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Chapter 15


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University of Ottawa

Chapter 15I The External Environment of OrganizationsThe external environment consists of events and conditions surrounding an organization that influence its activities The external environment has a tremendous influence on organizations and profoundly shapes organizational behaviour A Organizations as Open Systems Organizations can be described as open systems Open systems are systems that take inputs from the external environment transform some of these inputs and send them back into the external environment as outputs This concept is important because it sensitizes us to the need for organizations to cope with demands of the environment on both the input and the output side B Components of the External Environment It is useful to divide the external environment into a manageable number of components The General Economy The general economy affects organizations as they profit from an upturn or suffer from a downturn Customers All organizations have potential customers for their products and services Successful firms are highly sensitive to customer relations Suppliers Organizations are dependent on the environment for supplies that include labour raw materials equipment and component parts Shortages can cause severe difficulties Competitors Environmental competitors vie for resources that include both customers and suppliers Successful organizations devote considerable energy to monitoring the activities of competitors SocialPolitical Factors Organizations cannot ignore the social and political events that occur around them Organizations must cope with a series of legal regulations that prescribe fair employment practices proper competitive activities product safety and clients rights Technology The environment contains a variety of technologies that are useful for achieving organizational goals The ability to adopt the proper technology should enhance an organizations effectiveness In addition to these basic components of organizational environments there are a large number of interest groups that can exist in an organizations environment Interest groups are parties or organizations other than direct competitors that have some vested interest in how an organization is managed Events in various components of the environment provide both constraints and opportunities for organizations C Environmental Uncertainty
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