The environment of an organization consists of it surrounding anything that affects its operation favorably or unfavorably. The external environment includes the areas of General, Industry, and Competitor environment. Opportunity is a general environment condition that is exploited helps a company achieve strategic competitiveness. The general environment is the broader social dimensions that influence an industry and the firms within it.
The external environment influences strategy in many ways. These are as follows:
Providing opportunities and holding threats:
The external environment is the source of many of the opportunities and threats that influence the strategies of a company.
Shaping the “rules” of how firms in a given industry compete:
The structure of the industry in which a film competes can have a deep impact on the nature of the competition.
Influencing the availability of critical resources:
External environment may influence the availability of critical resources, i.e. suitable employees or interested customers.
Affecting the likely returns from alternative investments:
A company faces a lot of opportunities and threats to which it must respond, and this response helps determine its financial returns.
So, these are the various ways through which external environment can influence the strategies of a company.