External environment refers to the major factors and forces outside the organization that have the potential to significantly affect the performance of an organization. External environment is divided into two parts i.e. mega environment or general environment and specific or task environment. External environment can significantly influence the effectiveness of an organization to large extent. The explanation of specific or task environment is given below.
Task or Specific Environment
Task environment or specific environment refers to the forces and institutions outside the organization with which an organization interfaces in the course of conducting its business. Such forces and institutions are directly relevant to the achievement of the organizational goals because they have direct and immediate impact on decisions and actions of managers. The specific environment of each organization is unique and changes with conditions. The important constituents of task environment are: customers, suppliers, competitors, and Pressure Groups.
• Customers and Clients
Customers and clients of an organization refer to those individual and organizations that purchase its products and services. Organizations exist to meet the needs of customers through which they earn large sum of profits. But these customers possess potential uncertainty to an organization success because of their changing tastes, preferences, lifestyle etc. Therefore various organizations are making efforts to improve the quality of their products and services, stay close with the customers, listen to the customers about their needs etc.
Organizations need different resources such as raw materials, goods and services etc to conduct their operations. Therefore they purchase these resources from various individuals and organizations known as suppliers. The term suppliers also include providers of financial inputs (such as banks, insurance companies, pension funds etc) and labor inputs (such as labor unions, universities, local labor markets etc). It is the responsibility of each manager to ensure the steady flow of needed inputs at the lowest price available in order to maintain the effectiveness of an organization.
Competitors refer to those organizations that either offer or have a potential to offer rival products or services. It means that not only the existing rivals are threat to the success of organization but the potential newcomers could be disastrous too. Competitors in term of better pricing, new products, quality services etc represent an environmental force that managers must monitor along with the competitive scene for potential newcomers.
• Pressure Groups
Pressure groups refer to the special-interest groups that attempt to influence the actions of organizations. Such groups have the potential to influence the success of organization therefore managers have to be careful in their decisions and actions. Examples of pressure groups are: MADD (mother against drunk driving) which has pressurized the bar and restaurant industries. Similarly PETA’s (People for the Ethical Treatment of Animals) has pressurized food restaurants over their handling of animals during the slaughter process. The power of pressure groups changes with the change in social and political attitudes. Therefore organizations have to continuously monitor the major shifts in the society.