Challenges in External and Internal Environment, Slides of Business Economics

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CHALLENGES IN THE

EXTERNAL AND INTERNAL

ENVIRONMENT

Presented by :

Scanning the Environment

Organizations exist to survive. Given their vision and mission statements and set goals and objectives, it is for organizations to conduct themselves clearly, deliberately, and strategically. To achieve this, organizations should

develop "organizational intelligence"

Organizational

intelligence

Environmental scanning

• is the study and interpretation of the forces existing in the

external and internal environments.

•The external environment includes social, economic, political,

technological, and environmental forces that may influence an

organization, an industry, or any entity.

•The internal environment covers competitors, suppliers,

customers, stakeholders, culture, and the government.

Sources of Strategic Information

• Strategic information consists of the facts and data used by organizations to assist them in achieving their vision, mission, and goals.
• Strategic information can be drawn from both external and competitive environments. Both external and internal environments symbiotically interplay and directly or indirectly affect organizations.

Information is either primary or secondary.

• Primary information data -- are gathered through personal experience, observation, and experimentation.
• Secondary information data -- are data collected from reports, Internet sources, and other published materials.

Modes of Environmental Scanning According to Aguilar ( 1967 ), there are four ways of environmental scanning. They are undirected viewing, conditioned viewing, informal search, and formal search.

1. Undirected Viewing. The individual is exposed to information with no

specific informational need in mind. The sources of information are wide-

ranging and large chunks of information are quickly dropped from the

individual's attention.

2. Conditioned Viewing. The individual directs viewing of information to

specified facts and data to be able to assess their general impact on the

organization. It is not an active search but a mere viewing of information.

Modes of Environmental Scanning

3. Informal Search. The individual actively looks for information to

increase knowledge of a particular issue. It essentially involves a

relatively unstructured effort where the objective is to gather

information to expound on the issue, thus, determining whether a

strategic move is needed by the organization.

4. Formal Search. The effort exerted by the individual is deliberate

and planned. The search is both focused and structured and the

research methodology is clearly enumerated and followed.

The SWOT Matrix Analysis

• Strengths are features that organizations possess, thus, giving it significant advantage over others.
• Weaknesses are characteristics that place organizations at a disadvantage relative to others and may just be limitations or vulnerabilities of organizations.
• Opportunities are possibilities in the external environment that organizations can exploit to their advantage.
• Threats are challenges in the external environment that can cause problems to organizations.

CHALLENGES IN THE

EXTERNAL ENVIRONMENT

Social Forces

• Social forces refer to important issues that are characteristics of global and local societies. Society consists of individuals, families, and communities, including their beliefs, aspirations, traditions, and practices. Social Forces - Changing Social Structures - Aging Population/Demand for Health Services - Sophisticated Lifestyle of People - Cross-cultural Diversity

Political Forces Political Forces

• Political Independence/Changing Governments
• Terrorism/Suicide Bombings
• Chemical and Nuclear Threats
• Global Alliances Political Forces There are crucial concerns confronting nations today. Geopolitical issues have become the focus of major political powers.

Technological Forces

• We live in a digital world. Another important catalyst of competition is technology. In the 1980's, information technology began its journey toward radical communication and technology growth. Significant changes happening in the world today have been the result of rapid developments in information technology. These technological advances are observed in the fields of communication, business, banking, education, medicine, security, and in all facets of everyday living.

Technological Forces

• Communication Technology
• Computer-integrated Business
• E-banking
• E-learning
• Digital Medicine
• E-security

Environmental Forces Environmental responsibility is the urgent call of the global neighborhood. Ecological damage is happening everywhere. There seems to be an utter disregard or seeming indifference about the environment. Environmentally, no country can claim complete isolation. The safety and survival of one should be the concern of others. After all, nations share water boundaries.

Environmental Forces

• Climate Change/Use of Biodegradable Materials
• Environmental Waste Management
• Preservation of Rainforests and Marine Life

The Internal Environment

• Aside from understanding the developments and changes occurring in the global environment, organizations need to understand the internal environment, or better referred to as the local milieu.
• The internal environment is the setting in which an organization locally exists.
• These areas are government, culture, the stakeholders, competitors, suppliers, customers, and the community.

Government: The Business Caretaker

• The government is the sole legitimate institution tasked with overseeing organizational operations in the country. In implementing these administrative functions and responsibilities, the government undertakes the following:
• 1. Provides the needed infrastructure.
• 2. Creates an atmosphere of fair and robust competition among industry and company players, monitors and regulates monopolies and oligopolies, and eliminates unfair and illegitimate practices.
• 3. Formulates business policies, implements business operating guidelines, and regulates the conduct of business activities such as payment of taxes, health and safety practices in food, manufacturing, construction, and other service industries, ensures quality of products and services, and mandates minimum wages of employees, and their fair and just treatment.