The relationship between an organization and its environment may be discussed in terms of interactions between them in several areas, which are as follows:
1. Exchange of Information
Organisations scan environmental information and use it for planning, decision making and control.
Organisations transmit information to several internal and external agencies like govt., investors, trade unions and professional bodies.
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2. Exchange of Resources
Inputs to a business, like materials, men, money and machines, are drawn from environment.
Output in the form of goods and services is supplied to the environment.
3. Exchange of Influence and Power
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(i) Environment transmits opportunities and threats.
(ii) Environment has a considerable stronghold over an organization by virtue of its command over inputs.
(iii) Government controls the organization through legitimate power; markets, suppliers, etc., influence the planning and decision making of the organization.
(iv) An organization also influences the environment through its command over internal resources and capacity to provide output.