Briefly defined, the environment is everything that is outside the organization (i.e., the unit of analysis). The aim in describing the environment is to define the effect of the environment on organizational structure and design.

The environment of the organization consists of many different factors:

• The industry, including its size and competitiors, is a major part
• Actual customers
• Suppliers of resources: raw materials, services, and the labor market to the organization 
• Financial resources, including the stock market, banks, and private investors
• The evolution of the techniques of production
• Political factors, including regulation, taxes, services, and the political system in general
• Economic factors, such as inflation rates, exchange rates
• General sociological factors: values, beliefs, education, religion, work ethic, and special current trends such as environmental movements and women's rights

Changes in environmental factors may increase the demand for information processing capacity. The organizational design response is to create an organization with an information processing capacity to match the demand or to change the demand by manipulating the environment.

Measures for the external environment are:

• Complexity
• Uncertainty
• Equivocality
• Hostility
  
  

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Medtronic case: Environment