Case Scenario:
Environmental change, complexity, and resource scarcity are the basic components of external environments. Environmental change is the rate at which conditions or events that affect a business change. Environmental complexity is the number of external factors in an external environment. Resource scarcity is the scarcity or abundance of resources available in the external environment. The greater the rate of environmental change, environmental complexity, and resource scarcity, the less confident managers are that they can understand, predict, and effectively react to the trends affecting their businesses. According to punctuated equilibrium theory, companies experience periods of stability followed by short periods of dynamic, fundamental change, followed by a return to periods of stability (Jones, 2013).
The general environment consists of events and trends that affect all organizations. Because the economy influences basic business decisions, managers often use economic statistics and business confidence induces to predict future economic activity. Changes in technology, which transforms inputs into outputs, can be a benefit or a threat to a business. Sociocultural trends like changing demographic characteristics affect how companies run their businesses. Similarly, sociocultural changes in behavior, attitudes, and beliefs affect the demand for a business' products and services. Court decisions and new federal and state laws have imposed much greater political/legal responsibilities on companies. The best way to manage legal responsibilities is to educate managers and employees about laws and regulations and potential lawsuits that could affect a business (Jones, 2013).
The specific environment is made up of the five components shown here. Companies can monitor customers' needs by identifying customer problems after they occur or by anticipating problems before they occur. Because they tend to focus on well-known competitors, managers often underestimate their competition or do a poor job of identifying future competitors. Suppliers and buyers are very dependent on each other, and that dependence sometimes leads to opportunistic behavior, where either the supplier or the buyer benefits at the expense of the other. Regulatory agencies affect businesses by creating rules and then enforcing them. Advocacy groups cannot regulate organizations' practices. Nevertheless, through public communications, media advocacy, and product boycotts, they try to convince companies to change their practices (Jones, 2013).
Reference:
Jones, G. R. (2013). Organizational theory, design, and change. Upper Saddle River: Pearson.