Managers need to have a thorough understanding of the environment in which they operate and compete. The general environment consists of economic, technological, political-legal, sociocultural, and international dimensions. The task environment consists of competitors, customers, suppliers, regulators, and strategic partners.

The internal environment consists of the organization's owners, board of directors, employees, physical environment, and culture. Owners are those who have property rights claims on the organization. The board of directors, elected by stockholders, is responsible for overseeing a firm's top managers. Individual employees and the labor unions they sometimes join are other important parts of the internal environment. The physical environment, yet another part of the internal environment, varies greatly across organizations.

The ethical and social environment of management is also quite important. Understanding the differences between ethical and unethical behavior, as well as appreciating the special nature of managerial ethics, can guide effective decision making. Understanding the meaning of and arguments for and against social responsibility can help a manager better address both formal and informal dimensions of social responsibility.

The international environment of management is also very important. Current trends have resulted in the increasing globalization of markets, industries, and businesses. Organizations seeking to become more international can rely on exporting, licensing, strategic alliances, and direct investment to do so. Controls on international trade, economic communities, and national culture combine to determine the context of international management.

The organization's culture is the set of values that helps its members understand what the organization stands for, how it does things, and what it considers important. Culture is a very important ingredient in organizational success. It is generally determined by such things as the firm's founder, as well as symbols, slogans, stories, heroes, ceremonies, success, and shared experiences. Culture can be managed, although changing it may be difficult.