Chapter II. The essence of the external environment.

In the management thought idea of the importance of the external environment and the need to take into account the forces external to the organization, appeared in the late 50-ies. It has become one of the most important contributions of the system approach in the science of management, as emphasized the need for the director to consider the organization as integrity, consisting of interrelated parts, in turn published links with the outside world. A situational approach made it possible to expand the theory of systems at the expense of development of the concept, according to which the most appropriate in this situation the method is determined by specific internal and external factors, which characterize the organization and influence on it accordingly.

System and situational views on things attracted attention as a reaction to the changes, increasingly influence on the success of the organization. Today's changes in the outside world have brought to the external environment even more attention than ever. As writes Elvar Elbing: "the External environment of the organization is increasingly becoming a source of problems for modern managers. In fact, the leaders of the most important for the society organizations - business, education, government - under the influence of the recent events in the world were forced to focus on the rapidly changing environment and its impacts on the internal structure of the organization." [Alvar O.Elbing “On the Applicability of Envizonmental Models”, in J.W.Mc Guire, ed.. Contemporary Management (Englewood Cliffs, N.J.Prentice-Hall), p 283.]

Even if the changes were not so significant, managers would still have to consider the environment as the organisation as an open system depends on external world in respect of the supply of resources, energy, personnel, as well as consumers. Because of the leadership depends on the survival of the organization, the manager must be able to identify significant factors in the environment, which will have an impact not hosting it. More than that he should offer suitable ways of regulation of the external impact. [ George A.Steiner and John B.Miner, Menedgment Policy and Strategy (New York: Macmillan, 1977) pp. 41-42]

In this respect, the organization are like biological organisms. According to the theory of evolution of Charles Darwin, the surviving species survived because they were able to evolve and adapt to changes in their environment. And organizations have been forced to adapt to its environment, in order to survive and maintain the effectiveness of. Thus, the manager should use Darwinism in the environment of organizations, so that in a world of rapid change, where they survive only adapted, his organization was not in the number of disappearances.

Many environmental factors can influence the organization. Steiner and Miner point: "IN the past, leaders focused on the economic and technical circumstances. However, private change the settings of the people of social values, political forces and the scope of legal liability forced managers to expand the spectrum of required for external actions".

Hence it follows, that between the factors of the external environment there is a certain interrelation. This interconnection is defined as the force with which a change in one factor affects other factors. Also, how to change any of the internal variables may affect the other, changes in one factor environment can lead to change of the other. For example, in the 70-s years of decrease in deliveries of oil, first of all due to the political structure and objectives of the other countries, has had a strong impact on the overall state of the U.S. economy. The growth of prices on refined products resulted in a general increase of prices on almost everything. The same change was the catalyst for a series of government shares, for example, attempts to regulate the temperature in the public places of distribution of fuel, setting standards on fuel efficiency, the introduction of taxes on excess profits of oil companies, the establishment of a major federal project to overcome the energy dependence on other countries.

Before, there was a sharp fall in the prices of gasoline, Wednesday the direct impact of many of the organizations was also under attack, because the trade unions demanded compensation in connection with jumps of prices for consumer goods. Some firms, for example, which turned out military vehicles for-town trips and large models, and also engaged in the automobile tourism, have suffered because of the outflow of consumers. But in some cases the effect was positive. Went to the mountain of the case in a number of firms, producing heat-insulating materials, developing synthetic fuels and producing electric cars and devices running on solar energy. At the same time in these sectors increased competition, as many firms have decided to pursue their interest in developing industries.

The interconnectedness of the various factors of the external environment, as Emery and Трист, was supposed to turn environment of today's organizations in the rapidly changing.[ F.W.Emery and E.L.Trist, «The Causal Texture of Organizational Environments”, Human Relations, vol. 18 (1963), pp. 20-26.]

They cite the example of the failure of one of the British company for the production of canned food, which "was never able to realize that a number of external events becomes so interaction between the vulnerable that it leads to irreversible general changes". As they point further, the «survival becomes decisive manner connected with the level of knowledge of the organization to its environment".[ Emery and Trist, op. Cit, p. 29.]

The external environment has a certain complexity. Under the complexity of the external environment refers to the number of factors on which the organization is obliged to respond, as well as the level of variation of each of the factors. If we take into account the number of external factors over which the organization has to respond, if at her pushing government regulations, frequent renegotiation of contracts with the trade unions, few groups of stakeholders influence, numerous competitors and accelerated technological change, it can be argued that this organization is in a more complex environment than, for example, an organization concerned with the actions of only a few suppliers, in the absence of trade unions and the slow-changing technology. Similarly, when it comes to variety of factors, the organization that uses only a few of raw materials, several experts and the leading case with only a few firms of their countries, should consider the conditions of a less complex than the organization, in which these parameters are different. In terms of a variety of factors in more difficult conditions will be the organization that uses the varied and different technologies that have undergone a more rapid development than the organization, the organization, which all are not affected.

Along with the previously mentioned features, the external environment has also mobility.

Mobility of the environment is the speed with which changes occur in the environment of the organization. Many researchers point out that the environment of today's organizations is changing with increasing speed.

However, when that this trend is common, there are organizations, around which the external environment is especially lively. It is believed that the rapid changes in the external environment affecting first of all industries such as pharmaceutical, chemical, electronic, aerospace, manufacturing of computers, biotechnology and telecommunications. Here affected primarily by factors such as changes in technology and methods of competitive struggle. Less visible changes in the external environment occur in mechanical engineering, production of spare parts to cars, in the confectionery, furniture industry, the production of tare and packaging materials, food canned food.

In addition, the mobility of the external environment may be greater for some units of the organization and less for others. For example, many businesses research and development division is faced with a high mobility of environment, because he has to keep track of all of the technological innovations. On the other hand, the production department can be immersed in the relatively slowly changing environment, characterized by stable movement of materials and labor resources. At the same time, if the production facilities are scattered in different countries of the world or the resources coming from abroad, the production process can be in terms of mobile environment. Taking into account the ability of functioning in conditions of mobile environment, the organization or its affiliated companies need to rely on a variety of information, to take effective decisions regarding their internal variables. This makes decision-making more difficult the process. [Zub AT Strategic Management. Theory and practice. 2002, p.180]

The changes, which take place at the world commodity markets and the world economy as a whole, has a direct impact on the business activities of individual firms, using various means, forms and methods of adaptation to the external environment. In each country, they are various, it depends on the specific economic conditions, traditions, orientation to the external market, and many other factors. It is the analysis of the external environment, based on different calculations of profitability and efficiency of production of separate types of products and activities of the firm as a whole, gives the possibility to take into account the particular condition of the external environment through the application of flexible forms of relations between all the functions of control and have a direct effect on the entire economic cycle r&D - production and sales.

There is another characteristic of the external environment, which should be identified- this is its uncertainty. The uncertainty of the environment is a function of the amount of information available to the organization (or person) about the specific factor, as well as the function of confidence in the information. If little information or there is doubt as to its accuracy, the environment becomes more uncertain than in a situation where adequate information is available and there are reasons to consider it as highly reliable. Since the business is becoming increasingly global job, you need more and more information, but confidence in its accuracy decreases. Thus, the uncertain external environment, the more difficult it is to take effective decisions.