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8/12/2019 Organizations & Their Environment
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Organizations & their
Environment
Shoaib Ul-Haq
LUMS
1
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(a) Competitors, industry size and
competitiveness, related issues
(b) Suppliers,
manufacturers, real
estate, services
(c) Labor market,
employment agencies,universities, training
schools, employees
in other companies,
unions
(d) Stock markets,
banks, savings and
loans, private
investors(e) Customers, clients,
potential users of products
and services
(f) Techniques of production, science,
research centers, automation new
materials
(g) Recession, unemployment rate,
inflation rate, rate of investment,
economics, growth
(h) City, state, federal laws
and regulations, taxes,
services, court system,
political processes(i) Age, values, beliefs,
education, religion,
work ethic, consumer
and green
movements
(j) Competition from
and acquisition byforeign firms,
entry into overseas
markets, foreign
customs, regulations,
exchange rates
An Organizations Environment
(j)
International
Sector
(d)Financial
Resources
Sector(e)
Market
Sector
(f)
Technology
Sector
(g)Economic
Conditions
Sector
(a)
Industry
Sector
(h)
Government
Sector
(c)
Human Resources
Sector
(b)Raw Materials
Sector
(i)Socio-cultural
Sector
ORGANIZATION
DOMAIN
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External Environment
Environmental Domainis the chosen territory
of action defining the niche and external
sectors with which the organization will
interact to accomplish its goals.
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External Environment
Sectors are subdivisions of the external
environment that contain similar elements.
Task environment includes sectors with which
the organization interacts directly, usuallyincluding:
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External Environment
Industry sector
Raw material sector
Market sector
Human sector
International sectors
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General Environment
Includes those sectors that may not have a direct
impact on the daily operations of the firm.
Often included are:
Government sector
Sociocultural sector
Economic conditions
Technology sector
Financial resources sectors
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Market
Sub-environment
Customers Advertising
Competitors agencies
Distribution
system
Manufactur ing
Sub-environment
Labor Raw Suppliers
materials
Production
equipment
Scienti f ic
Sub-environment
Scientific Research
journals centers
Professional
associations
Organizational Departments Differentiate to Meet Needs of
Sub-environments
President
R & D
Division
Sales
Division
Manufacturing
Division
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Differences in Goals and Orientations
Among Organizational Departments
Characteristic
R & D
Department
Manufacturing
Department
Sales
Department
Goals
New
developments,quality
Efficient
production
Customer
satisfaction
Time
Horizon Long Short Short
Interpersonal
Orientation Mostly task Task Social
Formality of
Structure Low High High
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Environmental Uncertainty and
Organizational Integrators
Industry: Plastics Foods Container
EnvironmentalUncertainty High Moderate Low
Departmental
Differentiation High Moderate Low
Percent of
management in
integrating roles22% 17% 0%
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Environmental Uncertainty
Uncertainty means that decision makers have
some degree of insufficient information about
environmental factors, making prediction of
external changes difficult.
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Environmental Uncertainty
Characteristics of the Environmental domain
that influence uncertainty are:
The extent to which the external domain is simple
or complex.
The extent to which events are stable or unstable.
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Environmental Uncertainty
Simple Complex Dimensionconcerns heterogeneity
or the number and dissimilarity of external elements
relevant to an organizations operations.
Stable-Unstable Dimensionrefers to whether
elements in the environment are dynamic; the
domain is stable if it remains the same over a period
of months or years.
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Adapting to Environmental
Uncertainty
Organizations need to have the right fit
between the external environment and the
internal structure.
Buffering Department can absorb uncertainty
from the environment by protecting the
technical core from environmental changes
and helping it function efficiently.
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Adapting to Environmental
Uncertainty
Boundary-spanning roles link and coordinate
an organization with key elements in the
external environment by:
Bringing into the organization information bout
changes in the environment.
By sending information into the environment that
presents the organization in a favorable light.
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Adapting to Environmental
Uncertainty
Environmental uncertainty leads to:
Increased differentiation, which is the differences
in cognitive and emotional orientations among
managers in different functional departments, andthe difference in formal structure among these
departments.
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Adapting to Environmental
Uncertainty
With high differentiation, coordination
between departments becomes difficult,
creating greater needs for integration, which is
the quality of collaboration between
departments.
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Organization Forms
Mechanistic: Organic:
Tasks are broken down into
specialized, separate parts.
Tasks are rigidly defined.
There is a strict hierarchy of
authority and control, and
there are many rules.
Knowledge and control of
tasks are centralized at thetop of the organization.
Communication is vertical.
Employees contribute to thecommon task of the
department.
Tasks are adjusted andredefined through teamwork.
There is less hierarchy ofauthority and control, and
there are few rules.
Knowledge and control of
tasks are located anywhere inthe organization.
Communication is horizontal.
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Low Uncertainty
1. Mechanistic structure; formal,
centralized
2. Few departments
3. No integrating roles
4. Current operations orientation
High-Moderate Uncertainty
1. Organic structure, teamwork;
participative, decentralized
2. Few departments, much boundary
spanning
3. Few integrating roles
4. Planning orientation
High Uncertainty
1. Organic structure, teamwork;
participative, decentralized
2. Many departments differentiated,
extensive boundary spanning
3. Many integrating roles
4. Extensive planning, forecasting
Low-Moderate Uncertainty
1. Mechanistic structure; formal,
centralized
2. Many departments, some boundary
spanning
3. Few integrating roles
4. Some Planning
Contingency Framework for
Environmental Uncertainty and
Organizational Responses
ENVIRONMENTAL
CHANGE
STABLE
ENVIRONMENTAL COMPLEXITY
UNSTABLE
SIMPLE COMPLEX
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Organization Strategies for Controlling
the External Environment
EstablishingInterorganizationalLinkages:
Ownership
Contracts, joint
ventures
Cooptation, interlocking
directorates Executive recruitment
Advertising, public
relations
Controlling the
Environmental Domain:
Change of domain
Political activity,regulation
Trade associations
Illegitimate activities
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Relationship Between Environmental
Characteristics and Organizational Actions
Environmental
domain
(ten sectors)
High
complexity
Establishment of favorable linkages:
ownership, strategic alliances, cooptations,
interlocking directorates, executive recruitment,
advertising, and public relations
Organic structure and systems with low
formalization, decentralization,
and low standardization
Many departments and boundary roles
Greater differentiation and more
integrators for internal coordinationHigh
uncertainty
High rate
of change
Scarcity of
valued
resources
Resource
dependence Control of the environmental domain:
change of domain, political activity,
regulation, trade associations, and
illegitimate activities
Environment Organization