Advanced Diploma Business Management MANAGING IN ORGANISATIONS Assignment topic: Its clear that environmental factors- internal, market and external- may have a significant impact on the organisation Envinronmental analysis is concerned with identifying how the various factors interact with an organisation. Discuss the key factors in the general external evironment Name: Nguyen Thi Thu Van The usual way of analysing the general external environment is to consider the key factors under four headings, characterised by the acronym PEST. . Political/ Legal environment . Economic environment . Social environment Technological environment. The political environment includes all laws, government agencies, and lobbying groups that influence or restrict individuals or organizations in the society. The technological environment consists of those forces that affect the technology and which can create new products, new markets, and new marketing opportunities. All outside factors that may affect an organization make up the external evironment . The keys factors in the general external environment: 1. Political/ Legal Environment: The political environment within which an organisation exists has far-reaching consequences.
Governments, through their legislative powers, determine the legal and regulatory framework applying to business and the public sector. They also give direction to a country through the way in which they exert control over the economy. The political environment most obviously operates at national level, but may also be significant at local and international levels. The Political/ Legal Environment includes: Existing legislation in the home market, Future legislation, European/international legislation, Regulatory bodies and processes, Environmental regulations, Employment law ,Industry-specific regulations, competitive regulations, etc. . Economic Environment: The major impact of the economy may be felt in the availability – and hence, the price – of the factors of production. Land, labour and capital (in the form of new funds) will vary with the state of the economy and this will be reflected in a wide variety of indices such as level of demand, interest and exchange rates, prices, wages, level of competition, etc.
When an economy is growing, funds tend to be widely available, interest rate will be low and demand high, although labour and natural resource may be scarce and hence more expensive. In times of recession, the opposite tends to be the case. A major factor in the international environment is the establishment of the Euro and how this is impacting on the economies of both those in the Euro zone and, importantly for the UK, those outside it.
This may have implications at the national level, particularly in respect of inward investment. 3. Social Environment: Social change involves changes in the nature and norms of society. In particular, organisation needs to understand the trends in demographics and the cultural environment. a) Demographic Change: is the study of population dynamics, which has wide implications for both the nature of the workforce and the markets for goods and services.
Key demographic factors are: The rate of growth or decline in population, changes in the density of people in particular regions, changes in the wealth of people, changes in the ethnic structure of an area, changes in household and family structures, changes in employment patterns and changes in the age structure, locally or nationally. b) Cultural Environment: the concept of culture can be difficult to define, but generally it incorporates aspects of peoples’ beliefs and values, behaviour and thought patterns.
Sometimes there are visible signs of culture, such as a style of dress, the adoption of rituals, ceremonies, etc. In 1980, Professor Geert Hofstede attempted to identify key dimensions of common culture in different countries and named them as Hofstede’s Dimensions: . Power Distance: the extent to which people accept as normal an unequal distribution of power . Individualism/ Collectivism: the extent that people in a culture define themselves primarily as individuals rather than as part of one or more groups or organizations.
The tight social frameworks in which people tend to base their identities on the group or organization to which they belong . Uncertainty Avoidance: The extent to which people feel threatened by unknown situations and prefer to be in clear and unambiguous situations. . Masculinity/ Femininity: the extent to which the dominant values in a society emphasize aggressiveness and the acquisition of money and other possession as opposed to concern for people, and overall quality of life.
Consumer attitudes and opinions, Media views, Law changes affecting social factors, Brand, company, technology image, Consumer buying patterns, Major events and influences, Buying access and trends, Ethnic/religious factors, Advertising and publicity, Ethical issues, Demographics (age, gender, race, family size,) Lifestyle changes, Trends, Fads, Health Living standards, Housing trends, Attitudes to work, Attitudes to people doing certain types of work, Leisure activities, Management style, Organisational culture, Earning capacity Staff attitudes etc. . Technological Environment: Technological includes these aspects: equipment, the method of using that equipment, and the organisational requirements of using the equipment, Competing technology development, Inventions, Innovations, New discoveries, Research, Technology legislation, Innovation potential, Internet, Transportation, Bio-tech, Genetics, M-learning, E-learning ,Software changes, etc, anything to do with technological change and technology. a) Technological Change The technological environment is complex and dynamic.
Organisations find it difficult to plan effectively in such unstable conditions where new developments can revolutionise the way in which operations are carried out very quickly. Such changes have included the following. . Changes in production or working methods. . Effects of new technology on staffing. . Improvements in communications . A plethora of new products, which in turn open up new markets. b) Computerisation and IT Computerisation, in particular, can have a variety of effects on business, not all of them positive: .
Automated processes for manufacturing mean there is less need for traditional manufacturing skills and operations are carried out with less human intervention. . Technology creates new products, as in digital televisions making analogue sets obsolete. . Technology can also change the way goods and services are provided and delivered. . The major supermarket chains offer an Internet-based shopping service everyday groceries; customers can access the company website and other their groceries online, paying by debit or credit card. . Database systems have made it easier to analyse marketing information for some year now. Tesco is one of the major supermarkets to have developed the potential of the loyalty card. Ostensibly introduced to “reward” customers for continuing to shop at the supermarket, data collected about the buying habits of card holders when they present their cards with their shopping at the checkout has enabled Tesco to identify target markets for products and services with much greater precision. . Technology has enabled greater access to information for decision-making purposes, both from within the organisation and outside it.
Management information system and deciding support systems take data from that already available within the company and re-present it in a format that managers can use to aid decision-making. . Technology has changed the very structure of many businesses by enabling more flexible working patterns and allowing people to work from locations other than the traditional office. Conclusion: The usual way of analysing the general external environment is to consider the key factors under four headings, characterised by the acronym PEST or SLEPT.
PESTLE analysis is an important aspect of the strategic analysis of the external environment or outer dynamics in which the company operates. It’s a tool for understanding the “big picture” of the environment which also helps to understand the risk associated with market growth or decline. You can see your opportunities and minimize your threats. References: http://www. thetimes100. co. uk/theory/theory–organisation-management-structures–313. php http://www. thetimes100. co. uk/theory/theory–the-external-environment–236. php http://tutor2u. net/revision-notes-external-environment. html
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