Wednesday 15 February 2012

 Distinguish between an internal and external environment of an organisation  Distinguish between a macro and operating environment of an organisation

 The internal environment of an organisation includes all the conditions that are related to its performance and over which it has the most control. For an LSO such as BHP Billiton, the internal environment will include its employees and management, how they are trained, the policies and procedures that are in place to guide their work practices, technology and resources used within the organisation (e.g. machinery and its maintenance) etc. The external environment includes the operating and macro environment. The organisation has limited control over these conditions. Factors in the external environment include relationships with stakeholders such as suppliers and creditors, customers (e.g. BHP exports to manufacturers in China) and shareholders.

 The macro environment are the conditions outside of an organisation’s control which impact on it. Factors in the macro environment include the forces of globalisation (which include advances in technology and communications that help organisations and their competitors to operate in many countries), legal changes such as the implementation of the new carbon tax and social attitudes such as increasing consumer/customer/shareholder awareness and concern for environmental responsibility.

Factors (operating environment) Brief explanation Impact on organisation ShareholdersOwn shares in company, expect company to issue dividends Must keep production costs low, maximise efficiency and sales to produce higher profit

 The macro environment differs from the operating environment in that organisations have no direct control over conditions in the macro environment whereas they have some control over factors in the operating environment. For example, LSOs cannot control or stop the forces of globalisation, however, it can change the way it interacts with its stakeholders such as customers and suppliers.

Factors (macro environment) Brief explanation Impact on organisation Social attitudesThe values and expectations of members of the community influences their behaviour Organisations must try to satisfy the needs and expectations of a range of stakeholders. This may mean that companies have to be seen to be more environmentally friendly for example, as a result of greater community awareness and demand.