ORGANIZATION ENVIRONMENT
Every organization whether business or non- business has its environment which consists of
its surroundings.
Organizations have an external and internal environment.
Internal environment/Micro environment
Forces or conditions or surroundings within the boundary of the organization are the elements
of the internal environment of the organization.
i. Owners and Shareholders
Owners are people who invest in the company and have property rights and claims on the
organization.
ii. Board of Directors
The board of directors is the governing body of the company which is elected by
stockholders, and they are given the responsibility for overseeing a firm’s top managers such
as the general manager.
iii. Employees
Employees or the workforce, the most important element of an organization’s internal
environment, which performs the tasks of the administration. Individual employees and also
the labor unions they join are important parts of the internal environment.
iv. Organizational Culture
Organizational culture is the collective behavior of members of an organization and the
values, visions, beliefs, habits that they attach to their actions.
v. Resources of the Organization
An organization's resources can be discussed under five broad heads: physical resources,
human resources; financial resources, informational resources, and technological resources.
External Environment of Organization.
Factors outside the organization are the elements of the external environment.
i. Political Factors
This refers to the business-government relationship and the overall political situation of a
country.
A good business-government relationship is essential to the economy and most importantly
for the business.
ii. Economic Factors
This refers to the overall status of the economic system in which the organization operates.
The important economic factors for business are inflation, interest rates, and unemployment.
iii. Socio-Cultural Factors
Customs, morals, and values of the society in which the organization operates are what make
up the socio-cultural factors of the general environment.
iv. Technological Factors
It refers to the methods available for converting resources into products or services. Managers
must be careful about the technological factor. Investment decisions must be accurate in new
technologies and they must be adaptable to them.
v. Legal Factors
The legal environment consists of laws and regulatory frameworks in a country. Many laws
regulate the business operations of enterprises.
vi. Environmental / Natural Factors
Strategy-makers need to analyze the trends in the natural environment of the country where it
is operating its business.
