Nowadays, companies are immersed in a constantly changing environment. Not only can the internal environment exert a vital influence on an organization, but also the external business environment. The external environment is composed of all the related departments, the economic system, the social system and many others, which is not merely the natural environment (Ian Brooks et al., 2004:4). This essay discusses whether or not a company should be aware of changes in external environment. It explores different aspects of external environment and its effect on organization.
The external environment can be a contributing factor in many respects. Considering its complexity, a PEST analysis (stand for political, economic, social, technological) can make it more simplified. First, political system refers to the government’s relationship with the company and its attitude on the industry (Laurie J, 2002:109). It will to some extent determine the status of the business: monopoly, oligarch or competition. It can also affect international trading, for instance, trading barrier and import duty. Second, economic system mainly involves macroeconomic policy, economic structure and level of development. In the passage the external environment (the times 100, 2007) it was noted that ‘Business prosper when the economy is booming and living standards are rising’.
It is the truth that numerous companies experienced a big growth in 2007 due to the bull market and then went through a great depression since the financial crisis from 2008. So if any company can be aware of the changes in 2007 and grasp the investment opportunity, it will certainly make a profit. Furthermore, social system concerns more about people’s living style, values, the way of income distribution and consumption. To a large extent, many decisions are based on information from this system since public’s taste and demand will affect the scale of production and the feature of its product.
To cater for the mass market, a company must timely grasp the trend in need and then adjust any improper strategies. Last, technologic system relates to government’s funding on research, the speed of development for new technology and the protection for patent. The article managing external influences(the times 100, 2009) suggested that ‘intelligent companies find out what the most appropriate technologies are for their businesses and use them’. A supporting example is that First lower the floor for easy entry of the inconvenient people which makes its bus service more popular (the times 100, 2009).
However, there still exist some people voicing the other side of the coin. They think that focusing on the change of internal environment can generate a more effective way. It is true that internal environment is an indispensable part for all organizations. Apart from that, some companies expose themselves less to external environment. For instance, private corporations, they have more freedom because of far less control from the government.
Another proper example would be monopoly companies since they will not constrained by the social demand so much. In spite of the above argument, the external part cannot be ignored under any circumstances since nothing lives in the vacuum. Certain degree of interaction is consisted between the organizations and external environment. Hence it is vital to be aware of changes in external environment. All in all, companies should be alert to any changes in the external environment and keep their steps going forward. As long as we interact with the outside world, we can get benefit in the foreseeable future.