Organizational Environment

Changes in external organizational environments affect the decisions and performance of a company. There are two types of external organizational environment: the general environment that affects all organizations and the specific environment unique to each company. External environments are the forces and events outside a company that have the potential to influence or affect it.

Environmental change is the rate at which a company’s general and specific environments change. In stable environments, the rate of environmental change is slow. In dynamic environments, the rate of environmental change is fast. Although you might think that a company’s external environment would be either stable or dynamic, research suggests that companies often experience both.

Environmental complexity refers to the number and the intensity of external factors in the environment that affect organizations. Simple environments have few environmental factors, whereas complex environments have many environmental factors. The third characteristic of external environments is resource scarcity. Resource scarcity is the abundance or shortage of critical organizational resources in an organization’s external environment. Environmental change, environmental complexity, and resource scarcity affect environmental uncertainty, which is how well managers can under-stand or predict the external changes and trends affecting their businesses.