External Operating Environment

External Environment

The business environment is surrounding conditions in which the organisation operates, and it can be divided into two broad categories: internal and external.

The External Environment includes those things over which the business has little to no control over. It may be divided into an Operating Environment and a Macro Environment.

Operating Environment

The Operating Environment also known the task environment refers to the outside factors with which the organisation directly interacts in the course of conducting its business. It has a limited and small degree of control over these factors. These include customers, suppliers and creditors, competitors and interest and lobby groups.

Customers

Customers are buyers or users of the products or services produced by a large-scale organisation. As customers are an organisation’s main source of revenue, they are essential to the success of an organisation. Customers desire quality and reasonable priced goods and/or services that fulfill their desired purpose and demand that organisations are ethically and socially responsible by products that are “clean, green and safe”. Organisations are able to influence customers to purchase their goods and/or services however this is the extent of their control over them as customers can’t be forced into purchasing goods.

Suppliers and Creditors

Suppliers are organisations and individuals that source resources to the organisation, allowing it to conduct its operations. Organisations typically have a number of different suppliers. Reliable suppliers are required to ensure that production runs efficiently for the organisation and that their resources are of a high quality. Creditors refer to a bank, person or enterprise that has lent money or credit to another party. Businesses need sources of finance to fund their activities and growth. In a way creditors act as suppliers of finances. Organisations have some degree of control as they are able to select their supplies and creditors however they can’t control their actual operations as they are outside of the organisation.

Competitors

Competitors are other organisations that offer rival products or services, that are similar to that provided by the organisation. Competitors target the same market share with similar goods and/or services. The activities of a similar business/competitor affect the organisation as they will compare and evaluate against them in an attempt to gain a competitive edge. A competitive edge can be obtained using cost or differentiation. Organisations must respond to changes in the actions of competitors.

Lobby Groups

Lobby Groups are groups of people who attempt to directly influence or persuade an organisation to adopt particular policies. Types of these groups can include Trade Unions who represent the interests of employees regarding wages and working conditions, Consumer Groups who works to protect the rights and interests of people purchasing goods and/or services and Specific Issue Groups. Organisations are merely able to attempt to influence these groups or attempt to satisfy their desires as they are separate groups no real power is held over them.