[Solution] Dimensions of the External Environment
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Author: Sarah Bennett
An organization's external environment consists of two parts: broad forces that act on the organization and specific people or groups who interact with the organization.
The General Environment
The general environment is the set of broad dimensions and forces that create the overall context in which the organization operates. There are five dimensions of the general environment:
- The economic dimension is the health of the economy. Economic growth, inflation, interest rates, and unemployment are typically important factors for business.
- The technological dimension involves the means by which the organization can convert resources into products and services. Examples of technologies include website shopping-cart apps, solar panels, and the CRISPR genetic-engineering technique.
- The sociocultural dimension includes society's customs, mores, values, and demographic characteristics. These factors determine what products, services, and behaviors society will value. For example, society might put more or less value on being environmentally friendly, or consumer tastes might shift away from alcoholic beverages and toward caffeinated beverages.
- The political-legal dimension concerns the relationship between business and government. Governments pass laws and exercise oversight that affect nearly every aspect of business; a vivid example is the legislation enacted in 2020 to respond to the spread of COVID-19. The stability and trustworthiness of a government also affects how confident an organization feels about conducting operations.
- The international dimension involves competitors from other countries, supply chains that cross national boundaries, and trade agreements between countries. The United States–Mexico–Canada Agreement (USMCA) is an example of an element of the international dimension.
The Task Environment
The task environment consists of specific external groups that interact directly with the organization:
- Regulators - Government agencies that oversee and control organizational activities
- Competitors - Organizations vying for the same resources or customers
- Customers - Those who purchase or use the organization's products or services
- Suppliers - Organizations that provide resources
- Strategic partners - Organizations with which an alliance or joint venture is formed
For each example presented, identify whether it is part of the general environment or the task environment.
Economic dimension
Suppliers
View Explanation
The general environment is the set of broad dimensions and forces that create the overall context in which the organization operates. There are five dimensions of the general environment. One of these is the economic dimension, which concerns the health of the economy.
The task environment consists of the external groups that act on the organization. There are five groups that are part of the task environment. One of these is suppliers.
Complete the table by filling in the dimension of the general environment that corresponds to the given example.
Inflation rate
Computer software
Preference for smaller families
Stability of a country's government
Trade agreement between the United States and the European Union
Complete the table by filling in the dimension of the task environment that corresponds to the given example.
Federal Occupational Safety and Health Administration (OSHA)
Two nonprofits that rely on the same donors
Renters, relative to their apartment complex
A maker of accounting software, to businesses that use the software
Two companies in a joint venture to develop an innovative product
