MGHD27H3 Lecture : Textbook notes-Chapter 15-Environment, Strategy and Technology
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CHAPTER 15- ENVIRONMENT, STRATEGY, AND TECHNOLOGY
THE EXTERNAL ENVIRONMENT OF ORGANIZAITONS
external environment: events and conditions surrounding an organization that influence its
activities
Æ shapes profoundly shapes organizational behaviour
Organization as open systems
open system: systems that take inputs from the external environment, transform some of them,
and send them back into the environment as outputs
- inputs: capital, energy, materials, info, tech, and ppl
- outputs: various products and services
-- some inputs are transformed while others assist in the transformation process
- transformation process could be physical, intellectual, or emotion
- through application of financial knowledge, it transforms the capital into insurance coverage
and investment in areas like real estate
-the value of the open system concept is that it sensitizes us to the need for organizations to
cope with the demands of the environment on both the input side and the output side
Components of the external environment
- involves any person, group, event or condition outside the direct domain of the organization
1) the general economy
- organizations that survive through selling products or services often suffer from an economic
downturn and profit by an upturns
- if a poor economy is accompanied by high unemployment, some organizations might find it
opportune
2) customers
- successful firms are generally highly sensitive to customer reactions
3) suppliers
- organizations are dependent on the environment for supplies that include labour, raw
materials, equipment, and component parts
- shortages can cause severe difficulties
- more exclusive relationships with suppliers, on the basis of quality and reliable dliverty,are
becoming more common
4) competitors
- environmental competitors vie for resources that include both customers and suppliers
- organizations in hypercompetitive environments must become extremely flexible to respond
quickly to change and cope with hypercompeititon
- flexible manufacturing is necessary
5) social/political factors
- changes in public attitudes toward ethnic diversity, the proper age for retirement, or the
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proper role of bug business will soon affect them
- these attitudes often find expression in law through the political process
- organizations must cope with a series of level regulations that prescribe fair employment
practices, proper competitive activities, product safety and clients rights
6) technology
- tech refers to the way of doing things, not just some form of machinery
- the ability to adopt the proper technology should enhance an organizations effectiveness
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exist in an organizations environment
interest groups: parties or organizations other than direct competitors that have some vested
interest in how an organization is managed
- competition for attention from diff segments of the environment is not unusual
- diff parts of the organization will often be concerned with diff environmental components
- coordination of the natural division of interests is a crucial concern for all organizations
- as environmental demand change, its imp that power shifts occur to allow the appropriate
functional units to cope with these demands
- events in various components of the environment provide both constraints and opportunities
for organizations
Environmental uncertainty
Æ a condition that exists when the external environment is vague, difficult to diagnose, and
unpredictable
- uncertainty depends on the environments complexity and its rate of change
i) simple environment
- very few factors, they are similar to each other
ii) complex environment
- large number of dissimilar factors that affect the organization
iii) static environment
- components of this environment remain fairly stable over time
iv) dynamic environment
- the component of a highly dynamic environment are in a constant state of change, which is
unpredictable and irregular, not cyclical
[Chart pg 522]
- simple/static environment should provoke the least uncertainty in a matrix
- dynamic/complex environment should provoke the most
- change has more influence than complexity on certainty
- static/complex environment is more certain than a dynamic/simple environment
- as uncertainty increases, cause an effect relationships become less clear
- environmental uncertainty tends to make priorities harder to agree on, and it often stimulates
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a fair degree of political jockeying within the organization
- as well, more information must be processed by the organization to make adequate decisions
- environmental scanning, boundary spanning, planning, and formal management info systems
will become more prominent
- organizations will act to cope with or reduce uncertainty cuz uncertainty increases the
difficulty of decision making and thus threatens organizational effectiveness
Resource dependence
Æ the dependency of organizations on environmental input, such as capital raw materials, and
human resources
- carefully managing and coping with resource dependence is a key to survival and success
- classic case of a highly resource dependent organization is a newly formed small business
- resource dependence can be independent of environmental uncertainty and dealing with one
issue will not necessarily have an effect on the other
- competitors, regulatory agencies, and various interest groups can have a considerable stake in
how an organization obtain and transforms its resources
- in effect, the organization might be indirectly resource dependent on these bodies and thus
susceptible to a hair degree of social control
STRATEGIES RESPONSE TO UNCERTAINTY AND RSROUCE DEPDENNCE
strategy: the process by which top executives seek to cope with the constraints and
opportunities that an organization environment poses
- at the top, the objective organizational environment is portrayed in terms of uncertainty and
available resources
- much of the impact that the environment has on organizations is indirect rather than direct,
filtered through the perceptual system of managers and other organisational member
- strategy formulation itself involves determining the mission, goals, and objectives of the
organization
[chart 524]
- at the basic level, this would even involve consideration of just what business the organization
should pursue
- the strategy must be implemented by selecting appropriate managers for the task and
employing appropriate techniques
Organizational structure as a strategic response
[read page pg 526]
Other forms of strategic response
- structural variations often accompany other response that are oriented toward coping with
environmental uncertainty or resource dependence
- lobbying and public relations are also common strategic response
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Document Summary
The external environment of organizaitons external environment: events and conditions surrounding an organization that influence its activities. Organization as open systems open system: systems that take inputs from the external environment, transform some of them, and send them back into the environment as outputs. Inputs: capital, energy, materials, info, tech, and ppl. - some inputs are transformed while others assist in the transformation process. Transformation process could be physical, intellectual, or emotion. Through application of financial knowledge, it transforms the capital into insurance coverage and investment in areas like real estate. The value of the open system concept is that it sensitizes us to the need for organizations to cope with the demands of the environment on both the input side and the output side. Involves any person, group, event or condition outside the direct domain of the organization: the general economy.
