The organisational environment
Learning outcomes
• Understand the impact of environmental changes on a
business.
• Identify the various stakeholders that impact an
organisation.
• Differentiate between each of the sub-environments
which make up the organisational environment by
– describing the components of the internal business
environment;
– identifying the variables that form part of the task
environment; and
– categorising the forces of the external environment.
• Discuss the approaches and sources that can be used to
conduct an environmental scan.
• Conduct an internal and external analysis, by using a
SWOT analysis.
The
organisational
environment
An organisation and its environment
• Different environmental occurrences, that are
influencing an organisation operating in South Africa:
– Employees’ four-week strike in the steel and engineering
industry.
– Consumers’ drive towards a healthier lifestyle.
– High crime rates.
– Increased competition due to online shopping avenues.
– High mobile penetration rates.
– Unreliable suppliers.
– ISIS war crimes.
– Ebola virus outbreaks.
An organisation and its environment
• These various occurrences are triggered by an
organisation’s stakeholders.
• Stakeholders include all the different people who are
affected by an organisation’s policies and decisions,
including:
An organisation and its environment
• It is important for managers to start from within, to
ensure that the business’s foundation is in place in order
to survive the constant external changes.
• A manager can build a strong foundation, by
establishing a solid micro-environment – start insideout.
The micro-environment
• The micro-environment is also referred to as the
internal environment and includes all the variables
WITHIN a business.
• You as future or current managers will be able to
either directly or indirectly control the following
variables:
– Vision, mission and goals
– Business functions
– Business resources
The micro-environment
• Vision, mission and goals
- These variables are NOT set in stone for eternity,
as they too cannot escape the impact of the
external environment.
- Managers need to keep track of the occurrences in
the external environment and adapt where
necessary.
VISION STATEMENT
MISSION STATEMENT
STRATEGY
* WHAT do we want to
become?
* WHO are we?
* HOW will be achieve
our vision?
WHAT do we value?
GOALS AND OBJECTIVES
* HOW will we
determine our degree of
success?
The micro-environment
• Business functions
- Include all the functional departments within a
business, such as:
- These functions assist the business in achieving
their desired vision, mission, strategy and goals.
- These functional departments cannot operate in
isolation and require certain resources to function
efficiently and effectively.
The micro-environment
• The business resources
- Regardless of their size, organisations have access to
only a limited number of resources, to accomplish their
objectives.
- A business can make use of various tangible and
intangible resources, which contribute to an
organisation’s overall production.
• Tangible resources:
• Raw materials (wood, water and minerals),
capital, machinery and property.
• Intangible resources:
• Patents, trademarks, brand names, staff morale
and overall staff experience.
The task environment
• The task environment is the link/buffer between the
business and the macro-environment.
• Comprises of variables such as:
Consumers
Competitors
Suppliers
Intermediaries
Consumer classifications
Consumer market
Industrial market
Resale market
Institutional
market
International
market
• Purchase products and services for
own consumption or use.
• Purchase goods and/or services for
use in their own production of other
goods and services.
• Parties that buy products and sell
them, without any further processing,
in order to make a profit.
• Large-scale users (such as schools,
hospitals, nursing homes, government
agencies and non-profit
organisations).
• Foreign buyers including: customers,
manufacturers, resellers and
governments.
Different types of competition
Need
competition
Generic
competition
Product
competition
Brand
competition
Suppliers and intermediaries
SUPPLIERS
INTERMEDIARIES
• Every type of business is
dependent on some or other
form of suppliers.
• Between the organisation and
the end users, stands a set of
intermediaries which perform
a variety of functions.
• Various types of
intermediaries that businesses
can make use of:
• Approximately 60% of every
rand spent by an organisation,
goes towards supplier
purchases.
– Water, electricity and
communication services,
purchased from suppliers such as
Eskom and Telkom/Vodacom.
– External sources of capital, which
can be supplied by commercial
banks such as Standard Bank,
ABSA, Nedbank.
– Merchants
– Agents
– Facilitators
Macro-environmental Factors
factors
Demographic
Political-legal
Economic
Technological
Socio-cultural
Natural/Physical
International
Macro-environmental
Macro-environmentalfactors
Factors
Demographic
What demographic trends will affect the market size of the industry?
What demographic trends present opportunities or threats?
Social-cultural
What are the current or emerging trends in lifestyle, fashions and other aspects of
culture? What are the implications thereof?
Economic
What are the trends in interest and inflation rates, trade cycles and unemployment rate
for the countries in which the organisation operates in? How will these affect an
organisation’s strategy?
Political/Legal
What regulations are in place, that impact a business operating in South Africa?
Are there any changes to governmental regulations? What will be the impact of these
changes?
International
What international trends and occurrences will affect the industry?
How will these alter the competitive arena?
Natural/
Physical
Technological
What are the natural resources being used by an organisation?
Are there any shortages of natural resources, which could impact an organisation’s
productivity?
To what extent are existing technologies maturing? What technological trends or new
developments are affecting or could perhaps affect the industry?
Macro-environmental factors
•
Demographic factors “paint a picture” of who the
market is in terms of age, race, ethnicity and
location. The following factors can be investigated:
– Population growth
– Population age-gender composition
– LSM trends
– Urbanisation
Macro-environmental factors
Socio-cultural
• Social-cultural factors revolve around
people’s social behaviour, which is
constantly transformed by people’s culture,
values, lifestyle and expectations.
– Changing family structures
– Changing role of women
– Changing lifestyles
– Need for personalisation
– Consumerism
Macro-environmental factors
Economic
• Economic factors include all aspects which
either directly or indirectly impact the
disposable income as well as purchasing
behaviour of organisations and consumers.
These aspects include:
– Interest rates
– Inflation
– Business cycle
• Prosperity
• Recession/Depression
• Recovery
– Unemployment
Macro-environmental factors
•
Political/legal
Political/legal factors include the regulations, legislations and court
decisions that govern and regulate business and management
practices.
Macro-environmental factors
Technological
• Technological factors include all the scientific and technological
advancements which occur within a specific industry, as well as
in society at large.
• Technological advancements and innovations can affect the
entire organisation’s:
−
−
−
−
−
product lifecycle;
operations processes;
supply chain;
management approach; and
business’ position in the market.
• Examples of technological inventions that impact business
functioning:
−
−
−
−
SnapScan
IRI Scan Mouse
Power Felt
The Payment Pebble
Macro-environmental factors
•
•
•
Natural/Physical
Natural/physical factors include the earth’s natural
resources which are used by people and businesses to
support life and development – water, air, coal, oil, plants,
animals, gold and other minerals.
Excessive use of these scares resources may jeopardise
business practices, countries and even continents
sustainability.
Initiatives can be implemented by organisations, in order
to solve natural/physical problems:
Natural/Physical environment
problems
Solutions
The increasing cost of energy
Find alternative sources of energy . E.g. solar, wind, nuclear and
hydroelectric power.
Growing cost of pollution
Form new methods of producing and packaging products, to keep
pollution to a minimum. E.g. using less harmful chemicals.
Scares resource
Search for different production methods and substitute products.
Macro-environmental factors
International
• The world today has become one global market.
• The international trade industry is constantly influenced
by international occurrences, which create threats and/or
opportunities for an organisation.
• What impact do you think the following international
occurrences could have on an organisation?
− The banning by the USA on Iran exporting oil.
− Terrorist attacks and political instability in Nigeria, Egypt, Iraq,
Ukraine and Russia.
− South African businesses encountering fewer tariff and protective
measures against foreign competition, than in the past.
− BRICS partnership, where Brazil, Russia, India, China and South
Africa have formed an economic alliance for development,
integration and industrialisation.
− Support from the Industrial Development Corporation (IDC) as well
as the Department of Trade and Industry (DTI).
Managing the organisational environment
do we manage the
organisational environment?
do we manage the
organisational environment?
The more informed a manager is
about the environments, the easier it
becomes to manage the changes.
An organisation can make use of:
• Environmental scanning
• SWOT analysis.
Environmental scanning
Process of gathering recent information about the
occurrences within the business environments, in order to
aid managers in identifying opportunities and threats and
assist in the planning process.
• Three approaches that managers can use:
Ad hoc or irregular
approach
•Conducting an analysis once an
incident takes place, which directly
affects the organisation.
Periodical or
regular approach
•Regular, up-to-date studies are
conducted on specific issues that are
relevant and important to a business.
Continuous
approach
•Constant assessment of all key
environmental factors that could affect
an organisation.
Environmental scanning (cont.)
• Various sources and technologies that can be used by a
manager, in order to stay updated and informed, with
regards to environmental changes:
General media such as
newspaper and
magazine articles.
Economic data
published by Statistics
South Africa and the
South African Reserve
Bank.
Research reports
Private organisational
compiled by an
libraries and data banks,
organisation’s own staff
which store historical
or consultants.
data.
Trade shows and
conferences.
Online sources such as:
Internet forums, blogs,
Google Alerts, etc.
SWOT Analysis
Used to identify the internal strengths and weaknesses of
the organisation as well as the external opportunities and
threats.
S
STRENGTHS
An organisation’s resources, skills,
expertise, knowledge, superior service
or other advantage relative to
competitors.
O
OPPORTUNITIES
Favourable element/s within the
external business environments (task
and macro) that can be used by
management for profitability, survival or
growth.
W
WEAKNESSES
Limitation of deficiency in an
organisation’s resources, skills and
capabilities that negatively impact the
organisation’s performance.
T
THREATS
A major unfavourable element within
the external business environments
(task and macro) that can lead to the
failure of a product, service or the
organisation itself.
Summary
• NO organisation is 100% self-sufficient.
• Organisations depend on various stakeholders to
achieve business success.
• An organisation and its stakeholders form part of a
complex and ever-changing business environment,
which comprises of three sub-environments, namely:
the micro-, market and macro-environments.
• Environmental changes occur outside a manager’s
control.
• Managers need to stay informed in order to adapt
appropriately. The relevant knowledge can be
obtained through environmental scanning and SWOT
analysis.
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