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Environmental influences

Read this article where we compare internal and external environmental influences.
© Coventry University. CC BY-NC 4.0

We will start this section on comparing internal and external environments by exploring environmental influences.

The diagram below depicts the different environments in which an organisation operates.

Diagram made up of concentric circles showing environmental influences on an organisation. Outside the diagram is the external environment. The outermost circle shows the 'General (macro) environment' which is made up of economic, technological, legal, environmental, sociocultural and political factors. It is also made up of stakeholders. The next circle shows the 'Competitive (micro) environment' which is made up of buyers/customers, competitors, potential entrants, substitutes and suppliers. Like in the outermost 'general (macro) environment' circle, stakeholders also come into the 'competitive (micro) environment' circle. The next circle in shows business processes, structure, objectives, culture, power, technology, finance, people and business processes. The innermost circle shows the internal environment.

Environmental influences on an organisation (adapted from Boddy, 2020)

Select the diagram to enlarge it

Boddy (2020) describes the different levels in the framework. You will see that his description implies that all factors interact with each other in the continuing development of an organisation and its management policies.

Internal environment

The inner circle represents the organisation’s internal environment, including its culture, which we have just explored. Culture is the very essence of an organisation, being its lifeblood and DNA. Culture is reflected in the values, principles and customs of an organisation and has a powerful influence on how it is viewed by all its stakeholders, in particular its members.

Organisations with positive cultures value their staff who, in turn, work hard to uphold those values. It is, therefore, one of the prime responsibilities of leaders to create the very highest of standards and values within their organisations – principles that are understood and embraced by everyone, in particular the leaders themselves.

The competitive/microenvironment

External to the organisation is the industry-specific microenvironment, which Boddy also describes as the competitive environment. It covers interaction with the external environment and key influences with which the organisation interacts, such as suppliers. It also considers competitors, both existing and potential, and is important in mapping out the competitive landscape in which the organisation operates.

Macroenvironment

Outside of the microenvironment is the macro or external environment affecting all organisations. Generally speaking, external factors are not managers’ day-to-day concerns and only come to their attention when stakeholders force them onto the agenda.

References

Boddy, D. (2020). Management: Using practice and theory to develop skill (8th ed.). Pearson Education.

© Coventry University. CC BY-NC 4.0
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