Fundamentals of Management, 8th ed

external

environment

Everything outside

an organization’s

boundaries that

might affect it

general

environment

The set of broad

dimensions and

forces in an

organization’s

surroundings that

determines its

overall context

task environment

Specific

organizations or

groups that affect the

organization

internal

environment

The conditions and

forces within an

organization

economic

dimension

The overall health

and vitality of the

economic system in

which the

organization

operates

technological

dimension

The methods

available for

converting resources

into products or

services

Chapter 2: The Environments of Organizations and Managers

3 7

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and Twitter to hardware like smartphones and the iPad, are also influencing businesses

in many different ways.

The Political–Legal Dimension

The

political–legal dimension

of the general

environment consists of government regulation of business and the relationship between

business and government. This dimension is important for three basic reasons. First, the

legal system partially defines what an organization can and cannot do. Although the

United States is basically a free-market economy, major regulation of business activity

still exits. McDonald’s, for example, is subject to a variety of political and legal forces,

including food preparation standards and local zoning requirements.

Second, pro- or anti-business sentiment in government influences business activity.

For example, during periods of pro-business sentiment, firms find it easier to compete

and have fewer concerns about antitrust issues. On the other hand, during a period of

anti-business sentiment, firms may find their competitive strategies more restricted and

have fewer opportunities for mergers and acquisitions because of antitrust concerns.

During the prolonged period of economic growth that ended in 2008, the U.S. govern-

ment adopted a very “hands-off” approach to business, letting market forces determine

business successes and failures. However, as the economy ground to a halt in 2008, and