The Organizational Environment

YOM POST GRADUATE COLLEGE
MARKETING
ORGANIZATIONAL ENVIRONMENT & CULTURE
Jan 2022
Addis Ababa, Ethiopia
Table of Content
Introduction
Environment influences organizations indirectly, facilitating or hampering access to valuable,
scarce resources. Environmental factors or the restrictions imposed by the environment are, to a
certain extent, external to the organization. In other words, these factors are outside the
organization’s and its managers' control. Because these environmental factors reflect objective
data which together constitute an unavoidable situation in which companies and their managers
are forced to operate.
The organizational environment consists of forces and conditions inside & outside of the
organization which may impact its operation. The organizational environment can be a source of
both opportunities and threats for the organization. A successful organization will capitalize on
the opportunities and nullify the threats.
1. The organizational environment
Organizational environment is defined as a set of characteristics that describe the organization

and distinguish it from other organizations within a given time period affecting behavior of
personnel therein. These characteristics basically interconnect the internal work environment in
the organization, distinction can be made between an organization and another of the
organizations that are characterized by some extent of relative stability. That means the
interpretation of the meaning of characteristics and their impact on behavior will vary by
variation of individuals on the light of limited factors or variables of perception of each
individual. These characteristics affect the functional behavior of individuals, their trends and
motives (Al-Sherbeeni; 1997).
The organizational environment is the set of forces surrounding an organization. These forces
may hamper or facilitate the organization’s access to resources, which means they can both offer
opportunities and pose threats. Moreover, while these resources are valuable for the organization,
they are also scarce (Riggio, 2018). The forces encompassed by the concept of the organizational
environment include, among others, competition between rivals to retain customers, fast-paced
changed in technology, and an increase in the price of raw materials. All these factors may
somehow erode an organization’s competitive advantage. Consequently, the forces at play in the
environment can influence the organization’s behavior (Truxillo, Bauer & Erdogan, 2016).
2. Factors of organizational environment
2.1 Organizational factors
Organizational factors represent all forms and types of information coming an individual, and
which describe and clarify facts and characteristics of the organization positions, relationships
and circumstances within the organization. They also specify for individuals their duties dictated
by their belonging to the organization, types of opportunities and interests they could obtain
against fulfillment of the said duties and requirement. Organizational elements can be sub-
divided into the following groups: Organizational structure, labor intensity supervision scope,
mode of leadership, style of decision – making. (Nagi; 1991).
2.2 Material and moral factors for organizational environment
Material and moral factors for organizational environment are defined as an outermost force
attracting the human being thereto to get it through a certain behavior allowing access to the
incentive to which individual is entitled.
Thus, incentive stands as a prize or reward obtained by any person if his/her behavior was
satisfactory to the prize donor. With respect to the types of factors, elements include material and
moral factors. Material factors mean such factors which satisfy material needs of the individual
such as the need for food and clothing while moral factors mean such factors which satisfy moral
needs such as promotion. On the other hand, factors are also sub-divided into positive and
negative where positive factors facilitate and develop some disposal while negative factors
prevent some sorts of disposals (Al-kobaisi; 2005).
2.3 Psychological factors for organizational environment
These factors originate from the interior of individual due to perception of his attitude to the
surrounding environment. A human being does not merely live for satisfaction of his physical
needs only, but there are other needs which he feels and endeavors to satisfy (Psychological
needs). Psychological needs relate to the willingness of an individual in achieving and realizing
results and desire to obtain an eminent social status. Psychological needs are characterized to a
large extent by being personal, namely they may be found in some individuals rather than others.
Such psychological factors are sub-divided into needs for allegiance and belonging, possession,
struggle, and needs for power and influence.
2.4 Environmental factors for organizational environment
Environmental factors (external environment) are represented in the surrounding factors in the
organization affecting it including (P) political and legal environment, (E) economical
environment, (S) social environment, (T) technical and technological environment, (E)
ecological environment. This classification of the parts of macro-environment is called PESTE
(or sometimes due to the changed order of items STEP analysis (Pošvář, Erbes; 2005). The study
of environmental factors for organizational environment makes possible the interpretation of
many phenomena as well as control over many situations within the organization and affects the
same in terms of policies and decisions and accordingly long-run objectives can easily be
determined.
3. Operation of organizational environment
Each organization should be considered as operating in an environment. Organizations are

neither self-reliant nor self-sufficient. Rather they exchange resources and rely on the external
environment. The external environment can be defined outside of the organization as all forces
and conditions which are relevant to its operation and affect the organization. Organizations
takes input from external environment like (raw materials, money, manpower, and energy) and
change them into products or services, and return back as output to the external environment.
The other organizational environment is internal which can be defined as all forces and
conditions within the organization which affect its behavior. Thus, the organizational
environment can be broadly classified as: Internal environment & External environment
Internal Environment:
Every business organization has an internal environment, which incorporates every one of the
components inside the organization’s limits. Carefully they are a piece of the organization itself.
The internal environment is the environment that directly affects the business. There are some
internal factors which are commonly controllable in light of the fact that the organization has
command over these factors. It can change or adjust such factors as its workforce, physical
offices, and organization and useful methods, such as advertising, to suit the environment. The
real parts of the internal environment are:
 Management changes
 Employee assurance
 Culture changes
 Financial changes and additionally issues
External Environment:
External environmental factors are occasions that occur outside of the organization and are more
diligently to anticipate and control. External environmental factors can be increasingly perilous
for an organization given the reality they are flighty, difficult to plan for, and frequently
dumbfounding. It alludes to the environment that has a circuitous impact on the business. The
factors are wild by the business.
The general environment comprises of interrelated powers that can be ordered into four
components:
 Economic Environment
 Socio-Culture Environment
 Political-Legal Environment
 Technological Environment
Task Environment: The assignment environment puts backhanded weights on business the
executives through the institutional procedures of the following components:
 Customers
 Suppliers
 Competitors
 Financial Institution
 Government
 Media
4. Organizational culture
Organizational culture is a system of shared assumptions, values, and beliefs, which governs how
people behave in organizations. These shared values have a strong influence on the people in the
organization and dictate how they dress, act, and perform their jobs. Organizational culture
encompasses values and behaviors that "contribute to the unique social and psychological
environment of an organization." According to Needle (2004), organizational culture represents
the collective values, beliefs and principles of organizational members and is a product of such
factors as history, product, market, technology, strategy, type of employees, management style,
and national culture; culture includes the organization's vision, values, norms, systems, symbols,
language, assumptions, beliefs, and habits.
Types
Several methods have been used to classify organizational culture. While there is no single
"type" of organizational culture and organizational cultures vary widely from one organization to
the next, commonalities do exist and some researchers have developed models to describe
different indicators of organizational cultures. Some are described below:

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YOM POST GRADUATE COLLEGE

ORGANIZATIONAL ENVIRONMENT & CULTURE

Organizational environment is defined as a set of characteristics that describe the organization

2. Factors of organizational environment

2.1 Organizational factors

2.3 Psychological factors for organizational environment

2.4 Environmental factors for organizational environment

3. Operation of organizational environment

Each organization should be considered as operating in an environment. Organizations are

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