MSCI211 Chapter Notes - Chapter 11: Blackberry Limited, Corporate Social Responsibility, Causal Inference

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Chapter- Module 11: ENVIRONMENT, STRATEGY, AND STRUCTURE
The external environment of organizations: events and conditions surroundings the
organization, shapes organizational behaviour, 2008 global crisis.
o Organizations as open systems: 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, technology and
people
Outputs include various products and services
Some inputs are transformed (raw materials) while inputs (skilled
craftspeople) assist in the transformation and process. Transformation
processes may be physical (manufacturing or surgery), intellectual
(teaching or programming) or even emotional (psychotherapy). For
example, an insurance company imports actuarial experts, information
about accidents and mortality, and capital in the form of insurance
premiums. Through the application of financial knowledge, it transforms
the capital into insurance coverage and investments in areas like real
estate
o The value of the open systems concept is that it sensitizes us to the need for
organizations to cope with the demands of the environment on both the input
side and the output side (adaptation to enviormental demands or changing the
environment
Components of the external environment: involves any person, group, event or
condition outside the direct domain of the organization
o 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. Of course, some
organizations thrive under a poor economy,
o including welfare offices and law firms that deal heavily in bankruptcies. In
addition, if a poor economy is accompanied by high unemployment, some
organizations might find it opportune to upgrade the quality of their staff, since
they will have an ample selection of candidates. This is exactly what Blackberry
Limited and other tech firms did during the last recession. They hired thousands
of employees, including tech gurus laid off by other firms, in hopes of gaining an
edge on their competitors. Of course, when Blackberry Limited faced slumping
sales of its BlackBerry smartphones a few years later, it too had to lay off
thousands of workers
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o Customers: All organizations have potential costumers for their products and
services. Organizations must be sensitive to change in costumer demands. For
example, the small liberal arts college that resists developing a business school
might be faced with declining enrolment. Successful firms are generally highly
sensitive to costumer reactions.
o Suppliers: organizations are dependent on the environment for supplies, which
include labour, raw materials, equipment, and component parts. Shortage can
cause severe difficulties. A strike to a company that supplies component parts
might cause the purchaser to shut down its assembly line
o Competitors: enviormental competitors vie for resources that include both
customers and suppliers.
o Social/political factors: changes in public attitudes towards ethnic diversity, the
proper age for retirement, the environment, corporate social responsibility will
soon affect them. These attitudes find expression in law through the political
process. Thus, organizations must cope with a series of legal regulations that
prescribe fair environment practices, proper competitive activities, product
safety and enviormental protectionism
o Technology: environment contains a variety of technologies that are useful for
achieving organizational goals. Technology refers to ways of doing things, not
simply to some form of machinery. The ability to adopt the proper technology
should enhance an organization’s effectiveness.
Different parts of the organization are often concerned with different environmental
components
Marketing department to be tuned in to costumer demands and a legal department to
be interested in regulations stemming from the social/political component
Events in various competition, an opportunity in one enviormental sector might offset a
constraint in another.
Causing confusion among managers
Enviromental Uncertainty: The resulting uncertainty can be both challenging and
frustrating. Environmental uncertainty exists when an environment is vague, difficult to
diagnose, and unpredictable. We all know that some environments are less certain than
others
uncertainty depends on the environment’s complexity (simple versus complex) and
its rate of change (static versus dynamic)
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Simple environment. A simple environment involves relatively few factors, and these
factors are fairly similar to each other. For example, consider the pottery
manufacturer that obtains its raw materials from two small firms and sells its entire
output to three small pottery outlets.
Complex environment. A 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. The small-town radio station that plays the same music format, relies on the
same advertisers, and works under the same CRTC (Canadian Radio-television and
Tele- Communications Commission) regulations year after year has a stable
environment
Dynamic environment. The components of a highly dynamic environment are in a
constant state of change, which is unpredictable and irregular, not cyclical.
A static environment should provoke the least uncertainty; dynamic should provoke
the most
as uncertainty increases, cause-and-effect relationships become less clear. If we are
certain that a key competitor will not match our increased advertising budget, we
may be confident that our escalated ad campaign will increase our market share.
Uncertainty about the competitor’s response reduces confidence in this causal
inference. Second, environmental uncertainty tends to make priorities harder to
agree on, and it often stimulates a fair degree of political jockeying within the
organization
Finally, as environmental uncertainty increases, more information must be processed by the
organization to make adequate decisions. Environmental scanning, boundary spanning,
planning, and formal management information systems will become more prominent
illustrates that organizations will act to cope with or reduce uncertainty, because
uncertainty increases the difficulty of decision making and thus threatens organizational
effectiveness.
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