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week 12 - Chapter 15 .docx

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Teal Mc Ateer

Chapter 15 – Environment, Strategy & Technology External Environment  Events and conditions surrounding an organization that influence its activities Ex. 9/11 & SARS Organizations as Open Systems  Organizations  open systems  take inputs from the external environment, transform some of them, and send them back into the environment as outputs Environment Inputs  Transformation  output Environment  Inputs = capital, energy, materials, info, tech, people  Outputs = products/services  Inputs can be transformed = knowledge  This process sensitizes us to the need for organization to cope with demands of environment Components of the External Environment • The Economy  Organizations that only Sell g/s can suffer economics downturn and profit from upturn  Downturn  competition for customers ^, unemployment ^,  Some companies thrive in poor economic condition (welfare offices) • Customers  Organizations must be sensitive to changes in customer demands  Successful firms  sensitive to customer reactions • Suppliers  Labour, raw materials, equipment, components parts  Shortages  can cause difficulties  Changed to more exclusive relationship with suppliers • Competitors  Compete for resources  customers & suppliers  Hypercompetitive  aggressive competition o Must become flexible to respond quick to changes • Social/Political Factors  changes in public attitude towards ethnic diversity, age of retirement, environment, csr,  must cope with legal regulations  fair employment practices, proper competitive activities, clients rights, environment protectionism • Technology  Can be machinery or ability to adopt the proper technology should enhance effectiveness  Can be computer system/production technique  Interest groups o Parties/organizations other than direct competitors that have some vested interest in how an organization is managed 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) • Some environments have a lager amount of readily accessible resources • The degree of resource dependency is a function of environmental uncertainty  Dealing with one issue does not necessarily have an affect on the other • Competitors, regulatory agencies, and various interest groups can have a considerable stake in how organizations obtains & transforms resources  Organization might be indirectly resource-dependent on these bodies  Must develop strategies for managing both resource dependence and 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?  Rate of change/stability (dynamic vs. static) o Static  fairly stable over time (small radio station plays same music format, relies on same audience. Advertisers)  No environment is completely static o Dynamic  high – constant state of change (unpredictable and irregular, not cyclical)  Complexity (simple vs. complex) o Simple  relatively few factors which are all similar o Complex  large number of dissimilar factors that affect the organization Strategy for Uncertainty and Resource Dependence  The process by which top executives seek to cope with the constraints and opportunities that an organization’s environment poses  Strategy formulation involves determining the mission, goals, and objectives of the organization  No single correct strategy  Relationship between environment and strategy Objective/Org Environ (Uncertainty, Resources)  (Managerial experience and personality)  Perceived org environ (perceived uncertainty, perceived resources)  Strategy Formulation  Strategy implementation (structure, vertical integration, merger/acquisition, director interlocks, establish legitimacy, technology)  organizational effectiveness Organizational structure as a Strategic Response  How could an organization use their organization structure as a strategic response to the environment?  Look at environmental sectors o Sales  market environment o Production  technical o Research  scientific  There’s a range of uncertainty across the subenvironments faced by various departments  Demonstrates close connections among environment, structure and effectiveness  Strategy always determines structure Other Forms of Strategic Responses  Vertical integration  The strategy of formally taking control of sources of organizational supply and distribution E.g., Starbucks: importer, roaster, packager, seller  Can reduce risk for an organization  When environment becomes very turbulent  reduce flexibility ad increase risk  Mergers and acquisitions  Merger  joining together of two organizations  Acquisition  the acquiring of one organization by another  When they occur in the same industry, they can reduce the uncertainty prompted by competition E.g., Two giant phone companies merging  When they occur across different industries, the goal is often to reduce resource dependence E.g., Paper manufacturer buys a timber company • Strategic alliances – Actively cooperative relationships between legally separate organizations E.g., Wedding cake baker promotes florist  Properly designed alliances reduce risk and uncertainty for all parties and recognize resource independence  Joint venture  2 or more organizations form an alliance in the creation a new organization entity o To create new products and services or to enter new/foreign markets  Risks: (half fail) • Interlocking directorates – When one person serves on two or more boards of directors E.g., Peter George on Board of Governors  Board Member of the Ontario Institute for Cancer Research  Legally prohibited when firms are direct competitors • Establishing legitimacy – The appearance of being strategically correct E.g., good deeds  taking actions that conform to prevai
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