In business, environment refers collectively to all the
influences outside the organization that impact a business or a firm. Thus environment
always refers to the external environment. Of course we can think of environment as
consisting of several layers surrounding the form in its center. Moving from the most
inner layer to outer layers we can group them in three
groups.
Strategic group and markets:
This consists primarily with the customers, suppliers, channel partners and other
organization with whom the business has regular transactions. This layer has an almost
direct influence on the firm.
Industry or sector: This is
a layer that envelops the strategic group and market layer and embraces the complete
industry or sector of which the firm is a part, irrespective of whether it has any
business dealing with them. Some of the organization in this layer ma be direct
competitor of the firm. This layer affect the firm within the same industry or sector
more than those outside.
Macro-environment: This is the
most general environmental layer. All the firm and all the firms exist within this layer
and are affected by it. However each firm may be influenced differently by specific
features of macro-environment.
The macro-environment of a
firm is generally classified in six different kinds of influences.These are political,
economic, sociocultural, technological, environmental and legal. These six are
collectively referred as PESTEL framework.
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