Context of the organization

From CEOpedia | Management online

Context of the organization as defined in ISO 9001 is understood as set of factors affecting business (internal and from environment). ISO 9001:2015 require to evaluate internal and external factors affecting business during preparation to implement quality management system. Managers should define organizational objectives, culture of organization, production processes, information system, market position, customer requirements, employee needs, knowledge gap, key success factors, etc. Is should also contain comprehensive stakeholder analysis. Context of the organization is then used to make strategic implementation decision and preparing resources needed for efficient QMS implementation[1].

The context of the organization is a new concept in ISO 9001. This concept is in the uniform structure of "High Level Structure", which since 2012 has been defined for all management systems. Therefore, this is also linked to the revision of ISO 14001. The requirements for this element are given in Chapter 4 in all management system standards. In this chapter, two aspects can be distinguished: 4.1 Understanding the company and its context, 4.2 Understanding the needs and expectations of stakeholders. The idea is to determine the requirements that affect the planning of the quality management system.

Organization context - requirements The organization should define internal and external issues that affect the ability to achieve the intended goals of the quality management system and are appropriate to the strategic direction and purpose of the enterprise. The organization must review and monitor these issues.

1. External issues The external environment of the company includes, among others, factors:

  • economic factors
  • technological factors
  • political factors
  • social factors
  • cultural factors
  • legal factors
  • financial factors
  • environmental factors For example: The purchase of new technologies may have a positive impact on the functioning of the company, so it is important to design the system so that its implementation in the future is ready.

2. Internal issues The internal context of the organization consists of elements such as:

  • human resources
  • know-how and possessed technologies
  • applicable standards
  • targets
  • strategy
  • organizational structure
  • communication system
  • e.t.c. For example: To increase the production volume, human resources that the organization has are not sufficient. The machine park that is used is energy-intensive. It is worth systematically approaching all planned improvements that improve the functioning of the company.

Tools that can be used for analysis

Tools that can be used for analysis:

  • P.E.S.T analysis - Political, Economic, Social, Technological
  • P.E.S.T.L.E. (E) analysis - P.E.S.T + Legal + Environmental + (Ethical)
  • SWOT analysis - Strengths, Weaknesses, Opportunities and Threats

PEST

PEST is a tool that is used to analyze the company's macro-environment. The abbreviation PEST was taken from the words indicating the company's environment: Political, Economic, Social / Socio-cultural, Technological. When planning a business, all these factors must be taken into account.

Factors:

  • Political factors - which include the company regulation system is, for example, European integration, environmental protection regulations, antimonopoly laws and regulations relating to foreign trade.
  • Economic factors - they include inflation, interest rates, money supply, unemployment, economic cycles, trends in GDP, etc. In order to match the offer to the financial capabilities of citizens, the average salary or standard of living should also be taken into account.
  • Socio-cultural factors - include studying the level of education, lifestyle, habits, population demographics, moral and ethical norms etc. When introducing a new product, we need to know what preferences consumers have in order to properly adapt the product to a potential buyer.
  • Technological factors - include state spending on research, focus on technological effort, transfer speed or new technologies.

SWOT

SWOT is a strategic analysis of an enterprise named after four concepts: Strengths, Weaknesses, Opportunities, Threats. This analysis can be used both for the entire company and individual spheres of functioning, e.g. marketing, production, etc. It is often used as a technique of the initial strategic analysis of the company in the advisory activity. This analysis is a venture in which people in lower-level positions as well as managerial positions are involved[2] . To properly develop a SWOT analysis, it is necessary to identify factors that may affect the current and future situation of the company. We distinguish two qualifying factors that cause both positives and negatives: external (PEST, scenario analysis, etc.), internal (knowledge, financial resources, personnel, etc.).

PESTLE

PESTLE this is economic analilza for entrepreneurs. It is prepared mainly for the purpose of entering the market, it is adapted for a given territorial area.

Elements of the PESTLE analysis:

P - political - here mainly politics and programs of local authorities that define the functioning of business.

E - economic and financial determined business operations, as well as economic conditions of clients.

S - social - customer behavior and consumer behavior, which are culturally and socially conditioned.

T - technological - technological as well as scientific background which refers to conducting activities in the field of research and development.

L - legal - legal regulations that relate to a large extent to the process in which we obtain patents, and to the laws on the protection of intellectual property as well as to the research and development department.

E - environmental - these are international systems and initiatives by the government and the local government regarding environmental protection.

Examples of Context of the organization

  • Organizational objectives: The main objectives of the organization are to produce high-quality products and services that meet customer needs and expectations, while also increasing profits and improving operational efficiency.
  • Culture of organization: The culture of the organization is one that values customer satisfaction, quality, efficiency, and continual improvement. Employees are encouraged to take initiative and suggest new ideas for improvement.
  • Production processes: The organization has a comprehensive production process that is designed to ensure the highest quality product. It includes steps such as design, prototyping, testing, and quality control.
  • Information system: The organization has a comprehensive information system that is designed to track production, quality, and customer service data. This system is used to analyze trends and identify areas for improvement.
  • Market position: The organization holds a strong market position in its industry and has a reputation for providing high quality products and services.
  • Customer requirements: The organization is aware of customer requirements and strives to meet them through providing quality products and services.
  • Employee needs: The organization understands the needs of its employees and takes steps to ensure they are satisfied with their jobs. This includes offering competitive wages and benefits, as well as providing opportunities for career growth.
  • Knowledge gap: The organization is aware of the knowledge gap between its current employees and the skills that are needed to succeed in its industry. It takes steps to close the gap by providing training and development opportunities.
  • Key success factors: The organization is aware of the key success factors that are necessary to remain competitive in its industry. These include innovation, quality, customer service, and cost efficiency.

Advantages of Context of the organization

  • Context of the organization as defined in ISO 9001:2015 provides valuable information to make strategic decisions and implement efficient QMS.
  • This ensures that organization has clear understanding of its internal and external environment, including its market position, customer requirements and competitor’s activities.
  • By focusing on stakeholders’ interests, organizations can better identify their needs, objectives and expectations.
  • Context of the organization helps organization to identify knowledge gaps, weak points in its production processes and provides insights how to improve them.
  • It also helps to define organizational culture, skills of employees and develop strategies to keep them motivated and engaged.
  • Context of the organization also helps to identify key success factors, which will help an organization to achieve its business goals.

Limitations of Context of the organization

The limitations of Context of the organization include:

  • It can be difficult to identify all internal and external factors that could affect the business, meaning that the context of the organization may not be fully understood or taken into account.
  • Depending on the size and complexity of the organization, understanding the context of the organization can be time consuming.
  • Context of the organization can be difficult to interpret correctly, leading to incorrect conclusions and decisions being made.
  • The context of the organization can change over time, making it difficult to keep up with any changes that may affect the business.
  • It can be difficult to identify the stakeholders involved in the organization and how they may influence the business.

Other approaches related to Context of the organization

  • Process Based Approach: This approach focuses on the existing processes within the organization and how they can be utilized to create a quality management system. It requires a detailed analysis and understanding of the organization’s current processes and how they can be improved.
  • Risk Based Approach: This approach focuses on identifying and evaluating potential risks in the organization and determining how these risks can be managed and mitigated. It requires an understanding of the organization’s operating environment and the potential threats it faces.
  • Data Driven Approach: This approach relies on the collection and analysis of data from within the organization and from external sources. It requires an understanding of the organization’s data systems and how it can be used to inform decision-making and guide quality management system implementation.
  • Leadership Driven Approach: This approach focuses on the role of leadership in driving and inspiring the quality management system implementation within the organization. It requires a detailed understanding of the organization’s leadership and how they can be empowered to lead the implementation process.

In summary, there are four approaches to Context of the Organization that can be used in ISO 9001:2015 implementation. These approaches focus on processes, risks, data, and leadership, and each requires a detailed understanding of the organization’s existing systems and how they can be used to inform the implementation process.


Context of the organization — recommended articles
Quality strategy — Strategic management principles — Strategic fit — Development and organizational balance — Near environment — Strategic issues — Business needs — Growth potential — Burke-Litwin model

References

Footnotes

  1. ↑ Mohammad Mosadegh Rad, A. (2006)
  2. ↑ Hill T., Westbrook R., (1997)

Author: Magdalena Worłowska

Retrieved from "https://ceopedia.org/index.php?title=Context_of_the_organization&oldid=90724"