Final Exam notes Chapter 15.docx

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University of Toronto Scarborough
Management (MGH)
Anna Nagy

Environment, Strategy & Technology The External Environment of Organizations External Environment – Events and conditions surrounding an organization that influence its activities  Open Systems – Systems that take inputs from the external environment, transform some of them and send them back into the environment as outputs o Inputs include capital, energy, materials, information, technology, and people o Outputs include various products and services o Some other inputs are transformed while others assist in the transformation process o Transformation process may be physical, intellectual or even emotional External Environment Components  The General Economy – organizations that survive through selling products or services often suffer from an economic downturn and profit from an upturn. When a downturn occurs, competition for remaining customers increases and organizations might postpone needed capital improvements  Customers – all organizations have potential customers for their products and services. Successful firms are highly sensitive to customer reactions  Suppliers – organizations are dependent on the environment for supplies, which include labour, raw materials, equipment and component parts. Shortage can cause severe difficulties  Competitors – environmental competitors vie for resources that include both customers and suppliers  Social/Political Factors – organizations cannot ignore the social and political events that occur around them  Technology – environment contains a variety of technologies that are useful for achieving organizational goals; Interest groups – parties or organizations other than direct competitors that have some vested interest in how an organization is managed Environmental Uncertainty Environmental Uncertainty – a condition that exists when the external environment is vague, difficult to diagnose and unpredictable Uncertainty depends on the environment’s complexity (simple vs complex) and rate of change (static vs dynamic)  Simple Environment – involves relatively few factors and these are fairly similar to each other  Complex Environment – contains a large number of dissimilar factors that affect the organization  Static Environment – the components of this environment remain fairly stable over time  Dynamic Environment – components are in a constant state of change which is unpredictable and irregular, not cyclical Resource Dependence Resource Dependence is the dependency of organizations on environmental inputs such as capital, raw materials, and human resources. It can be fairly independent of environmental uncertainty, and dealing with one issue will not necessarily have an effect on the other Strategic Responses to Uncertainty and Resource Dependence  Organizational Structure as a Strategic Response o Lawrence and Lorsch study  Vertical integration o The strategy of formally taking control of sources of organizational supply and distribution o To buffer the organization against uncertainty of resource control is to use an inventory policy of stockpiling both inputs and outputs  Mergers and Acquisitions o Merger – the joining together of two organizations o Acquisition – the acquiring of one organization by another o Same industries: reduces the uncertainty of competition o Different industries: a diversification strategy to reduce resource dependence on a particular segment of the environment  Strategic Alliances o Actively cooperative relationships between legally separate organizations o Organizations retain their own cultures with true cooperation o Reduce risk and uncertainty and resource interdependence is recognized o Joint Venture – two or more organizations form an alliance in the creation of a new organizational entity  Interlocking Directorates o A condition existing when one person serves two or more boards of directors  Establishing Legitimacy o Taking actions that conform to prevailing norms and expectations o Can be achieved by associating with higher status individuals or organizations o Another way is doing good deeds in the community o Third is to make very visible responses to social trends and legal legislation o Most common way is to imitate management practices that other firms have institutionalized Technology of Organizations Technology is the activities, equipment and
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