Video Transcript: External Environment and Management
After this course, you should be able to define an organizational ecosystem and how the general and task environments affect an organization's ability to thrive. In addition, you will be able to explain the strategies managers use to help organizations adapt to uncertain and turbulent environments. The organizational environment includes all elements existing outside the boundary of an organization that have the potential to affect it. The external organizational environment includes all elements existing outside the boundary of the organization, that have the potential to affect that organization. The environment includes competitors, resources, technology and economic conditions that influence the organization. It does not include those events so far removed from the organization that their impact is not perceived the organization's external environment can be conceptualized further as having two components, task and general environments. The task environment includes the sectors that conduct day to day transactions with the organization and directly influence its basic operations and performance. The task environment is generally considered to include competitors, suppliers, customers and the labor market. Organizations in the same industry or type of business that provide goods or services to the same set of customers are referred to as a competitor. Competitors are constantly battling for loyalty from the same group of individuals, suppliers provide the raw materials the organization uses to produce its output. Those people and organizations in the environment that acquire goods or services from the organization are customers as recipients of the organization's output, customers are important because they determine the organization's success. Organizations have to be responsive to marketplace changes. The labor market represents people in the environment who can be hired to work for the organization. Every organization needs a supply of trained, qualified professionals, unions, employee associations and the availability of certain classes of employees can influence the organization's labor market. The general environment indirectly influences all organizations with an industry, and it includes five dimensions. The five dimensions of the general environment are social, economic, legal, political, international and technological factors that all influence organizations about equally. Changes in federal regulation or economic recessions are part of the organization's general environment, as are shifting social attitudes towards matters such as how and where products are used or made. These events do not directly change day to day operations, but they do affect all organizations eventually, the organizational ecosystem includes organizations in all sectors of the task and general environments that provide the resources and information, transactions, flows and linkages necessary for an organization to thrive. A new view of the environment argues that organizations are now evolving into these business ecosystems. An ecosystem includes organizations in all sectors of the task and general environments that are providing those resources and information transactions
that help organizations thrive. So why do organizations care so much about the factors of the external environment? The reason is that the environment creates uncertainty for organizations and its managers, and those managers must respond by designing the organization to adapt to the environment.