An organization is an open system with its dual affects it interacts and respond to both the environment.
An External Analysis is a process in which identifying and analyzing of external factor are involved that can have impact on organization, two factors internal and external are included, in the external factors which are wider in business environment which can affect the business where as the internal analysis is that is within the boundaries of a company.
There are two environment in which organization revolves around and affected and have a very huge impact on the organization, two organizations which are named as General Environment and Specific Environment.
In the General Environment there are multiple factors outside of the organization which have an impact on the organization as the organization is an open system in which the economy of a country, demography of a country, technological development and political factors are involved.
On the other hand in the specific environment an organization’s current rivalry, potential entrains, bargaining power of the buyers and the bargaining power of the supplier and substitute product these are the factor which have an impact on the organization.
For an organization the political scenario is important in general environment as it is the politicians who decide the trade policy, the governments changes day by day according to their tenure some parties provide soft policy for the businessman and some very harsh by putting huge amount of taxes.
In the demography and socio-cultural factor it relates to the structure of the population the age, race, the income of the population, and other statistics are focused.
Economy and Technological factor of an organization is also important layer for organization the ups and downs in the economy of a country and the new and sudden development of technology is also have a great impact.
In the specific environment the current rivalry of the organization who is the competitor with your producing product who also produces the same products which are can be known as substitute products they are also having a good impact as they can minimize the prices of their product the chance of loosing customer rises.
Potential Entrains plays a huge role in the market as they just enter in the market and flourishes in a way that left behind all the companies already working with that products.
The bargaining power of the both supplier and buyer also have an impact sometimes the supplier ask for its own wish price and sometimes they make delay in providing supplies and the customers sometimes they do not have much purchasing power to afford qualitative products they do ask for the bargaining which is not good for organizational culture.