Why Is Organisational Environment Important

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1. Why is an understanding of the organisational environment important to an organization? It is necessary to know and recognize the forces within the environment and use this information to measure and evaluate these forces in detail in the circumstance of the particular organisation, the goods and services they provide and the market they operate in. The environment consists of three headings; ‘external factors’, ‘the immediate environment’ and ‘internal factors’ all these headings have a fundamental role within the organisation and play a big part in the overall performance of a business. Therefore by understanding the organisational environment you are able to identify areas where the business is being affected and where it’s doing well. “The environment changes in both predictable and unpredictable…show more content…
Buyer Power: This element analyses how easy it is for buyers to decrease the price of the good or service of the business. This is affected by the ‘number of buyers in the market, ‘the cost of the buyer switching to another supplier’ and ‘the importance of each buyer to the firm’. If the organisation has a limited number of powerful buyers they are able to manipulate terms to benefit the business. 5. Competitive Rivalry: The most fundamental piece of information here is the number and ability of competitors in the similar market. If a competitor offers a similar services consumers will have a choice on whether to consume your goods or services or go elsewhere, therefore decreasing market attractiveness. Alternatively if no else provides the same goods or services it could often result in tremendous advantage for you in the market. 3. Outline the advantages and disadvantages of using Porter’s model as a tool to analyse the organizational environment. Advantages: • Porter’s model allows managers to think about current condition of their industry in a structured, easy to understand method as an initial point to enable more in depth
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