External Environment Impact: Frameworks & Organizational Decisions

This report examines the influence of the external environment on organizations, emphasizing the critical role of political factors, consumer behavior, economic policies, competitor strategies, and public opinion. It identifies appropriate frameworks and tools, such as supply chain management, digital business strategies, strategic planning, targeting and positioning, innovation, and market research, to address challenges faced by businesses. The report also highlights industry-specific factors, including resources, competition, technology, return on investment, and ethics, which significantly impact organizational decision-making processes. Ultimately, the report underscores the importance of understanding and adapting to the external environment for sustainable business development and effective strategic decision-making. Desklib offers additional resources and solved assignments for students.

Business Environment

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Contents
INTRODUCTION.................................................................................................................................2
Influence of the external environment on the organisation................................................................3
Appropriate framework and tool that will help in facing the challenges............................................4
Industry specific factors that are linked with decision making..........................................................5
CONCLUSION.....................................................................................................................................5
REFERENCES......................................................................................................................................6
INTRODUCTION
The external environment for business is changing all around the world (Ferrell & Fraedrich,
2015). This has a greater impact on the operations of the firm. Its influence can be seen on

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various aspects of the business. Organisations also need to be prepared for the plans so that
they can solve the problems companies are facing. For facing these challenges companies are
taking use of appropriate tools and frameworks. There are many industry specific factors that
are affecting the decision making process of the organisations. Organisations need to have
thorough evaluation of these factors so as to have highly productive decisions. This report
highlights the influence of external environment on the firm as well as the framework and
tool that is used by the organisations to confront the challenges faced by them. It also
showcases the industry specific factors that affect the organisational decision making.
Influence of the external environment on the organisation
External environment comprises of many factors. All these have a greater and wide
ranging impact on the operations of the firm. Any changes in these factors have a direct or
indirect influence on the business operations. Some of these factors and its influence are
illustrated below:
 Political: The regulations made by the government have a deeper impact on the
business of the firm. As they define the norms according to which businesses will run
so they can impact the business operations. Changing political domains all around the
world especially in terms of political ties have a greater impact on the trade and
taxations which directly affects the multinational firms (Epstein & Buhovac, 2014).
 Consumer behaviour: The demands of the consumers are changing and this behaviour
needs to be understood by the company. Since the competition has increased and
hence it has forced the organisations to make sure that they have a proper
understanding about the behaviour of consumers. They are demanding of products
that solves their multiple problems at a same time or say they act smartly.
 Economy: Governments economic policies decide the future of the organisation in
any country. If the policies are suitable for the business especially related with the
taxation and investments norms then it can add positively to the financial gain of the
firm.
 Competitor’s strategy: It is not just that the success and failure of the business of the
organisation depends on the strategy that is made by the company but it also depends
on the strategy made by the competitors. In competition the win of the organisation
depends on how much better is the operation of the firm as compared to rival’s
strategy.

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 Public opinion: This is also shaping the external environment for the business. It is
important that what consumers feel about the company (Klapper, Lewin & Delgado,
2011). If there is a positive thinking about the firm then there is always a chance that
company can attract larger number of people towards their products and services.
Appropriate framework and tool that will help in facing the challenges
There are many tools that can utilised by the managers in order to confront the challenges that
are faced by the companies (Babatunde & Adebisi, 2012). Some of them are as follows:
 Supply chain management: This is the tool that will help the firms in meeting the
demands of the consumers at the right time so that they maintain the demand and
supply chain. It will also help the companies in managing their resources in a better
way so that they may not have problems in their operations.
 Digital Business: In order to improve the performance of the company they need to
have a digital marketing strategy. Taking use of advanced technologies helps in
reducing the cost of operations as well as improves the effectiveness of the firm which
is necessary for its growth (Chavis, Klapper & Love, 2011). The storage of data
which is a bigger problem for the firm can also be solved by the use of advanced
technologies.
 Strategic planning: This will help the firms in safeguarding against the government
regulation as well as the economic policies made by them. Efficient planning of
resources will help the company in its sustainable development.
 Targeting and Positioning: It is seen that due to excessive competition companies are
making the losses since most of their products are not making expected profit. This
can be resolved by the strategy of targeting and positioning where the companies need
to target the segment of the population for which they have designed the products and
services (Chittithaworn, Islam, Keawchana & Yusuf, 2011). All other secondary
activities of the firm must be according to the target section they have made for their
respective products. In order to improve the attractiveness of the products and
services of the company in the minds of the consumers positioning strategy is highly
important.
 Innovation: This is one of the best tools using which any company can face the
competition they are in. It also helps in fulfilling the needs of the consumers which is
crucial for their growth of the firm. Innovation ensures that all the expectations the

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firm will be heard and the may not face problems in making new investments with
ensuring returns on it (Craig & Campbell, 2012).
 Market and industry research: In order to understand the behaviour of the consumers
as well as the strategies that are made by the competitors research is highly necessary.
It also helps in understanding the factors that are confronting the business as well as
the expectation that consumers have from the company (Trivikram, 2016). Research
must be based on the data that is collected by the firm from their previous operations.
Industry specific factors that are linked with decision making
There are several factors that shape the decision making of the firm. Industry specific factors
have higher linkage with the decision making of the organisation (Hamilton & Webster,
2015). Some of these factors are as follows:
 Resources: This factor plays one of the most significant roles in the decision making
of the firm. The amount of resources available with the firm as well as the quality it
has plays a more significant role in the decision making. Any firm must analyse the
resources available with them so as to make decisions more productive.
 Competition: The amount of competition that a firm is facing plays a vital role in the
decision making process. The products offered by the competitors and its
attractiveness in the market plays a very crucial role in the competition (Wetherly,
2014).
 Technology: In the modern day business technology plays a vital role in the decision
making process. Higher the demand of the industry regarding the technology more is
its influence on decision making (Sena Ferreira, Shamsuzzoha, Toscano & Cunha,
2012).
 Return on Investment: The return a company gets on its investments shapes it’s
decision making process. Decision related to the ROI helps in shaping the financial
decision making of the firm.
 Ethics and values: Every organisation has certain ethics and values and it is linked
with the work that is done within the industry (Carroll & Buchholtz, 2014). This has a
greater impact on the decision making process of the firm. All the decisions are made
checking the ethical norms of the industry.

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CONCLUSION
From the above report it can be concluded that there are several factors that exist in the
external environment of the organisation. This makes the influence of external environment
very wide in terms of its performance. There are many frameworks and tools that is utilised
by the firms so as to confront the challenges and the problems they are facing in their
business. Apart from this there are certain industry specific factors that are having influence
on the decision making of the organisations and hence need to be evaluated in a proper way
so as to take appropriate decisions.
REFERENCES
Babatunde, B. O., & Adebisi, A. O. (2012). Strategic Environmental Scanning and
Organization Performance in a Competitive Business Environment. Economic
Insights-Trends & Challenges, 64(1).
Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and
stakeholder management. Nelson Education.
Chavis, L. W., Klapper, L. F., & Love, I. (2011). The impact of the business environment on
young firm financing. The world bank economic review, 25(3), 486-507.
Chittithaworn, C., Islam, M. A., Keawchana, T., & Yusuf, D. H. M. (2011). Factors affecting
business success of small & medium enterprises (SMEs) in Thailand. Asian Social
Science, 7(5), 180.

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Craig, T., & Campbell, D. (2012). Organisations and the business environment. Routledge.
Epstein, M. J., & Buhovac, A. R. (2014). Making sustainability work: Best practices in
managing and measuring corporate social, environmental, and economic impacts.
Berrett-Koehler Publishers.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases.
Nelson Education.
Hamilton, L., & Webster, P. (2015). The international business environment. Oxford
University Press, USA.
Klapper, L., Lewin, A., & Delgado, J. M. Q. (2011). The impact of the business environment
on the business creation process. In Entrepreneurship and Economic
Development (pp. 108-123). Palgrave Macmillan, London.
Sena Ferreira, P., Shamsuzzoha, A. H. M., Toscano, C., & Cunha, P. (2012). Framework for
performance measurement and management in a collaborative business
environment. International Journal of Productivity and Performance
Management, 61(6), 672-690.
Trivikram, S., (2016). Retrieved from: http://myventurepad.com/influence-business-
environment-success-organisation/
Wetherly, P. (2014). The business environment: themes and issues in a globalizing world.
Oxford University Press.

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