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Chapter 15

Chapter 15 Organizational Behaviour Notes

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University of Guelph
BUS 2090
Hassan Wafai

Chapter 15 Individuals, Groups & Organizations Environment, Strategy & Technology The External Environment of Organizations External Environment: Events & conditions surrounding an organization that influences is activities Organizations as open systems  Organizations can be called open systems which are systems that take inputs from the external environment, transform some of these inputs and send them back into the external environment as outputs  Inputs include capital, energy, materials, information  Outputs include various products & services  Transformation process may be physical, intellectual or even emotional Components of the External Environment Interest Groups: Parties or orgs other than direct competitors that have some vested interest in how an org. is managed The General Economy  Organizations that sell product or services often suffer economic downturn and profit from upturn  When downturn happens, competition of remaining customers increases and org’s might postpone needed capital improvements  Some org’s might thrive under a poor economy (e.g. welfare office)  If a poor economy is coupled with high unemployment due to layoffs some orgs. Might find this prime for upgrading their staff since there are a lot of options Customers  All organizations have potential customers for their products & services  Orgs must be sensitive to changes in customer demands Suppliers  Orgs are dependent on the environment for suppliers which include labour, raw materials, equipment, and component parts  Shortages can cause severe difficulties  More exclusive relationships w/ suppliers on the basis of quality and reliable delivery are becoming more common Competitors  Environmental competitors vie for resources that include both customers and suppliers  Must monitor competitor activities  For many organizations, competition has become so aggressive that their environments are called hypercompetitive and they must be really flexible and respond quickly to changes in order to cope Social/Political  Public attitudes towards ethnic diversity, proper age for retirement, the environment, CSR or proper role of big business will affect companies  These attitudes find expression in law and through the political process  Orgs must cope w/ a series of legal regulations that prescribe fair employment practices, proper competitive activities, product safety, clients’ rights and environmental protectionism Technology  The ability to adopt the proper technology should enhance org. effectiveness Environmental Uncertainty  A condition that exists when an external environment is vague, difficult to diagnose and unpredictable  Customer may come and go, suppliers may turn bad all of a sudden etc.  Some environments are less certain than others  Uncertainty depends on an environment’s complexity and its rate of change Simple Environment  Involves relatively few factors and they are similar to eachother Complex Environment  Contains a large number of dissimilar factors that affect and org Static Environment  Components of this environment remain fairly stable over time  No environment is completely static Dynamic Environment  Components are in constant stage of change, which is unpredictable & irregular, not cyclical  Increasing uncertainty makes cause-and-effect relations less clear, tends to make priorities harder to agree on and often stimulates a fair degree of political jockeying and also more info must be processed by the org. to make good decisions  Environmental scanning, boundary spanning, planning and formal management info systems will become more prominent Resource Dependence Resource Dependence: The dependency of organizations on environmental inputs such as capita, raw materials and HR  Carefully managing & coping w/ this resource dependency is a key to survival & success  Although all orgs. Are dependent on their environments for resources, some orgs. Are more dependent than others b/c some environments have a larger amount of readily available resources  Competitors, regulatory agencies and various interest groups can have a considerable stake in how an org. obtains & transforms its resources  The concept of resource dependency doesn't means that orgs are totally at the mercy of their environments but means they must have strategies for both managing resource dependence & environment uncertainty Strategic Responses to Uncertainty & Resource Dependence  A strategy is the process y which top execs seek to cope w/ the constraints and opportunities presented by an org’s environment  Much of the impact that environment has on orgs is indirect rather than direct, filtered through the perceptual system of managers and other org. members  By means of the perceptual process personality and experience may colour managers perceptions of the environment  Strategy formation involves determining the mission, goals & objectives of the org.  The organization’s orientation towards the perceived environment must be determined  Strategy must correspond to the constraints & opportunities lf the environment Organizational Structure as a Strategic Response  Lawrence and Lorsch study for 3 industries – plastics, packaged foods and paper containers  Also examined the sectors of the environment that were faced by 3 departments in each company: sales, production and research  Found that relatively certain environment and fairly undifferentiated org adopts more mechanic structure  Strict functional lines and highly centralized  Coordination achieved through direct supervision and written schedules  Other orgs w/ uncertain environment & high differentiation adopted organic structure  Decision making decentralized to locate it where appropriate knowledge existed  Coordination achieved through informal mutual adjustment, ad hoc teams that cut across departments etc.  This study demonstrates close connections between environment, structure & effectiveness  Follow-up research doesn't totally support their findings Other Forms of Strategic Response  Structural variations often accompany other responses that are oriented toward coping w/ environmental uncertainty or resource dependence  Some forms of strategy implementation appear extremely routine but other are very formal  Lobbying & PR are common strategic responses and so are simple negotiating and contracting Vertical Integration  One basic way to buffer the org. against uncertainty of resources control is to use an inventory policy of stockpiling both inputs and outputs Vertical Integration: Strategy of formally taking control of sources of organizational supply & distribution  Major oil companies ate highly vertically integrated handling own exploration, drilling, transport, refining, retail sales and credit  Vertical integration can reduce risk for an org but when environment becomes very turbulent, it can reduce flexibility and actually increase risk Mergers & Acquisitions  Mergers of 2 firms and the acquisition of 1 firm by another have become increasingly common strategic responses in recent years
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