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txtbook ch15

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Department
Management (MGH)
Course Code
MGHD27H3
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txtbooknote

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Chapter 15- Environment, Strategy and Technology
I. The External Environment of Organizations
The external environment consists of events and conditions surrounding an organization
that influence its activities
has a tremendous influence on organizations and profoundly shapes organizational
behaviour
A. Organizations as Open Systems
Organizations can be described as open systems
Open systems - systems that take inputs from the external environment, transform some of
these inputs, and send them back into the external environment as outputs
important because it sensitizes us to the need for organizations to cope with demands of the
environment on both the input and the output side
inputs include capital, energy, materials, info, technology and ppl
outputs include various products and services
some inputs are transformed while other inputs assist in the transformation process
transformation process may be physical. Intellectual or emotion
inputs
transformation
outputs
B. Components of the External Environment
It is useful to divide the external environment into a manageable number of components.
The General Economy
The general economy affects organizations as they profit from an upturn or suffer from a
downturn
When a downturn occurs, competition for remaining customers increase
Some org thrive under a poor economy, including welfare offices and law firms that deal
heavily in bankruptcies
With high unemployment (poor economy), some org might upgrade the quality fo their staff
since they will have more selection
Customers
All organizations have potential customers for their products and services
Successful firms are highly sensitive to customer relations
Organizations must be sensitive to changes in customer demands and reactions
Suppliers
Organizations are dependent on the environment for supplies that include labour, raw
materials, equipment, and component parts. Shortages can cause severe difficulties
Shortages can cause severe difficulties, ie no workers
Firms have changed their strategy for dealing with suppliers keep many of them and try to
keep them in stiff competition so price would be lowered at the end
Competitors
Environmental competitors vie for resources that include both customers and suppliers
successful organizations devote considerable energy to monitoring the activities of
competitors
hypercompetitivewhen competition has become SOOO aggressive, in constant change
Social/Political Factors
1
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Organizations cannot ignore the social and political events that occur around them
Organizations must cope with a series of legal regulations that prescribe fair employment
practices, proper competitive activities, product safety, and clients’ rights
Technology
The environment contains a variety of technologies that are useful for achieving
organizational goals
The ability to adopt the proper technology should enhance an organizations effectiveness
Use CAD which allows designers, engineers and draftspeople to produce quick, accurate
drawings via computerbroken down the traditional role differences between those ppl
In addition to these basic components of organizational environments, there are a large
number of interest groups that can exist in an organizations environment
Interest groups are parties or organizations other than direct competitors that have some
vested interest in how an organization is managed
Events in various components of the environment provide both constraints and opportunities
for organizations
C. Environmental Uncertainty
Environmental uncertainty -a condition that exists when the environment is vague,
difficult to diagnose, and unpredictable
Uncertainty depends on the environment's complexity (simple versus complex) and its rate of
change (static versus dynamic)
Uncertainty depends on the environments complexity and its rate of change
oSimple environment. A simple environment involves relatively few factors, and these
factors are fairly similar to each other.
oComplex environment. A complex environment contains a large number of dissimilar
factors that affect the organization.
oStatic environment. The components of this environment remain fairly stable over time.
oDynamic environment. The components of a highly dynamic environment are in a
constant state of change, which is unpredictable and irregular, not cyclical.
It is possible to arrange the rate of change and complexity in a matrix
Complexity
Simple Complex
Rate of
ChangeStaticCell 1
Low Perceived Uncertainty
1. Small number of factors and components
in the environment
2. Factors and components are somewhat
similar to one another
3. Factors and components remain basically
the same and are not changing
Cell 2
Moderately Low Perceived Uncertainty
1. Large number of factors and components
in the environment
2. Factors and components are not similar
to one another
3. Factors and components remain
basically the same
DynamicCell 3
Moderately High Perceived Uncertainty
1. Small number of factors and components
in the environment
2. Factors and components are somewhat
similar to one another
3. Factors and components of the
environment are in continual process of
change
Cell 4
High perceived uncertainty
1. Large number of factors and components
in the environment
2. Factors and components are not similar
to one another
3. Factors and components of the
environments are in a continual process
of change
2
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Description
Chapter 15- Environment, Strategy and Technology I. The External Environment of Organizations The external environment consists of events and conditions surrounding an organization that influence its activities has a tremendous influence on organizations and profoundly shapes organizational behaviour A. Organizations as Open Systems Organizations can be described as open systems Open systems - systems that take inputs from the external environment, transform some of these inputs, and send them back into the external environment as outputs important because it sensitizes us to the need for organizations to cope with demands of the environment on both the input and the output side inputs include capital, energy, materials, info, technology and ppl outputs include various products and services some inputs are transformed while other inputs assist in the transformation process transformation process may be physical. Intellectual or emotion inputs transformation outputs B. Components of the External Environment It is useful to divide the external environment into a manageable number of components. The General Economy The general economy affects organizations as they profit from an upturn or suffer from a downturn When a downturn occurs, competition for remaining customers increase Some org thrive under a poor economy, including welfare offices and law firms that deal heavily in bankruptcies With high unemployment (poor economy), some org might upgrade the quality fo their staff since they will have more selection Customers All organizations have potential customers for their products and services Successful firms are highly sensitive to customer relations Organizations must be sensitive to changes in customer demands and reactions Suppliers Organizations are dependent on the environment for supplies that include labour, raw materials, equipment, and component parts. Shortages can cause severe difficulties Shortages can cause severe difficulties, ie no workers Firms have changed their strategy for dealing with suppliers keep many of them and try to keep them in stiff competition so price would be lowered at the end Competitors Environmental competitors vie for resources that include both customers and suppliers successful organizations devote considerable energy to monitoring the activities of competitors hypercompetitivewhen competition has become SOOO aggressive, in constant change SocialPolitical Factors 1 www.notesolution.com
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