The organization exists in order to achieve a goal. To reach this purpose, it has to evolve in an environment with which it interacts. This environment implies all external elements that have the potential to affect the organization. Some elements have direct impact on the organization while others do not. Today the environment is changing so fast that it becomes increasingly volatile. In fact, it creates uncertainty. Thus, some opinions state that this changing environment represents great threats for the organization. However, other opinions see the volatile environment as an opportunity for the organization to innovate. Based on these considerations, this paper analyzes the different sectors of the external environment, highlights the way they influence the processes of the organization and demonstrates how they make up threats or opportunities for the organization.

Part 1. – The environment

The external environment of the organization is made up of several sectors. Scholars state that: “for each organization, ten sectors can be analyzed”. These sectors can be all the outside institutions or forces that have impact to organization’s ability to reach its goal. Organization has to interact with the market sector, the industry, the government and the financial institutions. It also has to cope with the economic conditions. Organizations need to get human resources, and adequate technology. All of these components imply the external environment.

This external environment is not static. The elements with which organization works are quite dynamic. They change all the time. Most of the time, it is very hard for organization to even predict the change rates. Now, what are the characteristics of these elements? How volatile are they today?

The Market

Nowadays, customers are becoming increasingly advised. From day to day, they are arming with extensive information and they are being more resistant to stimuli. The clients want goods and services customized to their needs and their interest for a particular product can be abruptly shifted. Moreover in the context of the globalization, markets and technologies are more and more interconnected. Then, it is not easy to handle all the variables that motivate the choice of the customers.

The industry

It describes a particular business activity (for example, the software industry). This sector has a life cycle. This cycle shows an image of the changes observed in the industry over time. The life cycle is not static. It has several stages: birth stage, growth stage, shakeout stage, maturity stage and decline stage.

Birth Growth Shakeout Maturity Decline

(Exhibit 1)