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Book Notes

6 Pages

Management (MGH)
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Chapter 15: Environment, Strategy, and Technology The External Environment of Organizations External Environment: Events and conditions surrounding an organization that influence its activities External factors such as changing consumer preferences, economic downturns and booms, gas prices, etc. effect industries and their functionality (gas prices=automobile retailers, recession=consumer spending=retailers=unemployment=banks=mergers=restructuring) Organizations as Open Systems Open Systems: Systems that take inputs from the external environment, transform some of them, and send them back into the environment as outputs Inputs capital, technology, people, energy and outputs- products and services Ex. Universities take students, give them knowledge, and return educated individuals to the community as outputs Open systems sensitize us to the need for organizations to cope with the demands of the environment on both the input side and then output side Components of the External Environment The general economy: Organizations selling products or services suffer from economic downturns and profit from economic upturns. (except law firms dealing with bankruptcy) Economic changes affect employment, innovation, production, and sales. Customers: organizations must be sensitive to changes in customer demands Suppliers: Shortages in raw materials can cause an increase in price suppliers offer. Also, strikes and changes in supplying firms may influence your firms production decisions Competitors: Environmental competitors vie for resources that include both customers and suppliers. (consulting firms compete for clients) Successful organizations devote considerable energy to monitoring the activities of competitors. Organizations that find themselves in hypercompetitive environments must become extremely flexible to respond quickly to changes and cope with hypercompetition. SocialPolitical Factors: proper age for retirement, corporate social responsibility, ethnic diversity, environment, government (corruption) organizations must cope with laws Technology: Way of doing things, not only some form of machinery. The ability to adopt proper technology and change according to technological advantages will give companies a competitive advantage. Interest Groups: Parties or organizations other than direct competitors that have some vested interest in how an organization is managed. Examples include university regulating authorities, the local community, charities, etc. Environmental Uncertainty
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