In business thermodynamics, external entropy is a hypothetical term associated with disorder and chaos in the market place.

In 1998, American revenue optimization theorist Robert Cross was referring to external entropy as follows:

External entropy is the disorder caused by outside forces that affect companies but cannot be directly controlled, such as consumer attitudes, new competition, competitive actions, technological advances, geopolitical factors, economic gyrations, and cataclysmic events.”

In particular, external entropy, in contrast with internal entropy, is defined as some type of uncontrolled external force that causes disorder.

To note, the idea of a type of entropy “external” to a system, generally, makes little sense as entropy was originally defined by German physicist Rudolf Clausius, as the equivalence value of all uncompensated transformations in the system. It does, however, seem to have relation to the oft-used postulate that the order created (decrease in entropy) in the formation of a living organism is compensated by the increase in the entropy of the surroundings; although this makes little logical sense as well.

1. Cross, Robert G. (1998). Revenue Management: Hard-core Tactics for Market Domination (pgs. 10-11, etc.). Broadway Books.

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