Environment refers to the institutions or forces outside the organization that influence the organization's operations and performance.
General environment
Includes factors and forces outside the organization that have a strong influence but do not directly affect the organization. There are 5 groups of factors:
– Economic factors (bank interest rates, economic cycles, inflation,...);
– Political and legal factors (laws, regulations, state policies, political institutions, etc.);
– Social factors (anthropological trends, religion, ethical standards, living standards, public opinion, etc.);
– Natural factors (environmental pollution, resource scarcity, seasonality, etc.);
– Technical factors (new technology, saturation stage in the product life cycle, biotechnology, robotics, communications,...);
Special environment
Includes factors within the industry and external factors for the business, determining the nature and level of competition in that production and business industry. There are 5 factors:
– Competitors,
- Provider,
- Client,
– Potential new competitors,
- Alternative products.
Estimating environmental uncertainty
Based on two factors of environmental uncertainty: the complexity of the factors and their level of change, the environment can be divided into 4 groups:
– Simple and stable environment: (1) There are few elements, (2) The elements are somewhat similar and basically do not change, (3) Administrators rarely need complex knowledge about factors.
– Simple and dynamic environment: (1) There are few factors, (2) The factors are somewhat similar but change continuously, (3) Administrators have little need for complex knowledge about the element.
– Complex and stable environment: (1) There are many factors, (2) The factors are not similar and basically do not change, (3) Administrators need complex knowledge about the factors. element.
– Complex and dynamic environment: (1) There are many factors, (2) The factors are not similar and change continuously, (3) Administrators need complex knowledge about the factors .
Reduce uncertainty through environmental governance
To reduce environmental uncertainty, managers need to take appropriate management measures. Some measures can be applied such as: Using input or output buffers (reserves), Leveling, Forecasting, Limiting, Contracting, Enrollment, Linking, Through intermediaries, Advertising.
