Compare and Contrast General and Industry Environment

The two terms are utilized by economists to provide a detailed explanation of conditions that
characterize a specific financial sector or the wider external factors the influences the
operation of an organization. Example of these conditions includes taxation and the
purchasing power of the consumer. The distinction of general and industry environment lies
in the universality and scale of a company operation (Vossos, 2015). The general environment
represents those elements in the broader society that can influence all industries and the firms
that compete in those industries; it represents elements or segments that firms cannot directly
control. The general environment is composed of the following segments: demographic,
economic, political/legal, sociocultural, technological, and global segments. The industry
environment is the constellation of factors that directly influences a firm and its competitive
actions and responses. Firms are influenced by these factors and should attempt to establish a
position in the industry that enables the firm to favourably influence the factors or to
successfully defend against the factors influence. These factors are: threat of new entrants,
bargaining power of suppliers, bargaining power of buyers, threat from substitute products,
and intensity of rivalry among competitors. It is a kind of external environment. It is closer to
the organization and includes the sectors that conduct day-to-day transactions with the
organization and directly influence its basic organization and performance. Therefore, the
purpose of the assignment is to differentiate between general and industry environment.
Literature on general and industry environment
An industry environment provides a detailed description of all conditions that exhibit a
significant impact on the operation of a business, to be precise in the financial sector. Price
pressure and competitiveness in the industry is defined by porters five forces including
competition between firms in the industry, the threat of substitutes, threats of new entrants,
the bargaining power of suppliers and buyers (Vossos, 2015). General environment, on the
other hand, goes beyond the territories of a single industry. It primarily focuses on how the
industry or business is affected by the society. Example of external forces that fall under the
general environment include government regulations on taxation, employment, and trade
practices as well as whether consumers exhibit the willingness and purchasing power to buy
services and products.
General environment includes elements within the wider community that can affect an
industry and the companies in it. These elements are grouped into seven segments
environment consisting of segments of demographic, economic, political / legal, sociocultural, and technological, global, and physical. Industrial environment is a group of factors
threat influx of newcomers, power suppliers, power of buyers, threat of substitute products,
and intensity of competition among competitors that affect a company and move as well as
competing responses. As for how companies collect and interpret information about their
competitors called the competitor analysis. Meanwhile, according to Pearce and Robinson
(2013: 87), external environment consists of a remote environment, industrial environment,
and the operating environment. Dess, Lumpkin, and Taylor (2012: 79), said that the
company's external environment is classified into two, namely the general environment,

which consists of population demographics, socio-cultural, political and legal, technological,

economic; and competitive environment, which consists of the power purchaser, provider
(supplier), the threat of new entrants, threat of substitute products, and intensity of
competition in the same industry. While Thomson, Strickland and Gamble (2010: 57),
dividing the external environment into two, namely the macro environment (macro
environment), including economic conditions, population demographics, technology, social
values and lifestyles, the regulations; environmental and industry, including suppliers,
customers, competitors, new entrants, substitute products. But for small and medium
industries in the opinion of Julieta Ojeda-Gomez., Et al (2007: 290), the external environment
consists of the macro environment and micro environment, which both affect the performance
of SMEs. Macro environment, including in this case include the socio-cultural, political,
technological, demographic, and economic. While the microenvironment of the actors
involved directly with the company and also affect the company, consisting of suppliers,
customers, Intermediary Agent, government institutions, competitors. Julia Ojeda-Gomez.,
Et al (2007: 290).
The internal environment according to Moses Hubeis and Muhammad Naf (2008: 32) is a
corporate environment that is in the organization and normally has direct and specific
implications on the company. Owners and managers of companies should look into the
company to identify internal strategic factors, namely the strengths and weaknesses that will
determine whether the company is able to take advantage of existing opportunities while
avoiding threats. There are many opinions on how a company in analysing the internal
environment. According to Pearce and Robinson, 2013, the analysis of the company's internal
environment includes the resources, capabilities and competencies held by the company, this
is known to approach Resource Based View. In the Resource Based View approach that the
resources owned by the company is far more important than the structure of the industry in
gaining and sustaining competitive advantage. According to the Resource Based View
approach, the main concern is a firm resources and capabilities. Pearce and Robinson (2013:
164), divides the resources into: (1) Assets are visible that is tangible assets which includes
production facilities, raw materials, financial resources, and computers; (2) invisible assets
(intangible assets) are included in the brand, reputation, moral enterprise, technical
knowledge, patents, trademarks, and accumulated experience of a company; (3) Capability
organization, the skills and the ability of combining assets, people, and processes that can be
used by companies to transform inputs into outputs. Although there are many ways to analyse
the internal environment, the simplest way to observe and analyse the internal environment is
through functional analysis (Thomas L. Wheelen & J David Hunger, 2012: 195). H.I. Scoff
argued that the expertise and resources of the company can be set to the appropriate
competency profile business functions such as marketing, finance, research and development,
operations, human resources, information systems and corporate culture. This includes
internal factors according Musram Munizu (2010) which aspects of HR (managers and
employees); financial aspects; technical aspects of production; and marketing aspects. Based
on the above research background, and the object of study is the small and medium
enterprises sector of the craft, the dimensions of the internal environment that are relevant to

this research, including marketing, finance, operations, human resources, and information
systems.
Similarities between general and industry environment
Businesses in both the two environments are affected by external forces. The similarities of
the general and industry environments is that they are a potential source for opportunities in
the firm which when harnessed properly might foster the development of the firms. Also both
environments influence the strategic decisions and actions the organization will take.
Differences between general and industry environment
Industry environment, in comparison to the general environment, has more direct effect of
firms strategic competitiveness and above-average returns. The five forces model of
competition includes the threat of entry, the power of suppliers, the power of buyers, product
substitutes and the intensity of rivalry amongst the competitors. The firm finds a position in
the industry where it can influence the forces in its favour to achieve strategic
competitiveness and earn above-average returns.
Another difference between the general and external environment is that the general
environment is larger than the industry environment. In addition, the general environment is
beyond the control of the firms while the industry environment is within the control of the
firm. The general environment is uncertain compared to the industry environment, which is
more predictable and certain. The industry environment is affected by the porters
competitive forces whereas General environment entails the impact of government
regulations on a business.
Moreover, the general environment may refer to external conditions that may affect an
organization and go beyond the boundaries of a single industry. It particularly describes how
society can affect a business or industry in general. These may include government
regulations on trade practices, employment and taxation or even the economic climate:
whether consumers have the purchasing power and willingness to buy products and services.
Take an example of Gas providers who literally don't have to care about the bargaining power
of customers for example, as without an alternative, people must buy gasoline for their
transportation and gas heat, no matter what the cost. But in the case of food producers, they
must provide competitive prices, as with an abundance of substitutes, consumers can go for
other products when, for example, the price of tomatoes rises dramatically.
To add on, the general environment can affect anyone in an industry, whereas the Industry
environment also includes sectors that the organization interacts directly to make a direct
impact on the organization's capability to reach its goals through its operations and
performance. This Industry environment normally includes the industry, competitors and the
customers, while it sometimes includes techniques of production, suppliers, raw materials and
market sectors. Some organizations will also have human resources and the international
sector as part of this environment.

Furthermore, it is where a company operates within the second sub environment that actually
lies outside of the business. It is affected by the variables in the market environment and these
affect the business, making it important for the management to react on opportunities and
pressure in the market environment; whereas the general environment is the layer of the
external environment that will only affect the organization indirectly. It is the one that is
furthest away from the widely dispersed organization and is defined as the outer layer. The
organization is indirectly affected by the general environment and parts of it include
demographic, economic, political/legal, sociocultural, technological, and global segments.
Therefore an industry's environment is seen to describe all those conditions that can affect a
business within the strict boundaries of a financial sector. It literally encompasses "Porter's
Five Forces," such as rivalry between the industry's firms, the threat of new entrants, and the
threat of substitute products, the bargaining power of customers and the bargaining power of
suppliers.
Conclusion
In all, the general and the industry environments have an impact to the success of the
organization and the factors of this environment should be considered critically in order to
make informed decisions, policies and strategic plans to foster the survival, growth,
performance and the competitive edge of the organization. Both industry and general
environment affects the operation of a business. Industry environment is greatly concerned
with porters five forces whereas general environment address government regulations. There
is a mutual relationship between a firm and its environments. Both parties can gain from
opportunities and both can suffer detrimental outcomes (from threats). A firm that is active
and manages sustainable positive results is likely to be the one that studies and regularly
monitors changes to its environments. A firm with a competitive advantage is one that is able
to develop and practice successful strategies that enable it to gain from the opportunities
available to it and protects itself from the threats.
Reference
Brown, A. A. (2016). Impact of the macro and micro economic environment on business
strategy: a case study on Lonmin Platinum (Doctoral dissertation).
Burney, D., & Claflin, A. (2016). Practical considerations for implementing research on the
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Hill, C., Jones, G., Galvin, P., (2005) Strategic Management: An Integrated Approach, John
Wiley, Melbourne.
Porter, M. E., (1980) Competitive Strategy: Techniques for Analysing Industries and
Competitors, Free Press, New York.
Vossos, T. (2015). Differences between Industry and General Environment. Retrieved from,
http://www.ehow.com/info_8705940_difference-between-industry-generalenvironments.html