The working environment of an organization is the basic need and prerequisite for the success of that organization. So we discuss here some various working environment of an organization.
Table of Contents
Working Environment of an Organization
- Physical Environment
- External Environment
- General Environment
- Task Environment
- Internal Environment
- Environment and Organization
- Organization Environment Relationships
1. Physical Environment
Organizations are the products of the physical environment in the main. All organizations whether they are engaged in business or non-business activities draw the inputs from the environment, convert the inputs into outputs and send them back to the physical environment. So every organization has a two-way interaction with the physical environment.
It is true that today’s business organization is an open system that is influenced by the environment and in turn influences the environment. The physical environment of the business consists of two components internal environment and external environment.
An organization’s internal environment consists of conditions and forces within the organization. Its major components include its owner, board of directors, employees, organized labor, and the organization’s culture.
On the other hand, the external environment is everything outside an organization that might affect it. The organization and its environments may be shown in the following figure:
Organizations are the products of the physical environment.
The physical environment of a business consists of two components-internal environment and external environment.
2. External Environment
The external environment affecting the organization may be divided into two major categories-the general environment and the task environment. The general environment consists of those factors that may not have an immediate direct effect on operations but nevertheless influences the activities of the firm.
These include such factors as technology, socio-cultural and political factors, general economic conditions, and so on. The task environment, on the other hand, consists of those factors that directly affect and are affected by the organization’s fundamentals of management-7 operations. These factors include suppliers, customers, and competition regulators, and so on. Let us now understand the impact of all these factors in brief.
The general environment consists of those factors that may not have an immediate direct effect on operations but nevertheless influence the activities of the firm.
3. General Environment
3.1 The economic dimension
The economic dimension of the general environment depends on the economic system of the country in which the organization functions. The important economic factors for business are inflation, interest rates, and unemployment-all of which affect demand for different products.
During inflation, a company pays more for resources and must raise its prices to cover the higher costs. When interest rates are high, customers are less willing to borrow money and the company itself must pay more when it borrows.
When unemployment is high, the company is able to be very selective about whom it hires, but customers’ buying may decline because fewer people are working.
The economic dimension of the general environment depends on the economic system of the country in which the organization functions.
3.2 The technological dimension
It refers to the methods available for converting resources into products or services. Although technology is applied within the organization the forms and availability of that technology come from the general environment.
Every manager must pay careful attention to the technological dimension of their general environment and monitor current developments in order to make informed decisions about investing a new technological break-through.
The technological dimension of the environment refers to the methods available for converting resources into products or services.
3.3 The socio-cultural dimension
The socio-cultural dimension of the general environment is made up of the customs, mores, values, and demographic characteristics of the society in which the organization functions.
Socio-cultural processes are important because they indicate the product, services, and standards of conduct that society is likely to value. The standard of business conduct varies from culture to culture.
In many countries accepting bribes and bestowing political favor are considered immoral. In other countries the standards are different, side payment to local politicians may be openly expected in return for a favorable response to the common business transactions such as applying for a permit.
This dimension also influences employees in their level of commitment in between societies. For example, Japanese workers evince more commitment and attachment to their organization than American Workers.
3.4 The politico-legal dimension
The politico-legal dimension of the general environment refers to the government regulation of business and the relationship between business and government.
It is important for three basic reasons. It imposes certain legal constraints on organizations. The extent to which it is pro or anti-business significantly influences management policy and its stability is an important element in the long-range planning activity.
No one will be willing to invest money and set up industry in a country where the politico-legal factors do not favor industrialization.
The politico-legal dimension of the general environment refers to the government regulation for business and the relationship between business and government.
3.5 The international dimension
Virtually every organization is affected by the international dimension. It refers to the extent to which an organization is involved in or affected by the business in other countries.
Even firms that do business within only its own country may face foreign competition at home and they may use materials or production equipment imported from abroad.
In fact, the recent concept of global society has brought the nation of the world together and with the development of an excellent network of communication and transportation technology, almost no part of the world is cut off from the rest.
The international dimension environment refers to the extent to which an organization is involved in or affected by the business in other countries.
4. Task Environment
The dimensions of the general environment are broad and non-specific whereas the dimensions of the task environment are composed of specific organizations.
The task environment provides useful information more readily than does the general environment because the 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:
4.1 Competitors
Most of the policies of the organization are influenced by competitors. In a competitive environment, the matter place is characterized by moves and counter-moves.
Nevertheless, in the world economy, the competition in all respects has increased tremendously, and thereby., many firms are forced to wake up from their slumber.
In this situation, many organizations are now redefining business rediscovering the markets, and showing concern about customer service, human resource development, and society.
4.2 Customers
The primary goal of every organization should be customer satisfaction. A customer is a person who pays money to acquire an organization’s product or services.
In many cases, the chain of the transaction is more complex. A product passes through a number of channels before it is bought by the customer for consumption.
In each stage of the transaction, the ultimate objective of consumer satisfaction plays a virtual role. Hence managers should pay close attention to the customer’s dimension of the task environment.
4.3 Suppliers
Suppliers provide inputs (like raw materials, equipment, energy, capital, and labor) for the organization which is ultimately transformed into outputs.
So the relationship between the organization and the suppliers of these inputs presents the forces in the environment that directly influence the operations of a firm.
If an organization is unable to obtain these essential imports of the right quality and quantity at the right price, it cannot possibly achieve the objectives.
Hence dealing with suppliers is an important task of management. It is wise to maintain a good relationship with a network of suppliers.
The relationship between the organization and the suppliers of inputs presents the forces in the environment that directly influence the operations of a firm.
4.4 Regulators
Regulators are units in the takes environment that have the potential to actively control, regulate, or influence an organization’s policies and practices.
There are two important kinds of regulators: (i) government agency and (ii) interest groups.
The form of organization, the management, and the way how a firm conducts itself in the society is very much influenced by the various provisions of the laws which are enacted by the various regulatory agencies of the government.
On the other hand, an interest group is created by its members to attempt to influence organizations as well as the government.
Regulators are units in the task environment that have the potential to, actively control regulate of influence an organization’s policies and practices.
4.5 Strategic allies
They are important elements in a task environment for many organizations. They try to influence the organizations as well as the activities of the government in various ways.
Strategic allies try to influence the organizations as well as the activities of the government in various ways.
5. Internal Environment
The internal environment consists mainly of the organization’s owners, the board of directors, employees, and culture. Owners are those who have property rights and claims on the organization.
The board of directors, elected by stockholders, is responsible for overseeing a firm’s top managers. Individual employees and also the labor unions they join are other important parts of the internal environment.
An organization’s culture plays a major role in shaping its success because the culture is an important determinant of how well their organization will perform.
By the culture of an organization, we mean a set of values that helps its members understand what the organization stands for, how it does things, and what it considers important. As the foundation of the organization’s internal environment, it plays and major role in shaping managerial behavior.
Essentially the manager must understand the current culture and then decide it if should be maintained or changed. By understanding the current culture managers can take appropriate actions.
To change culture managers must have a clear idea of what the want to crate. One Major way to shape culture is by bringing outsiders into important managerial positions. The choice of a new CEO from outside the organization is often a clear signal that things will be changing.
6. Environment and Organization
An organization’s general and task environment affects the organization in a variety of ways. The elements in the task environment can be identified in two dimensions: (i) degree of change, (ii) degree of homogeneity.
The degree of change means the extent to which the environment is relatively stable or relatively dynamic. The degree of homogeneity means the extent to which it is relatively simple or relatively complex. This combination of environmental factors may be discussed as under:
6.1 Stable-simple environment: When environmental conditions are relatively stable and simple the organization faces little uncertainty and is likely to adopt a rigid structure. This type of structure, in the face of uncertainty, can run smoothly.
6.2 Dynamic-simple environment: Organizations with dynamic but simple environment generally face a moderate degree of uncertainty. Rules still predominate, but certain areas are likely to have the power to monitor and deal with rapid changes in environmental conditions.
6.3 Stable-complex environment: In this case, moderate uncertainty prevails, but a different form of organization is appropriate. Usually, the firm is somewhat decentralized, and it groups activities around different products or product lines in response to complex environmental.
6.4 Dynamic-complex environment: The general and task environment dimension may also interact in a very dynamic and complex way to yield a high degree of uncertainty. Managers face a large number of environmental variables and these are constantly changing. Hence, the emphasis is given on communication, decentralization, and managerial autonomy.
7. Organization Environment Relationships
Since organizations are open systems, they interact with environmental elements in various ways. We will try to unfold the nature of such interactions.
We first discuss how environments affect organizations and then identify a number of ways in which an organization may adapt to their environments.
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