Chapter 2: The External & Internal Environments PDF

Chapter 2 The External & Internal Environments Fundamentals of Human Presented By: Dr. Anas Resource Management, 10/e, DeCenzo/Robbins Learning Outcomes At the end of this chapter, you will be able to: Identify the major...

Chapter 2 The External & Internal Environments Fundamentals of Human Presented By: Dr. Anas Resource Management, 10/e, DeCenzo/Robbins Learning Outcomes At the end of this chapter, you will be able to: Identify the major components on an organization’s task environment. Explain how each component in the task environment impacts the organization. Identify the major components of an organization’s general environment. Discuss the nature of change in the external environment. Outline the main components of the internal environment of an organization and articulate their implications for managerial actions. Two Main Environments 1. External Environment – constitutes everything outside a firm that might affect the ability of the enterprise to attain its goals. Two types of External Environment: a. Task Environment – typically includes actual and potential competitors, suppliers, and buyers (customers or distributors). b. General Environment – it includes political and legal forces, macroeconomic forces, demographic, socio-cultural, technological and international forces. 2. Internal Environment - Constitutes everything inside the firm that might affect the ability of managers to pursue certain actions or strategies. It includes the three main components: 1. Organization – structure, culture & control 2. Employees – human capital 3. Resources – tangible and intangible assets Example of tangible assets: money, building, people Intangible assets: ideas, knowledge, company reputation. The Task Environment Five Forces Model by Michael Porter – framework/tool for analyzing task environment. 1. Threat of Entry – barriers to entry that make it costly for potential competitors to enter the market and compete with firms already in the industry. 2. Bargaining Power of Buyers – ability of the buyers to bargain down prices charged by firms in the industry or to raise cost by demanding better quality product and service. 3. Bargaining Power of Suppliers – ability of the suppliers to bargain up prices charged by firms in the industry or to raise cost by demanding lower quality product and service. The Task Environment-cont…… 4. The Threat of Substitute Products – the goods or services of different businesses or industries that can satisfy similar customer needs. 5. The Intensity of Rivalry – rivalry between firms in the industry in terms of: nature of the product, demand and supply conditions, and competitive structure of company. General Environment General Environment – is the larger environment within which the task environment is included. It is composed of: 1. Political & Legal Factors – are the result of changes in laws and regulations. Ex: Government companies to become private companies. 2. Macroeconomic Forces – affect the general health and well-being of a national or the regional economy that affects profitability. Ex: interest rates, salaries, current exchange rates General Environment – cont…… 3. Demographic Forces – are outcomes of changes in the characteristics of a population such as: age, gender, ethnic origin, social class. 4. Sociocultural Forces – refer to the way in which changing social, moral and values affect an industry. 5. Technological Forces – ability to create new products with the use of new technologies. 6. International Forces – changes brought about by global environment like economic growth of other countries such as USA, Europe, others. Internal Environment Internal Environment includes: 1. Internal Organization – organizational culture in the organization. 2. Human Capital/Employees – it constitutes the knowledge, skills, and capabilities of individuals/employees. 3. Resources – assets that managers have to work with in their quest to improve the performance of an enterprise. It can be tangible or intangible resources