Describe the nine major components of the external environment, the series of influences that originate outside the organization and that the company cannot control.

Question

What will be an ideal response?

Answer 1

There are nine major external forces:
Customers. Companies must continually improve products to create value for their customers.
Competition. Organizations compete against each other for customers, for the same employees, and sometimes for suppliers. Competitors’ strategic moves affect the performance of the organization.
Suppliers. The firm’s performance is affected by its suppliers. Therefore, it is important to develop close working relationships with your suppliers, and close relationships require employees who have the ability to communicate, empathize, negotiate, and come to mutually advantageous agreements.
Labor force. The recruits available to, and the employees of, an organization have a direct effect on its performance. Management recruits human resources from the available labor force outside the company’s boundaries.
Shareholders. The owners of a corporation, known as shareholders, influence management. Most shareholders of large corporations are not involved in the day-to-day operation of the firm, but they do vote for the board of directors, and the top manager reports to the board of directors.
Society. Individuals and groups within society pressure business for changes. People who live in the same area with the business do not want it to pollute the air or water or otherwise abuse natural resources.
Technology. Technology has changed the speed and the manner in which organizations conduct and transact business. Changing technologies requires technologically savvy employees who have the ability to adapt to new processes.
The economy. No organization has control over economic growth, inflation, interest rates, foreign exchange rates, and so on. In general, businesses do better when the economy is growing than they do during recessions.
Government. National, state, and local governments all set laws and regulations that businesses must obey. Governments create both opportunities and obstacles for businesses. To a large extent, business may not do whatever it wants to do; the government sets guidelines.