Summary Number.

03 Entrepreneurship
Semester (Spring 2017)
Organizational Environments and their effect on the organizational working: There are two
(2) types of environments which affect working of any organization and these environments are
termed as:
1) Micro Environment also known as Task Environment and Internal Environment
2) Macro Environment also known as Mega Environment and External Environment

As both of these environments can create affect on the working of the organizations that’s why
organization must analyze all the variables associated with these environments is order to
analyze their affect and extent of their affect on the organizational working. Furthermore analysis
of these environments can also helpful for the organization in developing strategies by linking
their Internal Factors i.e. (Strengths and Weakness) with External Factors i.e. (Opportunities
and Threats) in order to gain completive edge over their competitors and also to develop those
plans which are fit between the requirements of the era and available resources.
Factors Associated with Internal Environment and External Environment: Factors
Associated with Internal Environment and External Environment are as under:

Factors which comes under Micro Environment Factors which comes under Micro Environment
are as under: are as under:

1) Organization its self 1) Political Factors

2) Competitors 2) Economical Factors
3) Suppliers 3) Social Factors
4) Market Intermediaries 4) Technological Factors
5) Customers (Internal and External) 5) Environmental Factors
6) Consumers 6) Legal Factors
7) Socio-Cultural Factors etc

After considering all the factors which comes under Micro Environment and Macro Environment
it has been clear that Micro Environment consists these factors on which organization have some
level of control as far as factors of Macro Environment are concerned these are those on which
organization has no control and organizations must try to adopt these in order to sustain in the
competitive environment, and to adopt these factors associated with Macro Environment
organization try to make effective link of their Internal Strengths and Internal Weaknesses with
the factors of Macro Environment.

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Analyzing the effect of Micro Environment: In-depth overview of all the variables associated
with Micro Environment is given below, students might use these as the reference for analyzing
variables associated with Micro Environment:

1. Rivalry Among the firms: Discuss about the competition with respect to Economics, its
depth and include proper reasoning that why you think that industry has this type of
competition. Furthermore indicate competition which firm is facing with respect to
marketing that how many firms are there with whom your firm is in Direct Competition
& also discuss the intensity of competition by considering factors like a) Number of
competitors in the market b) Degree of Similarity in their offerings and target markets c)
Is there any giant(s) in the industry or each and every one has equal share of the market
d) Ease of liquidation from the market e) Impact of economies of scale on competition e)
Stage of product life cycle

2. Threat of Substitute Products: Discuss in detail about the In-Direct Competition of

your company, SBU or Brand. Keep in mind this type of competition of firm can be with
various types of SBU’s, Brands, Products etc, whether these SBU’s, Brands or Product
are from same product category or not, while concluding your analysis discuss about the
effect of this type of competition on the profitability of your selected organization. For
detailed analysis of the threat of substitute products please keep these factors in mind a)
How much does it cost the customer to switch to competing brands b) How likely are
customers to switch

3. Threat of New Entrants: Keeping in Mind, the entry and exit barriers associated with
the industry to which your selected organization belong discuss the extent of returns
which new competitors will receive if they enter the industry. For proper analysis of
profitability and ability of firm to enter nay market (new firm i.e. new entrant) keep
following factors in mind a) Governmental and Legal policies of current government b)
Ease of access to market (i.e. Product Distribution) c) Capital Requirements d) Cost
Advantages i.e. Economies of Scale and Economies of Scope e) Access to production
inputs and franchising etc.

4. Bargaining Power of Suppliers: Bargaining Power of Suppliers is related with the

control of the organization on all those from which organization receives, (i.e. vendors)
and the extent of control of the firm can vary on their suppliers as compared to one
another, and this control is purely dependent upon these factors a) Its Identity (i.e. Local
or International), b) Financial Condition of the Firm c) How strong is the position of
sellers? d) Are there many or only few potential suppliers? e) Is there a monopoly? f) Do
you take inputs from a single supplier or from a group? f) Can you easily switch from one
supplier to another one? g) If you switch to another supplier, will it affect the cost and
differentiation of your product? h) Are there other suppliers with the same inputs
available?

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 5. Bargaining Power of customers: Bargaining Power of customers is related with Internal
Customers as well as External Customers which organization have. That’s why I will try
to elaborate both the concepts in order to make all the concepts clear:

a) Internal Customers: Internal customers are the employees of the organization and
organization must try to maintain culture which will support not only the workforce
diversity, but also maintain the decorum which is required for the effective utilization of
resources and fulfillment of organizational objectives in short run as well as in long run.
Moreover organization must provide effective mix of compensation to their employees in
order to increase their level of motivation and also to decrease the rate of dejection of
valued employees.

b) External Customers: External Customers are not only the end customer or consumer but
the term also encompasses immediate customers or marketing intermediaries (i.e. Whole
seller, Retailer, Distributor and Jobber) therefore company must not only focus upon the
taste preference and loyalty of their end customers but also towards their influence and
control on their immediate customers in order to decrease their cost of operations and
also to increase their availability all over the market. Therefore in order to assess the
impact of bargaining power of customers e have to take into account the following factors
a) Availability of existing substitute products b) Buyer price sensitivity c) Degree of
dependency on existing channel of distribution d) Differential Advantage i.e. uniqueness
of the product (USP’s of the product) e)Extent to which buyers are informed

Analyzing the effect of Macro Environment: In-depth overview of all the variables associated
with Macro Environment is given below, students might use these as the reference for analyzing
variables associated with Macro Environment
a) Political Factors: Organization must consider possible outcomes of Local Politics as
well as International Politics in order to trace out the actual list of all the opportunities
and threats which can affect the organizational working. While understanding the impact
of International Politics organization must evaluate the impact of any good or bad
relationships, International Business deals and Agreements or Foreign help etc while in
order to analyze the actual impact of Local politics organization must evaluate the impact
of any Political Instability in country or in any province, company must also evaluate the
impact of any terrorism activity policies related with security measures and cost of
security and outcomes of terrorism or related activities on the organization.

b) Environmental Factors: Organization must also analyze outcomes which are associated
with environmental safety and environmental hazards such as Quality policy and
opportunities which company can avail by assuring the highest standard and Threats or
which company must avoid such as unhygienic and impurity removal from finished
goods as well as from final products.

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 Moreover environmental issues are also related with the safety of finished goods and
recycling of used and rejected products and by considering all the given factors company
can capture lot of opportunities while failing in the maintenance of desired standards
might decrease the popularity and market share of the company. Policies developed by
companies like (ISO, OSHA & CIEC etc) must be kept in mind in order to develop and
implement those action plans which will provide us desired results.

c) Social Factors: Organization must also analyze outcomes which are associated with
social activities of their target market i.e. their values, norms, wants and also the rituals
and rites of different geographic locations as well as with different ethnic groups. As
these factors helps organization its opportunities and threats more emphatically if
organization became able to analyze the effect of above mentioned social factors. As
these factors are capable of affecting the sales or negatively as well as positively.
Therefore organizations associated with all types of products (whether FMCG, SMCG,
Hybrid or Services) sector now-a-days trying to pay more attention towards these factors.

d) Technological Factors: These factors are also held responsible for the increase or
decrease of sales and organization must also analyze the technological requirements of
their customers by assessing the technological shifts and if company failed to do so then
their market share and sales cannot remains in better conditions. Some of the readers
might believe that Information Technology is the only form of Technology certainly Not,
the other forms of Technology includes a) Theoretical Technology we can related it with
the continuous efforts in the field of Research and Development and b) Physical
Technology and we can relate it with the requirements of Infra-structures etc

e) Economical Factors: These changes can be predicted by analyzing the rate of inflation
and national income and changes in this regard will be created by Government and
Central Bank of the country, through using Fiscal Policy and Monetary Policy the
concept is simple, as if government increases its expenditures, provide subsidies to the
private sector then it might create opportunities and but if the use of Expansionary side of
the Fiscal Policy results in Crowding out effect whether in complete or in Partial then it
will results in increase of threats for the private sector. Similarly when contractionary
side of the Fiscal Policy is used by the government then it might creates threats as
economy of the country will fall as compared to the past and circulation of the money
will also be diminished.

f) Legal Factors: Legal challenges are associated not only with the laws formulated by the
judiciary but also by National Government, provincial Government and Governor of the
state and also by the regulating or controlling bodies like (SECP, NEBAC, NESAC etc)
as these bodies are formulated in order to make others institutions work properly. and
organization must consider these changes in order to comply effectively with these
changes.

Our next task is to develop effective SWOT Analysis by considering the Analysis for Strategic
Environment (Task Environment plus Mega Environment)

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