Summary
The external environment of organizations includes various factors, the existence of which influences the behavior and performance of an organization. The action of these factors can be direct, like the competitors or indirect, like the change in the economic structure of a country. The environment of an organization allows detecting the main variables that are affecting the organization in order to generate a diagnosis, which generates the information to determine the strategic situation that complements the internal analysis of this. In this way the external analysis together with a correct internal analysis, allow to identify the strategy for the direction of an organization.
Keywords: external environment, organization, factors.
Introduction
Currently, organizations present an evolution in terms of their management systems in planning, since new ways of guiding the business strategy are required, which is continuously adapted to the environment. Under these conditions, a harmony must be achieved between the external environment (economy, politics, technology, legal) and the internal environment (resources, structure, organizational culture, leadership). In other words, the organization must identify those variables to which it is sensitive and thus be able to survive in the market.
Composition of the environment
The environment is an infinite aspect that includes everything that is outside the organization, so companies must have an answer to it. Companies are not self-sufficient, since for their existence they need exchange with the external environment. The company has the input of inputs, whether raw materials, labor, among others and transforms them into products or services that are returned to the external environment. That is why the company cannot control environmental factors, it can select those that may be beneficial and take advantage of certain factors, to influence and influence it, but without controlling it. On the other hand, the environment is composed of those factors that incur or may incur in the results, either in the present or in the future. (Voiculet, Belu, Parpandel, & Rizea,2010)
The authors (Arano, Cano, & Olivera, 2012) mention that according to Porter, the essence of formulating a competitive strategy is based on linking the company with its environment.
The environment for an organization is made up of the global environment and the specific environment.
General environment
This environment is made up of factors over which the organization has no direct influence, but these factors do affect all or most of the organizations. These are detailed below.
Demographic environment
This is important to consider as people are the foundation of the market and determine the size and composition of the workforce. Changes in society are influenced by demographics.
Technological environment
This segment allows organizations to incorporate external technological developments into their internal process. This is to implement scientific knowledge in the development, transformation and commercialization of goods and services. These technological advances do not always affect all sectors of the economy. The electronics, mechanical, automotive and aeronautical industries are much more susceptible to these changes. (Fernández, 2010)
Political environment
It is in which the company cannot exert pressure, but if a change in this can generate great changes either in the organization or in the worst case a radical change in the business world.
Economic environment
A change in this generates a radical change in all sectors, among the specific factors to be considered within this branch are: inflation, purchasing power of society, exchange rates.
Legal environment
Who regulates and monitors organizations through regulations, permits, concessions, among others.
Psychosociological environment
It is the effect generated by the values, customs, lifestyle, and consumer preferences of a specific geographic area.
International environment
It is an important factor for those organizations that seek internationalization, for example to study those countries, which are in financial instability, this type of considerations are of importance in the import aspect. (Paturel, 2006)
Specific environment
A specific environment is understood as that which covers the sectors in which the company is interested. There is a model for the analysis of this, which is based on the five competitive forces of M. Porter.
Existing competitors
They are those companies that produce the same product or service.
customers
Group of buyers of goods or services. In this aspect, the bargaining power that consumers have with companies determines competition in an industrial sector; This analysis should be directed towards the sensitization of the price and the degree of negotiation.
Providers
Set of companies that supply producers with the necessary material for the generation of products or services. An important aspect is the degree of negotiating power with suppliers since it influences the degree of positioning of a company.
Substitute products
Those that can meet the same needs that the product or service currently offers on the market. These represent a threat to the sector, since most of them cover the same needs at a lower price.
Potential competitors
They are the companies with the capacity to enter the market, this will depend on the type and level of barriers to entry and the retaliation capacity of the companies already existing within the sector. (Baena, Sánchez, & Montoya, 2003)
Organization of the business environment
The author (Rios, 2006) mentions in his article four processes for the analysis of the environment, exploration, surveillance, accumulation of competitive intelligence and forecasting, which are described:
Explore the environment
Monitor the environment of the company, to be on the lookout for changes. This allows the business trends or facts to be critical; This allows the company to have a reactive attitude.
Monitor the environment
It allows detecting the evolution of trends, sequences of events or the path of activities. Surveillance results in companies evaluating the extent to which environmental trends are causing a change in competing companies.
Competitive intelligence
It allows companies to define and understand their sector and identify weaknesses and strengths of their competitors. This is having data from your competitors and interpreting the information for decision making; This will help to be reactive to anticipated movements and thus reduce the response time.
Forecast the environment
Explore, monitor and competitive intelligence, generate information to analyze the environment, this information will allow managers to generate the correct forecast. This is to develop possible projections about the course, range, speed and intensity of the changes; This will try to predict the change.
Environment characteristics
Many authors define perceived uncertainty as the lack of information about events external to the organization. The environment is characterized by two main dimensions.
Degree of stability
Degree or speed at which environmental factors are modified.
Degree of complexity
Number of environmental factors that are relevant and impact on an organization.
Degree of diversity
The environment can be integrated or diverse, depending on the number of variables that compose it, if it is small or not and if these variables are similar or different.
Degree of hostility
The environment can be favorable or hostile, depending on the speed and effect of your impacts. Hostility is influenced by competition and by the increased threat of competitive variables.
Level of uncertainty in the environment
Level of uncertainty in the environment. Source: Pulgar & Ríos, 2011
This diagram shows us that the high uncertainty environment is made up of high complexity and instability, so planning is difficult in this environment. That is why to carry out strategic planning it is necessary to present the scenarios.
The causes that raise the level of uncertainty in the environment of organizations, is due to various factors in the evolutionary process of the economic, political and social system, this is known as globalization of the economy.
Globalization has generated a progressive elimination of national and tariff barriers to enter international markets, as well as changes in the cultural, environmental and ethical values of society. For an organization this aspect poses opportunities and challenges since they can cover a larger market or take advantage of other countries' advantages (such as salaries, lower-cost labor); but within its disadvantages a demand to be more competitive, cultural, political or economic obstacles.
External Diagnostic and Analysis Matrix (MADE)
The authors (Pulgar & Rios, 2011) mention in their book that the positive or negative influence of the environment on organizations generates opportunities or threats, which means formulating strategies. One of the tools that allows quantifying the environment, identifying opportunities and risks (threats), resulting in defining strategies, is an external analysis and diagnosis matrix (MADE).
The methodology for using this tool is as follows:
- Define the theory of study for the specific environment, depending on the type of organization Select the factors for each variable of the general and specific environment Select the sources for each factor Define the impact of the environment on the 4Ps Rank the factors Prioritize the factors Analyze the matrix Identify opportunities and threats (risks).
conclusion
The environment in which organizations are located determines the operation of this and, therefore, has a strong impact on their performance. It is necessary to understand how this environment is managed, identify those variables that compose it and how they relate to the operational form of the company. This can be done through Porter's five tools or through a systematic approach depending on the type of organization. One way to quantify these variables is through an external analysis and diagnosis matrix (MADE), which, through an external diagnosis indicator, will show the level of influence of the environment with respect to the organization, and the points that must be made. take into account for the formulation of the strategy and objectives.
References
- Arano, RM, Cano, M., & Olivera, DA (2012). The importance of the general environment in companies. Administrative Science, 2, 62-65, Baena, E., Sánchez, JJ, & Montoya, O. (2003). The business environment and the theory of the five competitive forces. S cientia et Technica, 23, 61-66. Fernández, E. (2010). Business administration: an interdisciplinary approach. Madrid; Spain: Paraninfo.Paturel, R. (2006). For a new technology for analyzing the environment of organizations. Innovar, 16 (28), 33-42 Pulgar, L., & Rios, F. (2011). Methodologies to implement the strategy: organizational design of companies. Lima, Peru: YoPúblico.Rios, J. (2006). The business environment and strategy. Management & Empresa.Voiculet, A., Belu, N., Parpandel, D., & Rizea, I. (2010).The impact of external environment on organizational development strategy. MRPA.
