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ORGANIZATION ENVIRONMENT
INTRODUCTION
 Organizational environment refer to all forces that have the potential to
influence organization and its performance
 A manager's environment this is made up of constantly changing factors both
external and internal that affect the operation of the organization.
This definition means that
 If a new competitor appears in the marketplace, the managerial
environment is affected.
 If key clients take their business elsewhere, managers feel the
impact.
 If technological advances, an organization's current methods of doing
business will be affected
 Although managers can't always control their environments, they need to be
aware of any changes that occur, because changes ultimately affect their daily
decisions and actions.
COMPONENTS OF ORGANIZATIONAL ENVIRONMENT
 Internal environment
 External environment
A. INTERNAL ENVIRONMENT
Refers to everything inside an organization it that affects manager's ability to
pursue actions. Elements of internal environment
i. Organizational objectives
These are specific results which an organization desire to achieve. The
overall activities of an organization are directed towards the
accomplishments of its objectives.• So if objectives are too difficult to
achieve, workers may be demotivated and manager’s performance in
terms of ability to run the organization will also be affected.
ii. Organizational structure
It affects the organization in two major ways;
i. Provides the foundation on which standard operating procedures
ii. ii. Routines rest is to be carried out.
iii. • It also determines which individuals participate in which decision
making processes and thus to what extent their views shape the
organizational actions.
iv. A rigid structure such as hierarchical organizational structure it
will fail to operate under flexible environment such a technological
environment which is fast- changing.
iii. . Organizational climate
The overall tone of the workplace and the morale of its workers are
elements of daily climate. Worker ability dictate the positive or negative
“atmosphere” of the workplace will influence the performance of an
 organization. The daily relationships and interactions of employees are
indicative of an organization's climate.
iv. Organizational Human Resources
The people in an organization may be classified into four categories
i. Owners of the business these are individuals or
organizations that have legal property right to that
business
ii. Managers these are all personnel responsible for ensuring
the company is being run in the best interest of the
shareholders and society
iii. Employees Are the workers of the company supervised by
managers to accomplish company goals
iv. Shareholders these are individuals allowed by owners to
invest in their organization through purchase of shares.
• This group may influence the organization in different ways including, investment
decisions, and how they commit themselves to work
v. Organizational culture
 Refers to set of values that decide what organization stands for, how
it does things and what it consider important. But an organization
culture starts with its founder.
NB: Culture differs between one organization and another. It involves
beliefs and attitudes of the company members.
 Cultural aspects are such as type of wear, language of
communication, attitude towards a customer, leadership styles,
managerial attitudes and characteristics can shape the vision of an
organization all account for the success of organization
B.EXTERNAL ENVIRONMENT
External environment is referred to the factors and forces outside the organization
that have potential to influence the success/failure of the organization.
Types of external environment
 Mega environment (general environment)
 Task environment.

1. THE MEGA ENVIRONMENT(INDIRECT ACTION ENV)

 Also known as indirect action environment, Consist of the broad conditions and
trend in the society within which an organization operates.
• It influences the climate within which an organization operates but it does not
affect the organization directly.
Elements of mega environment
i. Technological environment
 The technological dimension of the external environment impacts the
scientific processes used in changing inputs (resources, labor, money) to
outputs (goods and services).
• They include expertise, knowledge, procedures, techniques and systems
used by organization to profound changes in the transformation process,
also includes inventions and innovations.
• The success of many organizations depends on how well they identify and
respond to external technological changes
ii. Economic environment
 Refers to the system of producing, distributing and consuming wealth; this
includes the issues of income, expenditure, resources that affect the running of
a business hold and household.
 Within a country, economic condition and trends like wages, prices fluctuations
and fiscal policies affects the costs of products and services. Per capita income,
savings, investments, price level, employment, interest rates, productivity etc.
are important indicators of economic environment in a country.
iii. Social-cultural environment
The socio-cultural dimension is especially important because it determines
the goods, services, and standards that society values.
• The socio-cultural force includes values of a particular customer base, and
also issues of attitudes, behavior, traditions, trends, lifestyles, tastes, norms
and believes of a country.
• It may affect the organization in many ways, e.g. Nature of the workforce, buying
attitude, etc.
iv. Political and legal environment
The political and legal dimensions of the external environment include
regulatory parameters within which an organization must operate.
• Tax policies, trade regulations, and minimum wage legislation are just a
few examples of political and legal issues that may affect the way an
organization operates.
v. Demographic factors
Is concerned with various trends in population characteristics of the people
and social groups who make up a society; includes Age, gender, education
level, geographical location, family composition and income.

HOW MEGA ENVIROMENT AFFECT OPERATION OF AN ORGANISATION?

2. TASK ENVIRONMENT.(DIRECT ACTION ENV)

 Refers to the specific element outside of organization which an organization
interacts in the course of conducting its business.
Elements of task environment
The task environment consist of the following elements which affects the
organization directly
i. Customers and client,
 They affect the business as, they determine what to produce and have
a choice to choose what they want. For example, if they no longer
interested in your products the business is affected negatively and
vice versa.
ii. Competitors,
These may determine the services offered by the business for example
when they introduce a new product in the market or they come up
with any other mew strategy to win over customers.

iii. Suppliers,
These are the ones who supply the business with raw materials for
developing a product. For example if they fail to supply the raw
materials in a quality demanded by customers they may affect the
marketing activities negatively and vice versa
iv. Labor supply,

v. Government agencies/ regulators

These are institutions which regulate business. Examples of regulators
are such as BOT for banks, TCRA for communication companies, SSRA
for social security institutions etc.
vi. Strategic Partners.
These are companies the work together in joint venture or another form of
partnerships. Strategic partnership helps companies to get from other
companies the expertise the lack, they also help spread of risk and open
market opportunities

How the external environment affects managers????

There are three environmental constraints and challenges to managers,
includes;-
a) Forecasting the Impact of Job and Employment
b) Assessing Environmental Uncertainty/change
c) Managing stakeholders Relationship
The stakeholders of Organization includes:
i. Customers
ii. ii. Suppliers
iii. iii. Employees
iv. iv. Shareholders
v. v. Government
vi. vi. Communities
vii. vii. Social and political action groups
viii. viii. Competitors
ix. ix. Trade and industry association.
 ENVIRONMENTAL CHANGE
 Refers to the degree to which organization’s environment is stable or changing/
shifting
 Managers can classify organization environment as static or dynamic
 Environment change is becoming increasingly problematic owing to the fact that
environment ,It may result in difficulties of copying with change
NATURE OF THE ENVIRONMENT
• The nature of the environment can be described by the degree of underlying
uncertainty and environment complexity
A. Environmental complexity Refers to the number of elements/ forces in
the organizational environment and the extent to which the
organization understands these elements ,In this there is Simple and
Complex situation
B. Environmental dynamism/Uncertainty
• It measures the rate of environmental change. Nature of
environment can vary from calm (stable) & unconnected to highly
complex involving much interconnectedness and highly dynamic.
• In this there are stable and dynamic situations
NB: The more DYNAMIC (UNCERTAIN) and COMPLEX the environment
is, the greater the underlying uncertainty (RISKS) Levels of
Environmental uncertainty/risks
The environmental change and complexity can combine in four ways to create four
levels of uncertainty ❖ Level 1: Least uncertainty – for simple and static
environment
❖ Level 2: Moderate uncertainty – simple and changing environment
❖ Level 3: Moderately uncertainty – complex and static environment
❖ Level 4: High uncertainty - for complex and dynamic environment
MANAGING THE BUSINESS ENVIRONMENT
 Environmental forces may act either positive or negatively to the business.
When these forces are favorable, performance and efficiency of will increase
And Vice versa.
• Every business must respond to environmental forces, but two organizations
may respond differently to the same environmental change depending on their
goals, values, technology and managerial competences.
The following are strategies for organization to cope with uncertain and turbulent
environment
1. Wait and Watch- firms wait until the environmental forces become clear
and they surrender before these forces.
 2. Anticipation and adoption- They continuously anticipate and monitor
changes in the environment and take necessary action before an
environment situation becomes a threat to the business.
3. Innovation approach
4. Autonomous and Commanding Trust

How Organizations Adapt to Their Environment

1. Adapting – Information Technology
2. Adapting – Strategic Response
3. Mergers, Acquisition & Alliances (Combining two or more companies to form
one name, one company taken over by the other. (PUMA & BP companies)
4. Direct Influence
5. Corporate Social Responsibility (CSR)
Refer to practices and policies undertaken by corporations intended to have
a positive influence on the world. It encourages good practices - donating at
least 1% of pre-tax profits (e.g. NMB donating mosquito net to MNH).

Reasons for an Organization to Adapt the Environment

• Helps to identify opportunities and get advantage.
• Helps to identify threats and warning signals.
• Build the image towards the changing environment.
• To analyze the competitor’s strategy and formulate own strategy.
Identify firm’s strengths and weaknesses.

IMPORTANCE OF ORGANIZATIONAL ENVIRONMENT

• There is a close and continuous interaction between the business and its
environment.
• This interaction helps in strengthening the business firm and using its resources
more effectively.
• An analysis of business environment helps to identify strength, weakness,
opportunities & threats.
• Analysis is very necessary for the survival and growth of the business enterprise.