The general environment consists of events and trends that affect all organisations.
Because the economy influences basic business decisions, managers often use economic statistics and business confidence indices to predict future economic activity.
Changes in technology (which transforms inputs into outputs) can be a benefit or a threat to a business.
Sociocultural trends, like changing demographic characteristics, affect how companies run their businesses.
Similarly, sociocultural changes in behaviour, attitudes and beliefs affect the demand for a business’ products and services.
Court decisions and new federal and state laws have imposed much greater political/legal responsibilities on companies.
The best way to manage legal responsibilities is to educate managers and employees about laws and regulations and potential lawsuits that could affect a business.
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GENERAL ENVIRONMENT CONT.
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SPECIFIC ENVIRONMENT
The specific environment is made up of the five components shown here.
Companies can monitor customers’ needs by identifying customers’ problems after they occur or by anticipating problems before they occur.
Because they tend to focus on well-known competitors, managers often underestimate their competition or do a poor job of identifying future competitors.
Suppliers and buyers are very dependent on each other, and that dependence sometimes leads to opportunistic behaviour, in which one benefits at the expense of the other.
Regulatory agencies affect businesses by creating rules and then enforcing them.
Advocacy groups cannot regulate organisations’ practices.
Nevertheless, through public communications, media advocacy and product boycotts, they try to convince companies to change their practices.
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SPECIFIC ENVIRONMENT CONT.
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MAKING SENSE OF CHANGING ENVIRONMENTS
Managers use a three-step process to make sense of external environments: environmental scanning, interpreting information and acting on it.
Managers scan their environments based on their organisational strategies, their need for up-to-date information and their need to reduce uncertainty.
When managers identify environmental events as threats, they take steps to protect the company from harm.
When managers identify environmental events as opportunities, they formulate alternatives for taking advantage of them to improve company performance.
Using cognitive maps can help managers visually summarise the relationships between environmental factors and the actions they might take to deal with them.
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