affects the organization indirectly. It includes social, economic, legal–political,
international,
natural, and technological factors that influence all organizations about equally. For
example,
changes in federal regulations and economic recessions are part of the organization’s
general
environment, as are shifting social attitudes toward matters such as how and where the
products
we use are made. These events do not directly change day-to-day operations, but they
do affect
all organizations eventually.
Sometimes a dramatic change in the general environment can influence numerous
parts of
the task environment for an organization. After the initial outbreak of the novel
coronavirus in
China in January 2020, companies operating in industries as diverse as entertainment,
fashion,
auto manufacturing, fast food, and technology experienced disruptions in their business.
Disney
theme parks in Shanghai and Hong Kong were shut down, automakers such as
Hyundai and
Volkswagen were faced with a shortage of supplies from Chinese auto parts firms, and
airlines
such as Delta and United canceled flights to China. As the virus continued to spread,
organizations
around the world faced tremendous uncertainty about how the outbreak would alter their
business operations.5
A new view of the environment argues that organizations are now evolving into business
ecosystems. An organizational ecosystem is a system formed by the interactions
among a community
of organizations in the environment. It includes organizations in all the sectors of the
task and general environments that provide the resource and information transactions,
flows,
and linkages necessary for an organization to thrive.6 For example, Apple’s ecosystem
comprises
hundreds of suppliers and millions of customers for the products that it produces across
several
industries, including smartphones, consumer electronics, Internet services, personal
computers,
and entertainment.7
The organization also has an internal environment, which includes the elements within
the
organization’s boundaries. The internal environment is composed of current employees,
management,
and especially corporate culture, which defines how employees behave in the internal
environment and how well the organization will adapt to the external environment.
Exhibit 2.1 illustrates the relationships among the task, general, and internal
environments.
As an open system, the organization draws resources from the external environment
and releases
goods and services back to it. We will first discuss the two components of the external
environment
in more detail. Later in the chapter, we examine corporate culture, a key element in the
internal environment. Other aspects of the internal environment, such as structure and
technology,
are covered in later chapters of this book.
2-1a Task Environment
The task environment includes those sectors that have a direct working relationship with
the
organization—among them, customers, competitors, suppliers, and the labor market.
Customers Those people and organizations in the environment that acquire goods or
services
from the organization are called 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. For example, as Millennial and Gen Z customers
began
making up a larger part of the customer base at retail chain Target, CEO Brian Cornell
started
implementing changes to better serve that demographic. A big part of the transformation
involved making over Target’s grocery offerings to add more natural and organic foods
to the
mix and provide fewer processed foods.8
Competitors Organizations in the same industry or type of business that provide goods
or
services to the same set of customers are referred to as competitors. Competitors are
constantly
battling for loyalty from the same group of customers. PepsiCo and the Coca-Cola
Company
have been rivals in the war for soft drink customers for more than a century. The
companies have
diversified into other products, especially as sales of sugary sodas have declined in
recent years,
but carbonated soft drinks still constitute a big market for both. Notably, both have
invested in
new cola flavors and new marketing campaigns targeted at Millennial and Gen Z
consumers.
“It is not the strongest
of the species that
survives, nor the most
intelligent that survives.
It is the one that
is the most adaptable
to change.”
—Charles Darwin
(1809–1882), Naturalist
Chapter 2 The Environment and Corporate Culture 55
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