External Environment may pose significant threats or in some cases herald openings and novel possibilities for an organization. An organization is directly affected by events happening in the environment that it is supposed to be functioning in. The external environment provides the paradigm, the impetus and the most essential factor that shapes an organization. Any organization that easily adapts to the environment essentially survives and the ones that do not are the ones that are eliminated in the competition. External environment may effect in any of the following areas :-
1) Political Environment :- The politics of a country or region that an organization is functioning in affect the policies and benefits that an organization derives from a system. Also, it's the main pool from which the human resource of an organization is selected from and hence it is likely to shape an organization both internally and externally. Also, the political environment and external policies that an organization needs to adhere to are actually dictated by it's political environment
2) Technological Environment:- Any new development may render an organization's processes and systems obsolete if it is not quick to adapt to the new changes. To move forward it is essential to keep updating an organization on a reiterative basis. This becomes even more relevant in case of businesses that rely heavily on technology and are technologically sensitive.
3) Social Environment:- Pretty self explanatory, the social environment and the ethical leanings of the individuals responsible for an organization's functioning and the ergonomic leanings with the external environment define an organization's charter and it's modus operandi.
For success in the present world, one need to consider not only the internal environment of the company consisting of its resources and employees, but also needs to consider the external factors. These aspects cannot be stopped but one can adjust accordingly as per the changes in the economical, social or political pressures. These are the external factors which consist of:
• Opponents or competitors
• The changing economic structure
• Impact of the society
• Financial arrangement
• Legal or political system
• The impact of the environment
Opponent's procedures influence the capability of work in earning profits, as the basic aim of the opponent is to get advantage over the other which is obtained by either diversifying the existing products and services or by finding means to offer better options for the same worth of money. There are three stages of opposition existing in the present world organizations which can be either having a straight competition when the associations are challenging for the similar customers with the analogous products for example grocery or bakery items. Or when there is a rivalry existing between goods that can be replaced with one another for example butter for margarine. Similarly when consumer's purchasing power is the main attraction for the producers it results in competition between organizations for example the entertainment sector.
The allocation of the scarce resources is handled by the organization comprising the economic system. Economy is part of a nation which is expected to under go phases of progress by leaps and bounds. When the economy is in a flourishing stage lifting the standards of living resulting in the growth of the business.
On the other hand the society is a foundation of inspirations, outlook and activities which are a part of the human affairs. However the business is subjective to change by the actions of customer because of their approach and activities which alter depending on various factors such as maturity level, populace, type of vocation, and spare time activities.
Alternatively fiscal classification smoothes the progress of trade alternates. Activities dealing with money basically move around producing, having a loan, expenses and banking. For the lubrication of the wheels of commerce, capital is considered to be the main oil. Monetary doings engross production in a network of contacts linking fiscal bodies which consists of banks, people or companies who grant loans or to whom money is given as advance, clients and contractors. A main factor affecting the business is the interest rate because it is directly proportional with the cost of the company. The elevated the rate, more will be the expenditure to act as a stop on payments in the economy.
The rules and regulations created by the legal system provide the framework on which the organization runs. Administration policy of any nation shores up by promoting activities like ventures while puts off others which result in polluting the natural environment. In contrast the environment is made up of all the nature's gifts bestowed upon us ranging from land to water and to air which has any sort of life in it. Progressively more productions have turned out to be alert of the affiliation between their cost-effective movements that is composing produces and providing assistance for earnings making sure the environment is not at stake at any cost.
External environment consists of social factors, political impacts, ecological considerations, technological uplifts and cultural changes.
So just consider the technological upgrading in the photography. You cannot survive in the market unless you have the digital technology. Same is the case with the political instability in the government and its policies.
By being aware of the various tides of change in the range of environmental factors known a steeple what contingency plans should an organization have in place
The significance of external environment to org is it is necessary to know about the public opinions on their organisation to run an organisation we have to make contacts with the public
because it is a competitive world it is necessary to maintain public relations for getting popularity of organisation we have to built public image to organisation by keeping the relations by making external communication by creditors, union relations, bankers, investors, government, local community, etc,,, hence most of the large organisations create a department of customer relation ship department for making external relation ship from public this increases the public image in business environment and also generate more profits because more people will become a costumers for the products who maintain good relations with public
by this they will try the product and become regular customers to organisation hence we can create goodwill of org from outside parties this will enhance the organisation for offering share capital and also for making large loans form the banks, and from institutions this will give adequate working capital for the organisation and helps for smooth running for the organisation in periods of the inflation this will give support from the out side parties when external communiation is good for an organisation