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COLLAB 2N03 Study Guide - Final Guide: Communication Problems, Job Sharing, Jay Lorsch

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Chapter 15: Environment, Strategy and Technology
The External Environment of Organizations
-Events and conditions surrounding an organization that influence its activities
-Example: -SARS outbreak  had a huge impact on the tourism industry
- 9/11
- Recession 2008
Organizations as Open systems
-Organizations can be described as open systems
- Open Systems: Systems that take inputs from the external environment, transform some of
them, and send them back into the external environment as outputs
- Inputs include: Capital, energy, materials, information, technology and people
- Inputs have power over the organization
- Some inputs are transferred (ex: raw products) while other inputs assist in the transformation
process (ex: skilled craftspeople)
-Transformation process may be physical (ex: manufacturing or surgery) or it could be intellectual
(ex: teaching, programming) or even emotional (ex: psychotherapy)
-Outputs include: Various products and services
- The advantage of the open system concept is that it results in the realization of the need for
organizations to cope with the demands of the environment on both the input side and the output
Some of this coping involves adaptation to environmental demands while some coping may be
oriented toward changing the environment
Closed: The study of environment started when organizations considered them as closed
 Closed: thought they could run as completely self-contained units or machines,
meaning they thought they could be unaffected by the environment
Unhealthy ego
Inaccurate description of a company
Be respectful of your environment

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Components in the External Environment:
Sources of dependence:
1. The general Economy:
- Organizations that rely on selling products or services, suffer from an economic downturn
and profit from an economic upturn
- When a downturn occurs , competition for remaining customers increases, and organizations
might postpone capital improvement.
 In addition an economic downturn such as recession leads to downsizing
-Because organizations want to cut costs
 Some org. thrive under a poor economy such as welfare offices and law firms that deal
with bankruptcies.
 Some org. might find it opportune to upgrade the quality of their staffs since they will now
have an ample selection of candidates
2. Customers: All org. have potential customers for their products and services
- They need to be aware of changes in customer demands/needs
3. Suppliers: Org. are dependent on the external environment (suppliers) for supplies which
include labor, raw materials, capital (equipment, and component parts).
-Shortages can lead to the costs going up
- Therefore, more exclusive relationships with suppliers, based upon quality and reliable delivery
these days as opposed to having many suppliers and picking the one offering the lowest price in
the past.
4. Competitors: Successful organizations devote considerable energy to monitoring the activities
of the competitors.
- For some organizations today, the competition has become so aggressive that their
environments have been described as Hypercompetitive
 organizations in these environments must be extremely flexible to respond quickly to changes
such as an increased players in the market
5. Social/Political Factors: Changes in public attitudes toward the ethnic diversity, the proper

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age of retirement, the environment, CSR, affect organizations.
-These attitudes find expression in law
- Org. must cope with a series of legal regulations that prescribe fair employment practices,
proper competitive activities, product safety, clients’ rights, and environmental protectionism.
Examples: - Walmart’s move to ban handgun sales in its stores.
- Public’s increasing interest in environmentalism
-Increased number of single parents
 how it impacts flex time, job sharing etc.
6. Technology: -The environment contains a variety of technologies that are useful for achieving
organizational goals.
-Technology refers to the way of doing things not just machinery
- Current technology being used in my company compared to what is being used by competitors
in the industry
- The ability to adopt the proper technology should enhance an organization’s effectiveness.
Ex: Choice of an appropriate computer system
Interest Groups: parties or organizations other than direct competitors that have some vested
interest in how an organization is managed.
 Form of beneficent  A funding org that is contributing somehow to the performance of your
 It relives you  Free – Ex: Michael G degroote’s contribution to McMaster Campus
Resource dependence: The dependency of organizations on environmental inputs, such as
capital, raw materials, and human resources
-Organizations vary in how resource dependent they are (high to low)
- The degree of resource dependency is a function of environmental uncertainty
Environmental Uncertainty: A condition that exists when the external environment is vague,
difficult to diagnose and unpredictable.
*What makes an organization’s environment uncertain?
ROBERT B. DUNCAN: Environmental uncertainty is a function of:
1) Complexity (simple vs complex)
2) Rate of change/stability (dynamic vs static)
1) Complexity (Simple vs complex):
- Simple Environment: A simple environment involves relatively few factors, and these factors are
fairly similar to each other.
- For ex: A pottery manufacturer obtains its raw materials from two small firms and sells its entire
output to three small pottery outlets
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