Direct and Indirect External Environment of the Firm
What is needed to survive in dynamic environment.
The world is fast changing and as such if organisations are to survive there is need to adapt to the external environment. Organisational leaders have to closely monitor developments in the business environment in which they are operating. Key considerations when looking at the (external) environment is to separate them into two, being: direct and the indirect environment:
- The DIRECT ENVIRONMENT relates to those elements of the external environment which have a direct impact on the organisation. The direct environment includes the competition, buyers, suppliers and interest groups like employee unions and pressure groups. Managers of organisations must pay attention to developments in the direct environment and adjust accordingly.
- The INDIRECT ENVIRONMENT includes political, inflation, economic variables that may impact the organisation too, but in a more ambiguous, unintended way.
Failure to adapt to the environment threatens existence of the organisation. Managers of organisations need to keep an eye on both 2 categories of the external environment, and implement strategies that allow the organisation to survive and benefit.
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