What does the external environment of an organization include?

The external environment of an organization encompasses all factors outside the organization that can impact its operations, strategies, and performance. This includes the competitive landscape in which it operates, specifically the peers and competitors within the industry. Understanding the actions and strategies of these competitors is essential for an organization to position itself effectively in the market, respond to changes, and identify opportunities for growth.

In contrast, internal policies and procedures, the company’s workforce, and client-specific requirements fall under the internal environment, as they pertain strictly to the organization's internal functioning rather than the external factors that influence it. Recognizing the role of external forces is crucial for strategic planning and overall business success, which is why acknowledging peers and competitors is a vital aspect of an organization’s external environment.