The environment often places important constraints on an organization’s goals, for example. Third, the environment shapes the various strategic decisions that executives make as they attempt to lead their organizations to success. Figure 3.2 Natural disasters devastate many organizations. Japanese concrete manufacturers, steelmakers, and construction companies are likely to be very busy in the years ahead. The rebuilding of infrastructure and dwellings requires concrete, steel, and other materials. As odd as it may seem, however, these tragic events also opened up significant opportunities for other organizations. In addition to horrible human death and suffering, the March 2011 earthquake and tsunami in Japan devastated many organizations, ranging from small businesses that were simply wiped out to corporate giants such as Toyota whose manufacturing capabilities were undermined. These two firms are much smaller than Subway, but they could grow to become substantial threats to Subway’s positioning as a healthy eatery.Įxecutives must also realize that virtually any environmental trend or event is likely to create opportunities for some organizations and threats for others. Noodles and Company offers a variety of sandwiches, pasta dishes, and salads that contain fewer than 400 calories. Saladworks, for example, offers a variety of salads that contain fewer than 500 calories. Subway faces a threat from some upstart restaurant chains. Threats are events and trends that may undermine an organization’s performance. In the late 1990s, for example, Jared Fogle’s growing fame created an opportunity for Subway to position itself as a healthy alternative to traditional fast-food restaurants. ![]() Opportunities are events and trends that create chances to improve an organization’s performance level. Second, the environment is a source of opportunities and threats for an organization. An organization cannot survive without the support of its environment. Subway, for example, simply would cease to exist without the contributions of the franchisees that operate its stores, the suppliers that provide food and other necessary inputs, and the customers who provide Subway with money through purchasing its products. As the human body must consume oxygen, food, and water, an organization needs to take in resources such as labor, money, and raw materials from outside its boundaries. In the 17th century, British poet John Donne famously noted that “no man is an island.” Similarly, it is accurate to say that no organization is self-sufficient. First, the environment provides resources that an organization needs in order to create goods and services. Understanding the environment that surrounds an organization is important to the executives in charge of the organizations. Overall, the environment has a far greater influence on most organizations than most organizations have on the environment. Some aspects of the general environment, such as demographics, simply must be taken as a given by all organizations. While most organizations simply react to major technological trends, for example, the actions of firms such as Intel, Microsoft, and Apple help create these trends. A few organizations wield such power and influence that they can shape some elements of the general environment. ![]() Subway’s move to cut salt in its sandwiches, for example, may lead other fast-food firms to revisit the amount of salt contained in their products. Most organizations are limited to influencing their industry. The industry (or competitive environment) consists of multiple organizations that collectively compete with one another by providing similar goods, services, or both.Įvery action that an organization takes, such as raising its prices or launching an advertising campaign, creates some degree of changes in the world around it. The general environment (or macroenvironment) includes overall trends and events in society such as social trends, technological trends, demographics, and economic conditions. ![]() It is useful to break the concept of the environment down into two components. Congress, and many additional conditions and forces. In the case of Subway, for example, the environment contains its customers, its rivals such as McDonald’s and Kentucky Fried Chicken, social trends such as the shift in society toward healthier eating, political entities such as the U.S. Learn the difference between the general environment and the industry.įor any organization, the environment consists of the set of external conditions and forces that have the potential to influence the organization.Understand how an organization and its environment affect each other.Define the environment in the context of business.
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