Operating in a Competitive Environment

The task environment is that part of the external environment which consists of specific outside forces with which an organization interfaces in the course of carrying out its operations. It consists of the actors in the organization’s immediate environment (micro environment) . Usually single organizations have difficulty in exerting a direct influence on the external environment but it may be more successful in affecting its own task or market environment. The various elements of the micro environment need not necessarily affect all the firms in a particular industry in the same way Important elements in the task environment of an organization typically include : clients , competitors , suppliers, labor supply and government agencies (regulators).


Clients include the customers, owners and partners of an organization. The purpose of a business is to create and sustain customers. In an open market, the organization turns into a lifeless machine without customers. We cannot think of hospitals without patients, universities without students, departmental stores without shoppers. Organizations that stay close to the customer survive and flourish in a competitive environment. Owners, share holders and partners too, have a stake in the continued success of an organization . They get appropriate economic returns on their investments. Additionally they can exert greater influence on the way the firm deals with environmental pollution, worker’s safety, product liability etc.


Competitors’ action and responses to them are a key in determining whether a firm will prosper . Important data about competitors that should be examined from time to time include a number of product lines, product differentiation , prices, quality, market share, advertising location, productivity, service , competitive advantages etc. Competition may be local, regional, national or international in scope, and this is constantly changing . In higher technology fields, competition can be fierce and turbulent . For example computer companies have undergone dramatic changes and extremely tough product and price competition within a rapidly expanding market. In recent years, deregulation has changed the face of competition in several industries such as banking, airlines, media, telecommunications, passenger care industry etc.


Suppliers of raw materials, equipment parts and money are a very important part of any organization’s external environment . Without a continuous flow of supplies the organization’s profitability will suffer. The energy crisis in the early 70s affected the fortunes of many companies which depended heavily on petroleum for running their show. Generally speaking organizations must have sources of supply that are dependable in terms of quantity, quality, delivery and service and that which offers suitable prices and terms of purchase. Over dependence on a single source of supply should also be avoided, The organization should also be able to get credit on easy terms for its operations.


The environment’s labor supply represents those individuals that may be employed to work for the organization. All organizations need qualified , trained hands to take care of assigned duties. This in turn is influenced by the economy, employment, socio cultural factors, technological growth, unions etc . The influence of unions for regulating supply of labor when required is diminishing in recent years due to recessionary trends, global competitors deregulation , disenchantment of members over limited success achieved by unions etc .

Regulators (Government Agencies):

The task environment contains a number of government agencies that provide services and monitor compliance with laws and regulations at local, state or regional and national levels, these regulatory bodies have the potential to control, legislate and influence an organization’s policies and practices. They also exercise considerable influence on the cost of doing business. When doing business globally the firm must also take into account the procedures to be adopted in line with the stipulations laid down by institutions such as IFC, World bank, IMF, Environmental Protection agency etc.

Source: Strategic Management