear on the institution include the administrative/legal, technological, political, economic, and social and cultural contexts, the demands and needs of external clients and stakeholders, and relations with other pertinent institutions. Some examples of environmental considerations — that will be important in profiling an institution as a standard organization that can stand the test of time — are detailed below. Social and Cultural Environments
Social and cultural forces at local, national, and often regional levels have profound influence on the way organizations conduct their work and on what they value in terms of outcomes and effects. For example, the mores of an indigenous culture have a bearing on the work ethic and on the way in which people relate to one another. Undoubtedly, the most profound cultural dimension is language. The extent to which organizational members can participate in the discourse of the major scientific language will determine the extent to which research efforts focus inwardly or contribute to regional and global research agendas. Understanding the national/regional/local values toward learning and research provides insight into the type and nature of research that is valued. For example, what is the relative priority placed on contract research in partnership with local clients, e.g. testing products and procedures with indigenous populations, as opposed to sharing information with academic peers internationally, or generating biostatistical data that will shape national or regional policy? Arriving at these priorities involves culture-based decisions.

Firstly the socio-cultural environment is concerned with the society's attitudes and cultural values. When the organisation conducts its business it will need to do so in a way that respects and bears in mind the fact that the soci-cultural environment is characterised by different people and therefore it has to conduct it business in a way that respects and accomdates this environment. Failure to do so can result in bad publicity, losses and even the folding up of the business due to public pressure.

The organisation due to new trends in the socio-cultural environment is creating a different type of consumer and thus a need for different products, different services and consequently different strategies for its conduct. In a nutshell, the organization has to conduct its business in a way that is adaptable to socio-cultural changes and environments.

Economic Environment
In the economic environment, the organizational analysis should centre on those aspects of the economic system that directly impact the type of business being considered or at best to be offered the masses. For example economic indicators like, unemployment, inflation, labour laws, and opportunity costs, and balance of payments to name a few directly impact organizational activities. Clearly, a country under a structural adjustment regime or one that is expecting to undergo restructuring presents an investment context that needs to be understood. Countries with foreign currency restrictions represent different environments for institutions than countries without them, for such restrictions have ramifications for research, e.g. for equipment procurement and maintenance. It is important for the decision making body in an organization to know how the organizational structure is affected by these and other economic forces.

Unemployment
Unemployment is obviously the number of people without a job, but willing to work. This is an important indicator for business because it shows how 'tight' the labour market is. If unemployment is very low, then the labour market can be described as 'tight' as there are few people to fill any vacant jobs. This means that businesses may find it increasingly difficult to fill vacancies and may even have to offer higher wages to attract people to come to work for them. There may be particular shortages of skilled labour. High unemployment will mean the opposite and may mean that there is a pool of labour available and this will help keep wages down. However, demand for the goods and services produced may also be low and so this may not help.
Inflation
Inflation is a sustained increase in the general price level. In other words prices are consistently rising. This is important for business to keep an eye on, as they need to assess what to do with their own prices. Their costs are likely to be rising and so their margins will be squeezed. However, they need to watch carefully what their competitors are doing as well as if they put prices up too much they may become uncompetitive. Inflation is also likely to lead to higher wage demands as workers want to ensure they can keep up with the cost of living.
Economic growth
This is critical for a business to keep an eye on. The demand for their good or service is likely to depend on the income levels of consumers. Economic growth means that the income level in the economy is rising. However, how long will this last? Is growth too fast, in which case is higher inflation likely? Businesses also need to think carefully how sensitive their product is to changes in income. If their good is more of a luxury good, then demand may rise significantly as growth rises and they need to ensure they have the capacity to meet demand. However, they must also watch carefully in case the economy heads for a recession as this will in turn mean a large fall in demand and they may need to keep their capacity and therefore costs under control.

Balance of payments
The balance of payments is a measure of the trade performance of an economy. It measures the money flowing in from selling goods and services and from investment (credits on the balance of payments account) and the money flowing overseas from the buying of goods and services from overseas (imports) and investment overseas. The economy may have a surplus or deficit on the current account of the balance of payments (goods and services). A deficit means that imports of goods and services are greater than exports, whereas a surplus means that exports are greater than imports. So a wider economy cum a growing economy provides greater opportunities for businesses or organizations in this context to make profits, so businesses welcome rising living standard
Ecological Environment
The ecological environment refers to the relationship between human beings and thus organizations, and the air , soil and water in the physical environment. It refers to the limited natural resources from which an organization obtains its raw materials.
With regards to the above to conduct of the organization’s business. the organization will conduct itself in a way that is conscious of the ecology and will try to preserve it. For example if an organization’s core business is farming, with regards to the land it will treat it in such a way that it is persevered and prudent farming practices are put in place to ensure maximum yields and preservation of the land.
Political Environment
The organization needs to understand the relationship between governmental strategy or development plans and the institution within which they operate. Several specific dimensions of the political context should be scrutinized: The extent to which government and its bureaucracy supports and contributes resources to the institution: It is imperative that organizations and other funding agencies know whether significant governmental inputs are anticipated to support increased staffing, maintenance, or other recurring costs typical in research projects. The political context usually entails resource trade-off decisions at the government level. The extent to which the political system is stable or poised to undergo significant change: This factor is vital; the foreign policy employed by the government and its effect on the organization should also be considered.
Whether the political context of the institution directly involves the legal context: Some institutions require specific legal status to operate, to receive external funding, and to import equipment in support of research.
However, Political conditions are stimulated by general stability within a country and specific policies of government officials. In the United States, organizations generally enjoy substantial benefits and continuous encouragement of new business ventures as a result of the free enterprise system. When the political environment on which a business operates in is unstable businesses tend to conduct themselves in a cautious manner so as to try not to aggitate the current government and go against its policies. If the organization conducts itself in a manner that does not please the government it may face difficulties in the form of say for example price controls or forced closure or takeover by the government.

Small and many medium-sized companies are generally not affected by Labor Unions. It's only when the company really starts to grow and employ a substantial number of people, labor unions usually begin to play a significant role. Labor unions were established to protect the interests of specific categories of employees and to regulate the negotiating process between employers and workers. Organizations constantly need employees with different skills and experience who often belong to a specific labor organization.

Unions are very powerful and the organisation when it conducts its business must do so in way that does not cause tension between itself and the unions it is surrounded by. For example unjust dismissal of an employee can cause the organisation to fold up due pressure from the unions that will be fighting for the rights of their members. In addition to this when an organisation is a member itselfof a union, the way it conducts its business must be with in the confines of the rules it is bound by due to its membership to that union. Business owners and managers, therefore, need to be familiar with the labor legislation which regulates employment procedures, collective bargaining processes (for larger companies) and other labor-related issues.
Technology Environment
Both the types and the level of technology in the society give insight into understanding an institution. Institutions dealing with Western paradigms are dependent on the state of national infrastructure, e.g. power, water, transport; those which concentrate on indigenous research paradigms may have totally different dependencies.
Thus, it is important to understand the level of relevant technology in the institutional context and whether such technology is defined by computer literacy or by highly developed indigenous methods of verbal and nonverbal communication. It might also be helpful for an assessment to include a consideration of the process by which new technology comes into use, both to understand how difficult it is to acquire needed research technologies and to develop an appreciation for the society's willingness to embrace both new knowledge and change.
The organization needs to constantly pursue innovation and new products. The end result is that it is always a step ahead of its competitors and also tends to have the greatest market share and market dominance. , Technology tells the business what can be done in smarter ways. Technology not only can make business more efficient but also can make business more effective in targeting and reaching markets, however technology cannot enhance business in isolation as there are other vital factors that equally impact business. Microsoft for instance has the computer market due to it constant pursuit of innovation on the e-business front.

Administrative/Legal Environment
Relate to changes in laws and regulations with which businesses or organizations must be careful to keep within the law and to anticipate ways in which changes in laws will affect the way they must behave .The administrative and legal environment in a country provides a framework within which an organization operates. In some countries this environment is very restrictive and has significant impact on all aspects of the organization; in other countries the administrative/legal context is more permissive. Understanding the administrative/legal environment is essential to determining if organizational change can take place. The administrative context within which the organization operates may be shaped by a unique combination of forces, including international, governmental, nongovernmental policy, legislative, regulatory, and legal frameworks. An organization is affected by the policy or regulatory context that gave rise to it. This includes specific laws and regulations that support or inhibit the institution's development.
Several specific dimensions of the administrative environment should be examined: * Whether there are constitutional restrictions on the organization: An assessment should first determine whether the organization is part of a government ministry or department, and whether it is under federal or provincial jurisdiction. * Whether specific regulations govern the goals and structures of the organization, or whether the organization has a specific mandate and/or a specific structure that has been imposed. * Whether there is a legislative mandate that restricts leadership of the organization: It is helpful to understand any parameters that have been set around who can lead an organization. This includes identifying the governing body of the organization, and understanding how its members are selected, and further understanding who has the mandate or authority to set goals for the organization and develop curriculum.
Stakeholder Environment
All institutions and organizations are dependent for their survival on various groups of stakeholders. The stakeholder environment consists of those people and organizations external to the research institution who are directly concerned with the organization and its performance. Examples of stakeholders are suppliers, clients, sponsors, donors, potential target groups, and other institutions doing similar or complementary work. An organizational analysis seeks to learn the identity of these groups in order to assess their potential impact on the organization. Because of its international interdependent dimension, contemporary research relies on institutional relationships, and these need to be understood. Thus formal and de facto relationships with universities, government departments and agencies and other research institutions both within and outside the country need to be understood.
Influences from these multiple environmental contexts can become major facilitating or constricting forces on the institution as it works to accomplish its mission. In the extreme, these forces can keep an institution alive artificially; conversely, they can thwart organizational survival.
THE COMPETITOR FACTOR
Competitors constantly influence a broad range of managerial decisions related to routine business activities and to the development of an organization. If the marketplace is highly competitive, managers must ensure that the organization remains competitive and provides high quality products or services to customers at the right price.
Competitors represent a significant factor in formulating the organization's marketing plan and adopting suitable product development, price setting, promotion and distribution strategies. It is important, therefore, that business owners and managers monitor relevant trends in the marketplace in relation to competition in order to secure the company's survival and growth in a highly competitive environment.

In order to focus on the environmental scan, organizational assessments tend to gather data around four basic questions that cut across various components of the external environment:
What are the major forces affecting the organization?
The major categories of forces described in the previous section need to be integrated into some sort of environmental profile. This profile can take various forms, but whatever form it takes, the profile should identify and characterize the main forces acting on the organization.
How predictable are the external forces that affect the organization?
How stable are the social, political, and economic forces in the institution's immediate environment? A variety of factors can make the external environment unstable, therefore affecting the quality of organizational performance and the type of investment that IDRC might want to make.
How friendly or hostile is the external environment?
Clearly, the more hostile the external environment, the more the institution needs to respond to it, the more difficult it is to carry out work, and the more defensive the institution must become. A government that withholds funds, bureaucrats who prevent equipment from being imported, an IMF regime that reduces the purchasing power of staff — each of these environmental factors directly affects the organization and should be factored in the assessment.
How resilient is the organization?
Institutional resilience essentially relies on the autonomy of the institution within its environment. How dependent are the programs on external events and stimuli? Some institutions exist in complex environments in which their autonomy is subject to many forces, while others are less vulnerable. The more externally dependent or reliant an institution is for its programs, services, and performance, the more sophisticated and capable it must be about managing the external environment.
The institution's reputation is a major defense against such external forces. Organization should understand the perceptions of reputation held by the major stakeholders. Groups such as the research community, government legislators, government bureaucrats, and granting agencies all have perceptions of the research institution and its outputs. Each group has different criteria and influence, and these diverse "influencers" all contribute to the organization's reputation. Obviously, the stronger the organization's reputation and the more broadly based its support, the more resilient the organization will be regarding threats of all kinds, including reduction in financial support.
However, it should be noted that the external environment within which institutions operate is large and complex, and culling data from this environment requires the ability to separate the important from the less important. It is critical that the organizational assessment capture the impact that the environment is having on the motivation, performance, and capacity of the organization. As part of strategic planning, it is common nowadays for organizations themselves to undertake environmental scans. If a recent scan has been carried out, this will be of great assistance. If not, the evaluators must attempt to identify, with the assistance of key organizational members, the external factors (e.g. social, political, economic) that are most supportive as well as most troubling to the organization.
Performance is contextual, for it is the values of key organizational stakeholders that determine the short-term and long-term reputation of the organization. For example, government officials who see little evidence of immediate impact might view the research institution quite differently than does the research community, which applies international scientific norms as their referent. Local community residents might regard the institution as a helpful resource, but the scientific community of the country or region might find its work out-of-date. Understanding the external environment therefore helps to contextualize the understanding of performance.
With regard to capacity and its development, the institution's context is an intervening variable in many management choices. For instance, the usefulness of a particular organizational strategy or structure can be directly influenced by the organization's external environment. The extent to which resources are available is influenced by the external environment, as are the internal policies and procedures deployed by an organization to control these resources. The nature and type of inter organizational linkages are similarly affected by the environment. Ultimately, the external environment influences the choices an organization makes regarding its programs, types of outputs, and the standards of judgment that are appropriate and acceptable by which to measure its progress in fulfilling its mission.
Morever, by practicing prudent business practices an organization will be able to survive and shield itself. A good example locally is that of the commercial banks who were not sticking to their core businesses and engaging in imprudent policies.

In conclusion the environment in a nutshell can shield itself effectively by carrying out constant environmental analysis. By scanning, monitoring, forecasting and assessing constantly the organization is able to anticipate changes in the environment before they occur and act upon them accordingly.

THE IMPACT OF EXTERNAL ENVIRONMENT
ON
THE ORGANIZATION

BY OLA BENJAMIN FEMI
PDM/954/09

MARCH,2010

REFERENCES
Bill Carman. (2004) Key forces in the external environment
Scott Hunter (2007) Influence of the external environment on the organization
Guemoney O (2008) External environment on the environment Mondy (1995) Challenges of the external environment imposed on the managers