Mgt503 - Principles Of Management - Lesson 12

Explanation
THE ENVIRONMENT:
The impact of the external environment on a manager’s actions and behaviors cannot be overemphasized.
There are forces in the environment that play a major role in shaping managers’ endeavors
The environment is defined as outside institutions and forces outside the organization that potentially
affect an organization’s performance.

Explanation
External Environment
‘Major forces outside the organisation with potential to influence significantly a product or
service’s likely success is called its external environment.’

Explanation
Types of external environments:
The insights derived from systems theory have helped to highlight the importance of a managed interaction
between an organization and its external environment. Two major divisions have been made in the external
environment:
1) The Mega Environment
2) The Task Environment

Explanation
The Mega Environment
The mega-environment, or general environment as it is sometimes called, is that segment of the external
environment that reflects the broad conditions and trends in the societies within which an organization
operates

Explanation
The Mega Environment
The mega-environment, or general environment as it is sometimes called, is that segment of the external
environment that reflects the broad conditions and trends in the societies within which an organization
operates.

Explanation
The major elements of the mega environment include technology, legal-political, socio-cultural, and international element. These elements are important factors that can greatly impact a business and its operations. Technology refers to advancements and innovations that can affect how a business operates and competes in the market. Legal-political factors involve laws, regulations, and government policies that can influence business activities. Socio-cultural factors consider the social and cultural aspects of a society that can shape consumer behavior and preferences. The international element takes into account global factors and trends that can impact business operations on a global scale. Competitors are not considered major elements of the mega environment.

Explanation
The technological element of the mega-environment reflects the current state of
knowledge regarding the production of products and services.

Explanation
The economic element of the mega-environment encompasses the systems of
producing, distributing, and consuming wealth.
a. In a capitalist economy, economic activity is governed by market forces
and the means of production are privately owned by individuals, either
directly or through corporations.
b. In a socialist economy, the means of production are owned by the state
and economic activity is coordinated by state plan.
c. In practice, countries tend to have hybrid economies, incorporating
elements of capitalism and socialism.
d. Organizations are influenced in any given economic system by a variety of
economic conditions over which they have little control, such as inflation
and interest rates.

Explanation
The legal-political element of the mega-environment includes the legal and
governmental systems within which an organization must function.
a. Organizations must operate within the general legal framework of the
countries in which they do business.
b. Organizations are subject to an increase in lawsuits filed by customers or
employees.
c. The political issues which affect organizations include those which
influence the extent of government regulation.

Explanation
The socio-cultural element of the mega-environment includes the attitudes,
values, norms, beliefs, behaviors, and associated demographic trends that are
characteristic of a given geographic area.
a. The sociocultural element is of particular importance to multinational
corporations.
b. Sociocultural trends can result in important shifts in demand for products

Explanation
The international element of the mega-environment includes the developments
in countries outside an organization’s home country that have the potential impact
to the organization. International factors far beyond the direct influence of a
particular organization can have profound effects on its ability to operate
successfully.
a. Fluctuations of the dollar against foreign currencies influence the ability
of an organization to compete in international markets.
b. Free-trade agreement, such as the NAFTA, GATT can affect an
organization either positively or negatively.

Explanation
The Task Environment
The task environment is that segment of the external environment made up of specific outside elements
(usually organizations) with which an organization interfaces in the course of conducting its business. The
task environment depends on the products and services the organization offers and the locations where it
conducts business. The organization may be more successful in affecting its task environment than it is its
mega-environment.

Explanation
An organization’s customers and clients are those individuals and organizations
that purchase its products and/or services. It is becoming increasingly important
to stay in touch with customers’ needs.
2. An organization’s competitors are other organizations that either offers of have a
high potential of offering rival products or services.
a. Organization needs to keep abreast of who their competitors are and what
they are doing.