Internal and External Environment of Company.pptx

Analyzing the external and internal environment of a company.

1. Topic Understanding Internal & External Environment Group Members Muhammad Soban Mujeeb Ul Rahman

2. Understanding Internal and External Environments The internal environment includes everything inside a company, such as employees, resources, and company culture. These are factors a company can control. The external environment includes all outside forces that affect a company but can’t be controlled directly, like competitors, laws, or the economy. Understanding both helps a business respond to changes and make better decisions.

3. Types of External Environments External environments are divided into two main types: Mega Environment Task Environment

4. Mega Environment The mega environment is made up of broad forces that impact most companies. Technological Element: This refers to new technology developments that can impact a company’s products, services, and efficiency. For example, the rise of online shopping forced traditional stores to create websites to compete.

5. Economic Element: The economy affects how much people can spend. For example, during a recession, people buy fewer luxury goods, which impacts sales for companies selling expensive products. Legal-Political Element: This includes laws, regulations, and government policies. For instance, if the government raises the minimum wage, companies must pay employees more, which increases costs.

6. Sociocultural Element: Sociocultural factors are the social values, traditions, and customs in society. For example, as more people focus on health and wellness, companies selling unhealthy snacks may need to adjust by offering healthier options. International Element: This involves international trade and global influences. For example, a company that imports goods might face higher costs if import taxes go up in another country.

7. Task Environment The task environment includes groups and organizations that directly affect a company’s operations. Customers and Clients: Customers are the people who buy a company’s products or services. Knowing what customers want helps companies create products they’ll buy. For instance, a restaurant may start offering vegan options if customer demand increases.  Competitors: Competitors are other companies offering similar products. Understanding competitors helps a business stay competitive. For example, if one coffee shop lowers its prices, another shop may do the same to keep its customers.

8. Suppliers: Suppliers provide the materials or products that a business needs to operate. For instance, a car manufacturer relies on suppliers for parts like engines and tires. Labor Supply and the Importance of Managing Diversity: This includes the availability of skilled workers. A diverse workforce brings different perspectives and ideas, which helps companies serve customers better and adapt to change. Government Agencies: These agencies set standards that businesses must follow. For example, food agencies may have regulations to ensure that food products are safe for consumers.

9. Analyzing Environment Condition: Companies need to analyze their external environment to understand how changes may affect them. Views of the Organization-Environment Interface. Different models help explain how companies interact with their environments. Population Ecology Model: This model suggests that only companies that adapt to their environment survive, just like in nature. For example, a traditional bookstore may close if it doesn’t offer online shopping to meet digital demands.

10. Resource Dependence Model: This model focuses on how companies depend on resources from outside sources, like suppliers. For instance, a smartphone manufacturer needs a reliable supply of screens and batteries to continue production. Reconciling the Differing Models: Both models provide useful insights. Companies need to adapt to survive (Population Ecology) while ensuring they secure essential resources (Resource Dependence).

11. Characteristics of the Environment Understanding specific characteristics of the environment helps companies better prepare. Environmental Uncertainty: This means that a company can’t predict changes. For example, if new technology emerges suddenly, a company may need to act quickly to avoid losing customers. Complexity: Complexity means there are many factors to consider, making it harder to manage. For instance, an international company must consider different laws, customer preferences, and economic conditions in each country.

12. Dynamism: Dynamism is how quickly things change in an industry. For instance, fashion trends change fast, so fashion companies must frequently update their styles to stay relevant. Assessing Environmental Uncertainty: Companies analyze the level of uncertainty to prepare for unexpected changes. Environmental Bounty: This refers to the availability of resources that help a company grow, like a large customer base or a skilled workforce.

13. Managing Environment Elements Companies use different methods to handle and respond to external changes.

14. Adaptation Buffering: Buffering means creating a backup to deal with uncertainty. For example, a business might keep extra stock to avoid running out of products when demand increases. Smoothing: Smoothing involves adjusting to reduce fluctuations. For example, a car dealer may offer discounts in winter to encourage people to buy during a slow season.

15. Forecasting: Forecasting means predicting future changes so that a company can prepare. For instance, a clothing company might predict popular styles for the next season by studying fashion trends. Rationing: Rationing helps manage limited resources by setting limits. For example, during a shortage, a grocery store may limit how much of a certain item each customer can buy. Favorability Influences: These methods help a company build positive relationships and maintain a good public image.

16. Advertising and Public Relations: Advertising attracts customers, and public relations improves a company’s image. Boundary Spanning: This means roles or departments within a company that connect with external groups, like customer service. Recruiting: Hiring the right people is essential for a company’s success, especially when filling specialized roles.

17. Negotiating Contracts: This helps companies secure better deals with suppliers or partners, like getting a discount on bulk purchases. Co-opting: Working with external groups, such as by joining a community initiative, helps build positive relationships. Strategic Alliances: Companies can form alliances to share resources. For example, two tech companies might partner to create a new device.

18. Trade Association: Companies in the same industry can join trade associations to share resources and advocate for common interests. Political Activity: Companies sometimes support policies or politicians that align with their interests. Domain Shifts: A domain shift is when a company expands into a new area or industry. For instance, Amazon shifted from selling books to offering a vast range of products and services.

19. The Internal Environment: Organizational Culture: Organizational culture is the personality or identity of a company, made up of shared values, beliefs, and behaviors. Nature of Organizational Culture: A positive culture encourages teamwork, motivates employees, and promotes creativity, making employees more engaged and productive.

20. Manifestations of Organizational Culture Symbols: Symbols include logos, uniforms, or slogans that represent the company’s identity. For example, Nike’s “swoosh” symbol is instantly recognized. Stories: Stories about the company’s beginnings or achievements give employees a sense of pride and identity. Rites and Ceremonials: These are events that celebrate employee achievements and promote a sense of community within the company.

21. Promoting Innovation An Adaptive, Entrepreneurial Culture: An innovative culture encourages employees to take risks and share new ideas. For instance, Google allows employees to spend part of their work time on personal projects, leading to the creation of products like Gmail.

22. Changing Organizational Culture Sometimes, a company’s culture needs to change to meet new challenges. For instance, a company might move from a strict, rule-based culture to a more open, flexible one to attract younger employees. How Leaders Influence Cultural Change? Leaders have a strong influence on culture. By setting positive examples, sharing a clear vision, and encouraging openness, leaders can create a culture that motivates employees and supports business goals. For instance, a leader who values teamwork and regularly communicates this to employees helps build a more collaborative culture.

23. Summary Understanding the internal and external environments is critical in management. The external environment includes both broad (mega) and specific (task) factors that impact the company. The internal environment, especially organizational culture, plays a big role in how employees work and how the company grows. Leaders play a crucial role in shaping and sometimes changing the culture to support the company’s goals and respond to new challenges.