Module 2 - Challenges in The External Environment
Module 2 - Challenges in The External Environment
Module 2 - Challenges in The External Environment
MODULE 2
Challenges in the External Environment
Learning Outcomes
Particularly at the end of this module, the students should be able to:
Organizations exist to survive. Given their vision and mission statements and set goals
and objectives, it is for organizations to conduct themselves clearly, deliberately, and
strategically. To achieve this, organizations should develop "organizational intelligence!'
Organizational intelligence refers to the expertise, insight, and wisdom possessed by an entity.
It serves as a valuable guide to its journey to becoming competitive. Thus, organizations need
to possess this capability to be able to accurately audit the environment and come up with
creative and cutting-edge strategies.
Environmental scanning is the study and interpretation of the forces existing in the
external and internal environments. The external environment includes social, economic,
political, technological, and environmental forces that may influence an organization, an
industry, or any entity. The competitive environment covers competitors, suppliers, customers,
stakeholders, culture, and the government. Environmental scanning is carefully monitoring the
surroundings with the end goal of ascertaining early indications of prospects and challenges
that may influence the organization's present and future plans.
Conducting environmental scanning is both easy and difficult. For informal scanning,
experience and expertise will help make the process effortless and straightforward. The
competencies, skills, and intelligence of the individual will allow for easy scanning of the
environment. On the other hand, environmental scanning can be demanding, in that there is a
need for comprehensive, as well as accurate information. It will be mostly dependent on the
following: (1) the speed of the organization to conduct scanning; (2) the presence and
availability of complete information; and (3) the physical and financial capability to do so.
Social Forces
Social forces refer to important issues that are characteristic of global and local societies.
Society consists of individuals, families, and communities, including their beliefs, aspirations,
traditions, and practices. Significant societal factors in the environment create varying impacts
on organizations. Some of the more critical social concerns today are changing social structures,
the world's aging population, the great demand for health services, the evolving sophistication
in the lifestyles of people, and the cross-cultural implications of mobility of peoples including
migration, among others.
Changing Social Structures. The social environment can be better understood and
analyzed in terms of broad social structures. Social structure refers to the network of
social institutions that includes the family and the community. The family is one of the
basic institutions of a social organization. It performs various functions that include
human reproduction, raising up children, and sending them to schools to ensure a
better life in the future. When bound together, families form communities.
Today, social structures are significantly changing. Family sizes are decreasing in
developed countries like Europe and America. In China, the one-child policy has been
strictly implemented and monitored for the last decades, although this law has now
been relaxed. On the other hand, a greater number of underdeveloped countries allow
larger family sizes that bring about accompanying social implications. As a result, there
is a pressing need to provide for a well-balanced family like good education, decent
housing system, acceptable monthly incomes, safety and security in communities, and
more opportunities for livelihood. The interrelationships of these social constructs
describe today's changing communal and shared structures, including marked
differences in universal and collective values, beliefs, morals, and religions.
Aging Population/Demand for Health Services. There are more maturing and aging
individuals today. Like an inverted triangle, the baby boomers are greater in number.
Baby boomers are individuals born in the 1940s. Today, they are precisely the people
who need more medicine and health services. This reality has fundamental social
implications like the need to provide elderly people with adequate medical care and
community service.
Sophisticated Lifestyles of People. Compared to the past, the lifestyles of people today
have dramatically changed, too. Their way of looking at themselves, the people around
them, their lives and careers, their values, attitudes, philosophies, and expectations
have taken a deeper and wider perspective. They are more demanding, complicated,
varied, and unique. Their priorities, as well as their wants, are continuously changing.
Whereas earlier generations were content with having a simple abode to stay safe,
today the new generation of people want to own houses and live extravagantly. Once
content with simple things, they expect more from life and living.
Cross-cultural Diversity. Similarly, the global community is getting figuratively smaller.
Workplaces are shifting and people in the global community are either working or
migrating to every part of the world. As a result, cross-cultural diversity has become an
important organizational issue; culture being a basic component of the global
environment. When we speak of multicultures, we consider the culture of the individual
and the host country.
While foreigners bring with them their deep-rooted cultures, beliefs, aspirations,
values, traditions, perspectives, religion, and sense of nationalism, there is a need for
them to also respect the culture of their host country and adjust to its cultural traditions
and idiosyncrasies. Therefore, to promote good multicultural working interrelationships,
flexibility, mutual acceptance, and deference to intra-cultures are necessary.
Political Forces
There are crucial concerns confronting nations today. Geopolitical issues have become
the focus of major political powers. Some of these issues are political independence, changing
governments, balance of power, terrorism, suicide bombings, global alliances, and chemical and
nuclear warfare. These critical problems are affecting the global political balance.
Terrorism/Suicide Bombings. The bloody and painful transition toward equality of basic
human rights and the right to a better life have brought about critical security problems
like terrorism, kidnappings, suicide bombings, and hijackings. News about wounded and
dead children, elderly citizens, and innocent people have become normal occurrences
heard over radio and seen on television. Kidnappings for ransom have become sure
sources of finances. The fearless and bold attacks by suicide bombers are a brazen
testimony of disregard for law and order.
Global Alliances. Politically, nations are aligning themselves for self-preservation and
more so, for global stability and strength. Today, no nation attempts to stand alone
because global relationships are essential to national survival. European nations have
bonded themselves as the European Union. The same is true with ASEAN countries.
Economic Forces
Economic realities have concomitantly come to the forefront. Economic issues greatly
affect the growth and development of a nation. Nations are strategizing to maintain a
continuum of financial stability. Most often, trade and investments are transacted to ensure
monetary security. Economic realities include globalization of products and services, the
presence of aggressive competitors and suppliers, the fall of large and "supposedly" financially
stable organizations, increasing oil prices, economic trade agreements, the emergence of new
markets, and the rise of China as a major economic player in the world.
Since quality is a given, it is necessary for survival. Thus, aside from satisfying
minimum quality requirements, organizations should offer differentiated and innovative
products and services to satisfy customers with discriminating expectations. Doing this
creates bargaining power and increases competitiveness and profitability.
Fall of Financially Stable Organizations. The last few years saw the downfall of a
number of financially successful organizations that were managed by respectable and
competent presidents and chief executive officers. The corporate fiascos of Enron,
World.Com, and the Lehman brothers are but a few examples of the more widely
talked-about financial catastrophes.
Increasing Oil Prices. The never-ending increases in oil prices have been creating
economic instability in global communities. Characterized by unpredictability in price
and production, organizations using oil and any of its "derivative" products find difficulty
in projecting costs and profit figures. Planned strategies have become difficult to
actualize. A versatile commodity, oil is a multi-purpose raw ingredient found in many
products. Changes in oil prices are detrimental to the survival and success of many
organizations.
Economic Trade Agreements. Economic trade agreements among nations have likewise
become a vital bargaining power in a country's economy. Bilateral and multilateral
economic treaties between and among economic global partners provide trade
priorities and privileges, allowing local products to reach other markets. Examples of
these products are clothes, furniture, bananas, handicrafts, dried mangoes, fashion
jewelry, and human resources. The World Trade Organization (WTO), Asian Free Trade
Organization (AFTA), North American Trade Agreement (NAFTA), and Asia-Pacific
Economic Cooperation (APEC) are examples of these economic alliances. The
implementation of zero or near-zero tariffs on all traded products is now effective.
Emerging Markets. Closely interrelated to the political, social, and economic growth and
development of a country is the emergence of different markets. Developed,
developing, and underdeveloped countries are economic markets with unique • needs,
wants, demands, distinct traits, and peculiarities.
Rise of China. One of the most potent economic markets in the world today is China. It
is seen both as a supplier and a big market. Constituting one-third of the world's
population, China is a market for other countries' products and services. As a supplier,
the country is capable of providing goods and services to the world market. Although
not apparent, the economic status of nations indirectly affects political alliances.
Technological Forces
E-banking. Banking transactions like deposits, withdrawals, and payments can be done
online nowadays. Intra-banking operations are more efficient while international
banking 'transactions are operated with accuracy and expediency. Confidentiality of
transactions can be largely maintained while anomalies can easily be tracked as long as
procedures for check and balance are in place.
Digital Medicine. Another surprising and most welcome development in the field of
medicine is the use of technology. Scientists conduct stem cell researches from leftover
human embryos with the hope of curing illnesses like diabetes, Parkinson's disease, and
spinal cord injuries. These days, computer-guided robots perform surgical procedures.
Using androids, surgical operations are more precise, cheaper, and less time-consuming.
E-security. Security is another vital global issue. The use of information technology is
inevitable in manufacturing missiles and other forms of ammunitions, coding military
secrets, safeguarding fortified installations, monitoring enemies, securing soldiers, and
planning counterattacks. More particularly, robots can detonate bombs and operate
helicopters for reconnaissance missions. True, the age of digital living has arrived and
more changes are expected.
Environmental Forces
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