This work shows the impact that the internal and external environment have on organizations, it also suggests some proposals so that companies can forecast and make correct decisions in the face of these changes.
external-environment-of-organizations-competitivenessFor Simón Andrade Espinoza, organization is "the action and effect of articulating, arranging and operating a set of means, factors, or elements to achieve a specific goal." (ESPINOZA, 2010)
For Ferrell, Hirt, Adriaenséns, Flores and Ramos, «organization consists of assembling and coordinating the human, financial, physical, information and other resources that are necessary to achieve the goals, and in activities that include attracting people to the organization, specify job responsibilities, group tasks into work units, direct and distribute resources, and create conditions for people and things to work for maximum success. (FERREL, 2012)
According to the American Marketing Association, organization is a structure within which people are assigned to positions and their work is coordinated to make plans and achieve goals. (ASSOCIATION, 2012)
External Environment of Organizations are all those factors that influence the organization and that do not belong to the system. This environment in turn is divided into two sections that allow analyzing direct or indirect variables known as Microenvironment and Macroenvironment; The optimal functioning of all companies depends on how these aspects are analyzed and used for the survival or growth of any organization. (MALOTA, 2013)
EXPLORE THE ENVIRONMENT
A smart company is one that oversees its environment, in order to forecast future changes.
This exploration must include trends or critical events before the changes have developed, since once they mature, they have patterns that force the company to acquire them.
COMPETITIVE INTELLIGENCE
Competitive intelligence helps companies know where they are standing, to know themselves and to know their competitors and environment.
To achieve this, the organization must carry out a competitive analysis, thus avoiding the surprise factor of its competitors and the general environment itself. Also creating a response to these factors.
Peter Drucker mentions the following:
(DRUCKER, 2013)
FORECAST THE ENVIRONMENT
Predicting is being able to predict upcoming changes, to achieve this you can ask the following questions.
How long will it take for a new technology to be released?
Will the current social concern about an issue lead to new legislation?
Are current trends in our lifestyle likely to continue?
It should be mentioned that, being a forecast, it cannot be fully guaranteed that what is projected will happen.
PLAN SCENARIOS (PE)
Scenario planning is about seeing the future as an extrapolation of trends and current events.
Planning moves between different disciplines, including economics, psychology, sociology, and demography.
This provides ideas on how managers can be more creative in anticipating the future.
It also provides a series of tools that allow managers to imagine future threats and opportunities.
In order to plan scenarios, it is necessary to analyze the environment, not only the external one but also the internal one that also influences the environment.
INTERNAL ENVIRONMENT
CUSTOMERS
Customers can be current or potential and can be individuals or organizations. For example: institution, schools, government entity, contractor, distributor or manufacturer, and the individual consumer. Today organizations transform their processes to adapt to customer needs.
COMPETITORS
Every company should seek to know the strategies of its present and future rivals.
Competitors include foreign, domestic, start-up, and foreign competitors.
The high competition in a sector, causes the drop in prices of a product, or aggressive sales strategies.
SUPPLIERS
As suppliers know, they are in charge of supplying the necessary inputs and raw materials. For example, raw materials, services, energy equipment and labor.
Suppliers play an important role in influencing aspects such as quality and the final price of the product.
Suppliers can also pose a threat when they are unique or their customer is not significant to them.
EXTERNAL ENVIRONMENT
The general environment is made up of elements that influence factors such as price, availability of raw materials, demand, seasonality, among others, ILLUSTRATION 1: EXTERNAL ENVIRONMENT
DEMOGRAPHIC ENVIRONMENT
Demographics include elements such as the age of the population, increasing or decreasing levels of wealth, changes in ethnic composition, geographic distribution and disparity in income level.
The impact of a demographic trend, like that of any environment, varies by sector.
For example, the increase in the number of births has a positive effect on the industry that produces baby products.
ECONOMIC ENVIRONMENT
The economy has an impact on all sectors, from raw materials to the delivery of the good or service.
Likewise, this aspect impacts all organizations at the service level, intermediaries, retailers, government.
As economic indicators, one can cite interest rates, unemployment rates, the consumer price index, gross domestic product (GDP) and net disposable income.
Capital.
Any organization needs capital in the form of machinery, inventory, office equipment, tools, and most of all cash. All operations depend on the availability and prices of the capital goods they require.
Job.
A resource of the economic environment is its capital, since it requires remuneration for its work provided, the company must consider the availability, quality and price of the labor force, wages being a very important economic input for an organization
Price levels.
Materials, raw materials and supplies are affected by changes in the price level, inflation not only affects organizations, but also negatively affects all types of organization through its effects on the cost of human, material and other capital. supplies.
POLITICAL ENVIRONMENT - LEGAL
Political processes and legislation influence the environmental regulations to which the sectors must submit.
Government fiscal and tax policies is another important factor of the organization. The economic impact of treaties and legislation can sometimes negatively impact companies. The Government controls taxes and their application affecting the entire society.
GEOGRAPHIC ENVIRONMENT
Companies must have the ability to respond to aspects of the environment itself, such as climate, availability of human resources and other aspects related to the geographical environment that surrounds them.
TECHNOLOGICAL ENVIRONMENT
Developments in technology generate new products and services, and optimize the way they are produced and delivered to the end user.
The innovations create new sectors and allow companies to enter other markets, they also help them to stay in the customer's taste, on the contrary, the lack of innovative products or services can cost them their decrease.
SOCIOCULTURAL ENVIRONMENT
Sociocultural forces influence the values, beliefs, and lifestyle of society.
There are some modern trends that enhance sales of products and services in many sectors, but sales of others decline.
Raid opportunities are in people who want to maintain a healthy diet and take care of their bodies, people concerned about the environment, and the postponement of the moment of having children, families with double sources of income, number of temporary workers
GLOBAL ENVIRONMENT
As previously described, the forces that affect companies were six, however, at present, another has been developed. An ecological environment is in response to respect for the environment that is affected by the work of industries.
The addition of this factor in the environment also allows organizations to create a competitive advantage, some companies choose to obtain the title of "socially responsible company", thus earning points with their customers.
ECOLOGICAL ENVIRONMENT
All the resources we use to live come from the ecosystem: air, water, food, energy, etc.
However, our waste and the effects of our development also end up in it.
The environment is an integral part of economic and social development and these cannot be achieved without the preservation of the environment on a sustained basis.
Sustainable development is a development model that seeks to satisfy the needs of the present without compromising the satisfaction of the needs of future generations. (CONTRERAS, 2014)
COMPETITIVE ENVIRONMENT
There is an environment that must also be considered, the "competitive environment", that is, the nature of rivalry in a sector.
This sector must be analyzed, you can use the analytical tool called:
"Porter's 5 Forces Model".
This technique helps to decide whether a company should stay in or leave a sector.
In the same way, this model helps to improve the competitive position of the company with respect to each of the 5 forces.
5 PORTER FORCES MODEL
ILLUSTRATION 5: PORTER'S FIVE FORCES MODEL
1. Rivalry between competitors
The most powerful force of all, refers to the rivalry between companies that compete in the same industry, offering the same product.
A strong rivalry between competitors could be interpreted as a large number of strategies designed to outperform others, strategies that take advantage of the weakness in them.
The rivalry tends to increase mainly as these increase in number and become equal in size and capacity.
Rivalry tends to increase when:
- demand for industrial products decreases. there is little product differentiation. price reductions become common. consumers have the ability to easily switch brands. fixed costs are high. product is perishable. mergers and Acquisitions in the industry are common.
Organizations must analyze rivalry between competitors, allowing us to compare our competitive advantages with those of other rival companies, and thus formulate strategies that allow us to overcome them.
Some examples of these strategies are:
- increase the quality of products, reduce prices, provide new features to products, provide new services, increase advertising, increase sales promotions.
2. Threat of entry of new competitors
This force hints at the potential entry into the industry of companies that produce or sell the same type of product.
When companies can easily enter an industry, the intensity of competition increases; however, entering a market is usually not a simple thing due to the existence of entry barriers.
Examples of entry barriers are:
- the need to quickly achieve economies of scale the need for technology and specialized knowledge the lack of experience strong consumer loyalty to certain brands high capital needs lack of proper distribution channels government regulatory policies high tariffs. lack of access to raw materials. possession of patents. saturation of the market.
Likewise, strategies can be used to reduce this effect.
Some examples of these strategies are:
- increase product quality; reduce prices; increase sales channels; increase advertising; offer better sales conditions, for example, offer greater financing or extend guarantees.
3. Threat of entry of substitute products
This refers to the potential income of companies that produce or sell alternative products to those of the industry.
Substitute products often enter an industry easily when:
- The prices of substitute products are low or lower than those of existing products. There is little advertising for existing products.
there is little consumer loyalty.
the cost of switching from one product to another substitute is low for consumers.
Strategies to counter this effect are:
- Increase the quality of products. Reduce prices. Increase sales channels. Increase advertising. Increase sales promotions.
4. Bargaining power of suppliers
It is the power that industry suppliers have to increase their prices and be less concessive.
Their bargaining power also tends to increase when:
- There are few substitute raw materials. The cost of changing from one raw material to another is high. Companies make purchases with little volume.
Companies must create strategies that allow them to negotiate with their suppliers, obtaining the greatest benefit from both parties.
Some examples of these strategies are:
- Acquire suppliers. Produce the raw materials one needs. Make strategic alliances with suppliers that, for example, reduce costs on both sides.
5. Bargaining power of consumers
It refers to the power that consumers have to obtain good prices and conditions.
Bargaining power increases when:
- there is no product differentiation. consumers buy in volume. consumers can easily switch to competing brands or substitute products. consumers are well informed about sellers' products, prices, and costs. sellers face reduced demand.
Examples of strategies to create loyalty and a mutually beneficial relationship with the customer are:
- Seek product differentiation. Offer greater after-sales services. Offer greater and better guarantees. Increase sales promotions. Increase customer communication.
(PORTER, 2015)
CONCLUSION
As explained in this work, the internal and external environment plays a crucial role in organizations, they depend on these environments for their success and permanence in the markets. It is important that companies constantly study their environment, in order to carry out relevant strategies that lead them to achieve their objectives.
THANKS
Thankful to God for all his blessings, also for the opportunity to work in the process of improving myself.
To my “alma mater” the Orizaba Technological Institute for their dedication in training quality professionals, to my MAE Professor Fernando Aguirre y Hernández for their dedication, dedication and commitment in sharing their knowledge.
To God for life and for science!
THESIS PROPOSAL
Execution of the Porter's five forces model in some company in Orizaba.
Objective: to provide the company with forecasts and proposals for its strategic planning.
Bibliography
- ASSOCIATION, AM (05 of 2012). AMA. Obtained from https://www.ama.org/Pages/default.aspxCONTRERAS, AR (2014). MONOGRAPHS. Obtained fromhttp: //www.monografias.com/trabajos89/ambiente-externo-organizaciones/ambienteexterno-organizaciones.shtml#ixzz407Qt4423DRUCKER, P. (08 of 2013). SUMMARY. Obtained fromhttp: //www.resumido.com/autor/peter_druckerESPINOZA, SA (AUGUST 2010). SCRIBD. Retrieved from http://es.scribd.com/doc/36432154/Teoria-de-La-Organizacion-y-El-Directive-TEORIAGRUPO-2#scribdFERREL, HF (09 of 2012). UDLAP. Obtained fromhttp: //catarina.udlap.mx/u_dl_a/tales/documentos/lco/villasenor_b_a/capitulo1.pdfMALOTA, EM (04 of 2013). ACADEMY. Obtained from http://independent.academia.edu/EulaliaMariaMalotaPORTER. (SEPTEMBER 2015). BUSINESS GROWS. Obtained fromhttp: //www.crecenegocios.com / the-model-of-the-five-forces-of-porter /
