Influence of the external environment on strategic decision

Corporate culture[ edit ] Economic Decision-making Christine Lagarde The need to improve the oversight of severe levers of business performance have been recognized by corporate boards, these include strategy, risk, major transactions, and people, as well as planning and executive compensation. And rigorous and transparent processes have been adopted around these levers. But the lever that hardly ever states on board agendas is culture, even though its contribution to the business world, it is not supervised as the other levers are. And a non-efficient culture could block strategic outcomes, decay business performance, decrease customer satisfaction and loyalty, and repress employee engagement.

Influence of the external environment on strategic decision

And we know that organization is a social entity that has a hierarchical structure where all necessary items are put together and they act within it to reach the collective goal. Organization or more specific business organization and it activates are always being affected by the environment.

In an organization, every action of the management body is influenced by the environment. Organizations have an external and internal environment; External Environment.

In this post, we will look at the elements of organizations environment. External Environment of Organization In a simple way factor outside or organization are the elements of the external environment.

The organization has no control over how the external environment elements will shape up. The external environment can be subdivided into 2 layers: General Environment Task Environment General Environment of Organization The general environment consists of factors that may have an immediate direct effect on operations but nevertheless influences the activities of the firm.

The dimensions of the general environment are broad and non-specific whereas the dimensions of the task environment are composed of the specific organization.

Economic Dimension The economic dimension of an organization is the overall status if the economic system in which the organization operates. The important economic factors for business are inflation, interest rates, and unemployment.

These factors of the economy always affect the demand for products. During inflation, the company pays more for its resources and to cover the higher costs for it, they raise commodity prices.

When interest rates are high, customers are less willing to borrow money and the company itself must pay more when it borrows. Technological Dimension It denotes to the methods available for converting resources into products or services. Managers must be careful about the technological dimension.

Internal Environment Factors

Investment decision must be accurate in new technologies and they must be adaptable to them. Socio-cultural dimension Customs, mores, values and demographic characteristics of the society in which the organization operates are what made up the socio-cultural dimension of the general environment.

The socio-cultural dimension must be well studied by a manager. It indicates the product, services, and standards of conduct that the society is likely to value and appreciate.

The standard of business conduct vary from culture to culture and so does the taste and necessity of products and services. Political-Legal Dimension The politico-legal dimension of the general environment refers to the government law of business, business-government relationship and the overall political and legal situation of a country.

Business laws of a country set the dos and don ts of an organization. A good business-government relationship is essential to the economy and most importantly for the business.

And the overall situation of law implementation and justices in a country indicates that there is a favorable situation in of business in a country. International Dimension Virtually every organization is affected by the international dimension.

Influence of the External Environment on Strategic Decision | Your Business

It refers to the degree to which an organization is involved in or affected by businesses in other countries. Global society concept has brought all the nation together and modern network of communication and transportation technology, almost every part of the world is connected.

These factors include suppliers, customers, competitors, regulators and so on. A manager can identify environmental factors of specific interest rather than having to deal with a more abstract dimension of the general environment.

The different elements of the task environment may be discussed as under: Competitors Policies of the organization are often influenced by the competitors. Competitive marketplace companies are always trying to stay and go further ahead of the competitors.Environmental Factors in Strategic Planning.

For any business to grow and prosper, managers of the business must be able to anticipate, recognise and deal with . The Advantages of SWOT Analysis in a Strategic Plan.

Internal and External Environment

SWOT Analysis Techniques. Internal & External Factors That Affect an Organization. by Sampson Quain; Updated May 04, Related Articles. Internal and External Environment Factors That Influences Organizational Decision Making;.

Strategy is subject to a number of different influential factors: Among these are both the internal and external environment; and leaders are a third force in determining a business strategy.

According to Henry Mintzberg (), a strategy lies on a continuum between planned (deliberate) and. The external environment is constantly changing and this forces the organization to adjust and adapt for it to survive.

The Business Environment A) The Industrial Environment- Industry- a group of companies where the organization operates and competes.

Any force outside of company employees, leadership, and business strategy that can affect an organization's performance can be considered an external influence.

Influence of the external environment on strategic decision

All outside factors that may affect an organization make up the external environment. The external environment is divided into two parts: The External Environment; The Internal Environment; Decision Making and Problem Solving economic, and global influences.

Indirectly interactive forces may impact one organization more than .

Influence of the External Environment on Strategic Decision | Your Business