The Company as an Open System: Internal and External Environments
The Company as an Open System
The company, as a living entity, interacts with other businesses to produce goods and services that meet market needs. It serves two primary functions:
- Producing goods and/or services at the individual level
- Creating wealth at the societal level
Systems Approach
The systems approach to management views the organization as a unified system with a specific purpose, composed of interrelated parts. This perspective allows managers to consider the organization as a whole and its relationship with the external environment. The systems approach emphasizes that changes in one segment of the organization can impact all other segments.
Company’s External Environment
Companies operate within a complex external environment that influences their operations. Key factors in this environment include economic, sociological, political, and technological aspects. Within this external environment, factors such as stocks, banks, suppliers, unions, and customers directly affect the organization.
Demographic changes, such as an aging workforce, increased female participation, and geographic shifts, must also be considered in management plans.
The political and legal environment is crucial for commercial success. Companies must stay informed about current and proposed changes in political or legal codes to avoid potential issues.
Every company exists within a technological environment. Management must determine the appropriate level of technology for the enterprise and plan for the introduction of new technologies. Financial and human factors should be considered when implementing new technologies, as some workers may require support to adapt.
Internal Environment of the Company
The internal environment of the company encompasses human resources, financial, technological, and physical aspects. Financial resources include fixed investments, sales estimates, and miscellaneous income, which are used to calculate cash flow and measure the company’s economic health.
Corporate Culture
Corporate culture is a critical factor in the success of investment projects. A lack of organizational structure and limited budgets can hinder the establishment of effective community relations. Many industries have created departments dedicated to community relations, corporate affairs, or government affairs to address this need.
In the case of banks, the community reinvestment department serves as a link between the company and the community. The coordination of community relations activities can provide insights into the company’s approach, budget, and commitment to the community.
Globalization
Globalization refers to the growing interdependence among countries, reflected in increased international flows of goods, services, capital, and knowledge. Within this global context, multinational and transnational corporations play a significant role in conquering markets.
Organizations have ample opportunities to enter new markets, reach more potential buyers, and expand their business horizons in today’s globalized world.
Social Variables Institutional Variables Competitive Variables Economic Variables Political Variables Technological Variables