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Lecture 8

BU398 Lecture 8: Chapter-4
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Department
Business
Course
BU398
Professor
Jennifer Komar
Semester
Fall

Description
Chapter 4 – The External Environment The Environmental Domain • Organizational environment – all elements that exist outside the boundary of the organization that have the potential to affect all or part of the organization • Domain – the chosen territory for their products, they are the external sectors that an organization will interact to accomplish its goals, e.g. target market and geographic location • Environment comprises of 10 sectors: industry, raw materials, human resources, financial resources, market, technology, economic conditions, government, sociocultural, and international Task Environment • Task environment - Includes sectors with which the organization interacts directly and that have a direct impact on the organization’s ability to achieve its goals • Includes: o Industry – Netflix disrupted the home entertainment industry and wiped out the retail video rental business, which affected their goals o Raw materials – someone could come up with a raw to get cheaper resources and affect your goals, e.g. recycling program to get cheaper aluminum o Market sectors – people are paying closer attention to Generation C (after 1990), because it makes up a big cohort and they want a different approach to products and services than do their parents o Human Resource – hiring better quality employees can help achieve it’s goals o International sectors – due to globalization and intense competition, e.g. outsourcing from competing company’s General Environment • General environment – includes sectors that might not have a direct impact on the daily operations of a firm but will indirectly influence it • Includes: o Government – e.g. environment legislations where they make companies pay fees o Sociocultural – e.g. as Canada is becoming more multi-cultural, we have a greater pool of languages of employees that people can speak o Technology – massive technical changes can occur, e.g. online software, it helped people give feedback to companies o Financial resources - o Economy – the economic condition can affect the way a company does business, e.g. having to cut jobs International Context • International sector – it is becoming really competitive as foreign companies are buying up companies in north America, even if you don’t plan on going international, the environment will become extremely complex and competitive Environment Uncertainty • Two essential ways the environment influences organizations o the need for information about the environment o the need for resources from the environment • Environmental uncertainty focuses on the task environment, as how many elements the organization deals with regularly, how rapidly these elements change Simple-Complex Dimension • Simple-complex dimension – concerns environmental complexity, which refers to heterogeneity, or the number of dissimilarity of external elements relevant to an organization operations • The more external factors the greater the complexity • E.g. universities are complex, they are continually buffeted by social, cultural and value changes, and also coping the changing government regulations, competition for quality students • E.g. family owned hardware store in the suburbs, it does not deal with complex technologies, or extensive government regulation, cultural and social changes have little impact Stable-Unstable Dimension • Stable-unstable dimension – refers to whether elements in the environment are dynamic • Stable if it remains the same over a period of months or years, and experiences readily predictable change, e.g. public utility, a gradual demand will occur and you can predict it over time • Unstable if environment element shift abruptly and unexpectedly, e.g. toy companies, hot new toys are difficult to predict Framework • The simple complex and stable unstable dimensions are combined into a framework for assessing environmental uncertainty • Simple stable (Low uncertainty) – uncertainty is low and only few external elements to contend, and they tend to remain stable, e.g. beer distributor, the demand for beer changes only gradually • Complex stable (low-moderate uncertainty)– greater uncertainty, large number of elements have to be scanned, analyzed, and acted upon in order to perform well, external elements do not change rapidly or unexpectedly in this environment , e.g. universities has a lot of factors to assess but has a stable environment • Simple unstable (high-moderate uncertainty)– rapid change creates uncertainty for managers, even though it is simple with few external elements, they are hard to predict, e.g, toy companies • Complex unstable (high uncertainty)– large number of external elements with rapidly changing environment, e.g. airline industry, lots of external elements, and rapidly changing environment, like the worker shortages, price cuts, soaring fuel prices Framework for Organizational Responses to Uncertainty • Stable simple – mechanistic structure: formal, centralized, few departments, no integrating roles, current operations orientation; low speed response • Stable complex – mechanistic structure: formal, centralized, many departments, some boundary spanning, few integrating roles, some planning; moderate speed response • Unstable simple – organic structure, teamwork: participative, decentralized, few departments , much boundary spanning, few integrating roles, planning orientation; high-speed response • Unstable complex – organic structure, teamwork: participative, decentralized, many departments differentiated, extensive boundary spanning, many integrating roles, extensive planning, forecasting; high-speed response Ad
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