BUSINESS

Importance of External Environment for the Business

Importance of External Environment for the Business

Introduction

External environment has number of stakeholders for any business. These external stakeholders affect and get affected by and through the operations of the business. There are number of external stakeholders, which can impact the business. The most common external stakeholders are Government-because it lays out the rules of the game, Business Supplier, Competitors, Pressure groups and etc. These external stakeholders have a very important role to play as far as the success of the business is concerned, an effective management of these stakeholders is concerned, several steps are necessary for the business.

Discussion

One cannot conceive the firm as an entity isolated from the environment in which it acts. The company must continuously monitor its environment because on the one hand, it fits into this environment and, secondly. It acts on that environment; the comparison can be influenced by its environment in a positive way (environmental opportunities) or negative (environmental constraints). The company must permanently monitor market developments, changes in competition and technology.

The external environment is extremely important for the success of any business. The external environment has got the factors which have influence on the business and its operations in one way or the other.

The Value of Environment

In the management thought of the importance of the external environment and the need to consider the forces external to the organization, appeared in the late 50s. This was one of the most important contributions of the systems approach in management science, as highlighted the need for a manager to consider the organization as an entity composed of interconnected parts, in turn connected to the outside world. The situational approach allowed extending the theory of systems through the development of the concept that the most appropriate method in this situation is determined by specific internal and external factors that characterize the organization and influence on it accordingly. 

Why External Environment is important for the success of the Business

The external environment will impact the business indirectly. Many environmental factors can influence the organization. Previously, the leaders concentrated their attention mainly on economic and technical circumstances, but changing attitudes of people, social values, political forces and the scope of legal liability was forced to expand the range requiring consideration of external influences (Donaldson, 1995, pp. 65-91).

External Factors and their importance

Environmental factors, indirect effects usually do not affect the operations of organizations as much as environmental factors, the direct impact. However, management must take them into account. Among the indirect effects are usually more complicated than the direct impact of Wednesday. Guidelines are often forced to rely on the assumption that such an environment, based on incomplete information, in an attempt to predict the possible consequences for the organization (Vallejo, Houseman, 2004).

The main environmental factors indirect impacts include: technology, state of the economy, socio-cultural and political factors, as well as relationships with local governing bodies. (Rowley, Moldoveanu, 2003, pp. 204-219)

Technology

Technology is both internal and external variable factor of great ...