External Environment

Chapter 4 The External Environment The Environmental Domain Organization Environment is composed of altogether elements that exist outside the line of the transcription that have the potential to affect all or part of the organization. Its theater is the chosen field of action. The environment comprises several(prenominal) sectors or subdivisions of the environment that contain similar elements (ie. industry, raw materials, human resources, commercialise, technology, monetary resources, economic conditions, government, sociocultural, and international. Task Environment includes sectors with which the organization interacts showly and that have a direct impact on the organizations ability to achieve its goals. oIndustry, raw materials, market sector and hr and international sectors General Environment includes sectors that might non have a direct impact on the daily operation of a firm but will directly influence it. oGovernment, sociocultural, economic conditions, technolog y, and financial resources sectors International Context oDomestic sectors can be affected by international events Environmental UncertaintyResponding to the need for information. 2 Ways the environment influences organizations (1) the need for information just about the environment and (2) the need for resources from the environment. Uncertainty applies to sectors that the organization deals with on a regular basis, the task environment, and this must be analyzed along dimensions of constancy and degree of hesitation. mere(a) Complex Dimension concerns environmental complexity, the heterogeneity, or the trope and dissimilarity of external elements relevant to an organizations operations. in external factors and in of organizations in that domain = complexity Stable-Unstable Dimension refers to whether elements in the environment ar dynamic oIf an environmental element remains the same over a period of months/ years = stability FRAMEWORK FOR ASSESSING ENVIRONMENTAL UNCERT AINTY Environmental Complexity SimpleComplex Environmental ChangeStableLow Uncertainty Low number of external factors Low change Low-Moderate Uncertainty High number of external factors Low change UnstableHigh-Moderate Uncertainty Low number of external factors High changeHigh UncertaintyHigh number of external factors High change Adapting to Environmental Uncertainty Positions and Departments An in complexity and uncertainty in the external environment = in of positions and departments in the firm, which in turn internal complexity Buffering and Boundary Spanning The purpose of buffering roles is to absorb uncertainty from the environment. Buffer departments (hr, purchasing, finance, legal) surround the technical cell nucleus (primary org. function) and exchange resources and information between the organization and the external environment. Some firms rid the organization of buffers and expose the technical core to the uncertain environment opening up the organization and mak ing it more fluid and adaptable. Boundary-spanning roles link and coordinate an organization with line elements in the external environment. in the beginning concerned with exchange of information to oDetect and bring in to the organization information about changes in the environment, and oSend information into the environment that presents the organization in a golden light. Business intelligence and competitive intelligence is necessary to analyze large amounts of data and find patterns.Differentiation and Integration organizational specialty is the differences in cognitive and aflame orientations among managers in different functional departments, and the difference in formal social organisation among these departments. When the external environment is complex and unstable, organizational departments become highly specialized to mete out the uncertainty in the external sector. High differentiation = difficult to coordinate between departments, so integrators become esse ntial additions. Uncertain environments = high level of differentiation and integration Organic vs. Mechanistic Management Processes Mechanistic Organizational System stability = Formal structure and control imposed on employees Organic Organizational System v stability = v Formal structure and control imposed on employees oRules were loosened, free-flowing, adaptive, and decentralized MechanisticOrganic 1. Tasks are broken down in specialized, divorce parts 2. Tasks are rigidly defined 3. Strict hierarchy of authority, control, and rules 4. Highly centralized at top of organization 5. Communication is vertical1. Employees contribute to common tasks of the dept. 2. Tasks are redefined through employee teamwork 3. Less hierarchy of authority, control, and rules . Decentralized 5. Communication is horizontal Planning, Forecasting, and Responsiveness Planning and environmental forecasting becomes necessary in uncertain environments contributing to the organizations ability to quickl y respond to sudden changes in the environment. Contingency Framework for Organizational Responses to Uncertainty CONTINGENCY FRAMEWORK FOR ENVIRONMENTAL UNCERTAINTY & organisational RESPONSES Environmental Complexity SimpleComplex Environmental ChangeStableLow Uncertainty Few departments No boundary spanning Non integrating roles Current operations orientation, low-speed responseMechanistic structure formal, centralizedLow-Moderate Uncertainty Many departments Some boundary spanning Few integrating roles Some planning, moderate-speed response Mechanistic structure formal, centralized UnstableHigh-Moderate Uncertainty Few departments Much boundary spanning Few integrating roles Planning orientation, fast response Organic structure teamwork, participative, decentralizedHigh Uncertainty Many departments Extensive boundary spanning Many integrating roles Extensive planning orientation, high-speed response Organic structure teamwork, participative, decentralizedResource Dependence Reso urce Dependence means that organizations depend on the environment but strive to acquire control over resources to minimize their dependence pic comes from dependence and negative effects on performance can follow with too much dependence on other organizations. Interorganizational relationships present a tradeoff between resources and autonomy Controlling Environmental Resources Responding to the need for resources. Two strategies are adopted to manage resources in the external environment 1. Establish favourable linkages with key elements in the environment 2.Shape the environmental domain Establishing Interorganizational Linkages Ownership companies/ use ownership to establish linkages when they buy a part of or a controlling involvement in another company giving the company access to technology, products, or other resources it doesnt currently have access to (ie. acquisitions and mergers) Formal Strategic Alliances when in that respect is a high level of complementarity bet ween the business lines, geographical positions, or skills of two companies, the firms often form a strategic alliance (ie. contracts, joint ventures) Cooptation, employment Directorates Cooptation occurs when leaders from important sectors in the environment are made part of an organization (ie. lineup of directors) oInterlocking Directorates is a formal linkage that occurs when a member of the board of directors of one company sits on the board of directors of another company. Executive Recruitment transferring or exchanging executives to establish favourable linkages Advertising and Public Relations Changing or Controlling the Environmental Domain Change of Domain organizations can change the domains it is in, in each of the 10 domains specified (ie. t can choose which market its in, what relationships to hold, suppliers, and locations, etc. ) Political Activity, Regulation political strategy can be used to erect regulatory barriers against new competitors or to squash unto ward legislations trade wind Associations when work to influence the external environment is accomplished jointly with other organizations that have similar interests Illegitimate Activities when excessive downward pressure leads managers to adopt unfavourable techniques to reach an ends. Organization-Environment Integrative Framework