External Environment
anything external to the firm, factors beyond an organization
organizational boundaries
That which separates the organization
The 6 types of organizational environment
- Economic
- technological
- political (legal)
- Socio ( culture)
- business
- Global
Uses in technology
Way to communicate with others
- (human knowledge)
Research & development
- (provides new ideas for products & services)
Process technologies
- (used to improve a firms performance in international operations)
What is ERP?
(in a technological environment)
Enterprise Resource Planning
(a large-scale information system for organizing and managing a firm process across product lines)
ERP Application
- supply chain management
(forecasting, purchasing, distribution) - accounting and finance
(accounts payable and receivable, asset management) - manufacturing
(material requirements planning, scheduling)
The poiltical legal envieramnt
reflects the relationships between business and government
ex. regulations
- politically stable
- international relations
Pro or Anti- Business sentiment
The Canadian government has put a halt on bank mergers
Government activities
- crown corporations
- laws and regulations
- taxation & financial policies
- financial aid
- purchasing polices
crown corporations
government-owned companies
- ex. EDS, CBS BOC, Canada Post
- some provinces use crown corporations to invest in the province
- The trend is toward privatization
taxation and Finacail poliesces
federal government
- relies on income tax and other revenue to find activities
provincial government
- relies on income tax and sales tax for revenue
municipal government (NS - HRM)
- rely on property taxes for their revenue
purchasing polises
Fiscal policy
- how the gov collects and spends tex dollars
- The federal gov is the largest buyer of goods and services
- federal gov can be used to influence regional economics and companies
Department of Finance (BOC)
- determines fiscal and monetary policy
- controls money supply, interest rates & taxes
the socio-cultural environment
costumes, values, attitudes, and demographic characteristics of the society in which an organization functions
- customer preferences & tastes
(very across & within national boundaries )
(vary within the same country) - ethical compliance and responsible business behaviour
Five Forces MODLE
Made by economist Micheal E porter
- Bargaining power of supplies
- risk of entry by potential competitors
- bargaining power of budget
- threat of substitute producers
ALL CONNECT TO
- Rivalry amount established firms
How do we stay on top of potential competitors? (BAGE)
- brand loyalty
- absolutes cost advantage
- economics of scale
- government regulations
Rivalry among established companies
If the rivalry is weak …
- companies can increase prices & increase profitably
If rivalry is strong …
- price wars
- price drops or profitably drops
Bargaining power of buyers
Highest when…
- many small sellers (few larger buyers)
- buyers purchase in larger quantities
- buyers account for a large percentage of sellers’ total orders
- buyer can vertically be integrated
bargaining power of supplies
Highest when…
- seller’s products have few substitutes and are important to buyers
-when the buyers’ industry Is not an important customer to suppliers
