Environmental Analysis
An organization’s external environment has three components: the remote environment (macroeconomic), the industry environment, and the operating environment (in the organization itself). The company chosen for analysis is the University of Phoenix. The University of Phoenix operates in the educational services industry. It is affected by certain macroeconomical variables such as inflation, recession, and unemployment.
The economy is affected as a whole by the business cycle, but different segments are affected in different ways. They are also affected to different degrees. Firms and industries that produce capital goods and consumer durables are more so affected by the business cycle than any others. Inflation is a general increase in the price of good and services. When times get tough, firms can postpone purchasing new capital goods and beginning new plant construction until there is more disposable income. They can also wait to replace old equipment until the economy improves. Then when the economy improves, the companies can purchase the new equipment before their old ones completely breakdown. Household consumption can be similarly compared. According to McConnell and Brue, “when recession occurs and households must trim their budgets, purchases of these goods are often deferred” (McConnell & Brue 2004, p 11). The cutbacks cause households to tighten their belts and this affect the firms negatively, as McConnell and Brue note, “Families repair their old cars and appliances rather than buy new ones, and the firms producing these products suffer” (McConnell & Brue, 2004, p 11). The service industry does not suffer from these circumstances. McConnell and Brue state, “In contrast, serv ...