chapter 4 the external environment
sociocultural sector (general environment)
-green movement -concerned about natural environment and want organizations to do more to protect it -ex: nike making shoes with recycled materials eco-friendly glues
stable (stable-unstable dimension)
-remains essentially the same over a period of months or years ex: public utility. rural midwest, demand and supply factors for a public facility are relatively stable. a gradual increase in demand may occur which is easily predicted over time
market sector (task environment/organization's environment)
-smart companies paying close attention to the generation c customer born after 1990 who will make up about 40 percent of us, europe, brazil, russia, india, and china by 2020 and about 10 percent of the rest of the world -always been connected by internet need to come at them differently than you do with their parents
Lawrence and Lorsch's
______________ concluded that organizations perform better when the levels of differentiation and integration match the level of uncertainty in the environment. -organizations that performed well in uncertain environments had high levels of both differentiation and integration, while those performing well in less uncertain environments had lower levels of differentiation and integration
economic conditions (general environment)
affect the way a company must do business ex: global recession. Briggs Inc plans customized events for corporations to woo top clients, reward, etc lost customers. They had to move events to smaller venues, save clients money, and scale down decor. -companies can scale down and hold events in hotels instead of fifth avenue locations -financial burden but it has helped company hold onto clients long-term
sociocultural sector (general environment/organization's environment)
age, values. beliefs, education, religion, work ethic, consumer, and green movements
financial resources(general environment)
all business have to be concerned with it -first and foremost in the minds of entrepreneurs -small businesses turn to online person-to-person lending networks for small loans as banks tightened their lending standards. ex: Jeff walsh borrowed $22,000 through prosper.com for his coin laundry business. Alex Kalempa needed $15,00 but banks offered him credit lines of $500-$1000
international sector (task environment/organization's environment)
also part of the task environment because of globalization and intense competition china=worlds largest producer of raw materials for pharmaceuticals, and got authorization from FDA for medicine in US. India-based companies have been exporting generics for a decade, but believe china with low costs and brilliant scientist will take over
resource dependence
although companies like minimize their dependence, when costs and risks are high they also team up to share scarce resources and be more competitive on a global basis -formal relationships with other organizations present a dilemma to managers -seek to reduce vulnerability with respect to resources by developing links with other org, but they also like to maximize own independence and autonomy -org linkages require coordination, and reduce freedom inter-organizational relationships thus rep a trade off between resources and autonomy
differentiation
another response to environmental uncertainty -refers to the "differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among those departments." -when external environment is complex and rapidly changing organizational departments need to become highly specialized to handle uncertainty. employees in r&d will have unique traits to distinguish them from man. departments -coordination among departments becomes difficult as more time and resources must be devoted to achieving coordination when attitudes, goals, and work orientation differ so widely
integration
another response to environmental uncertainty -the quality of collaboration among departments -formal ____ are often required to coordinate departments -when the environment is highly uncertain, frequent changes require more information processing to achieve horizontal coordination, so ____ become a necessary addition to organizational structure
technology sector (general environment)
area in which massive changes have occurred in recent years, from streaming video and advances in mobile tech to cloning and stem-cell research -green movement helping -dozen of companies and hundreds of academics are using genetic engineering and other bio techniques to try and create a "super-algae" than can be converted into diesel or jet fuel
organic
as environmental uncertainty increases, organizations tend to become more ____ which means decentralizing authority and responsibility to lower levels, encouraging employees to take care of problems by working with one another, encouraging teamwork, and taking an informal approach to assigning tasks and responsibility
organic
burns and stalker in rapidly changing environments, the internal organization was much looser, free-flowing, and adaptive, with loose hierarchy and decentralized decision making.
government sector (general environment/organization's environment)
city, state, federal laws and regulations, taxes, services, court system, political processes
international sector (task environment/organization's environment)
competition from and acquisition by foreign firms, entry into overseas markets, entry into overseas markets, foreign customs, regulations, exchange rate
industry sector (task environment/organization's environment)
competitors, industry size and competitiveness, related industries
simple-complex dimension
concerns environmental complexity, which refers to heterogeneity, or the number and dissimilarity of external elements (competitors, suppliers) that affect an organization's operations -the more external elements that regularly influence the organization, the greater number of other companies in an organization's domain, the greater the complexity
sectors (the organization's environment)
contain similar elements -ten sectors industry, raw materials, hr, financial resources, market, tech, economic conditions, government, sociolcultural, and international -can be broken down into task or general environment
market sector (task environment/organization's environment)
customers, clients, potential users of products and services
organizational environment
defined as everything that exists outside the boundary of the organization and has the potential to affect all or part of the organization -can be understood by analyzing its domain within external sectors -composed of domains and sectors -domain is the chosen environmental field of action -it is the territory an organization stakes out for itself with respect to products, services, and markets served. -domain defines the organization's niche and defines those external sectors with which the organization will interact to accomplish its goals
unstable (stable-unstable dimension)
environmental elements shift rapidly -environmental domains are increasingly unstable for most organizations ex: video game industry, mattel toys in china, pakistani government restricting certain youtube videos or drugs related to heart pain. ex: music player who got reimbursed after video said what company did wrong toy companies hard to gauge. kids going to technology and the shrinking retail market being captured by the likes of wal-mart
raw materials sector (task environment/organization's environment)
ex: beverage industry. steelmakers owned the beverage can market until the mid-1960s, when Reynolds Aluminum Company launched a huge aluminum recycling program to gain a cheaper source of raw materials and make aluminum cans price-competitive with steel
the task environment or general environment
for most companies, the sectors can be furthered categorized as either ______
interlocking directorate (establishing formal relationships)
formal linkage that occurs when a member of the board of directors of one company sits on the board of directors of another company - the individual is a communications link between companies and can influence policies and decisions
general environment
government sector, sociocultural, economic conditions, technology, and financial resources sectors
task environment (organization's environment)
includes sectors with which the organization interacts directly and that have a direct impact on the organization's ability to achieve its goals -industry, raw materials, and market sectors, and perhaps HR and international sectors
general enviroment
includes those sectors that might not have a direct impact on the daily operations of a firm but will indirectly influence it
government sector (general environment)
influence every phase of organizational life. -2010 patient protection and affordable care act and the dodd-frank act(finance) -overall federal agencies issues 43 major new rules expanding government financial oversight -small companies in particular were struggling with the time and expense required to meet provisions of new health care and financial reform laws
human resources sector (task environment/organization's environment)
labor market, employment agencies, universities, training schools, employees in other companies, unionization
boundary-spanning roles
link and coordinate an organization with key elements in the external environment. -primarily concerned with the exchange of information to detect and bring into the organization information about changes in the environment and to send information into the environment that presents the organization in a favorable light -prevent the company from stagnating by keeping top managers informed about environmental changes -greater the uncertainty the greate the importance of boundary spanners ex: market research department scans and monitors trends in consumer tastes -one approach is business intelligence
recent approach to buffering
more recent approach is to drop the buffers and expose the technical core to the uncertain environment -believe being well connected to customers and suppliers is more important than internal efficiency
industry sector (task environment/organization's environment)
netflix has been disruptive here since 1997 -wiped out blockbuster and is now become a major competitive threat to tv and movie providers. -subscriptions for cable televison (long controller of home entertainment industry) fell for the first time in the cable companies history in late 2010
business intelligence
one approach to boundary spanning, refers to the high-tech analysis of large amounts of internal and external data to spot patterns and relationships that might be significant. ex: verizon uses it to actively monitor customer interactions so that it can catch problems and fix immediately -expensive -related to another important area of boundary spanning known as competitive intelligence
complex environment (simple-complex dimension)
one in which the organization interacts with and is influenced by numerous diverse external elements ex:- oil companies use multiple technologies, cope with gov regulations, affected by international events, compete for scare financial resources and highly trained engineers, interact with numerous suppliers, customers, contractors, and partners, respond to changing social values and deal with complex legal and financial systems in multiple countries
simple environment (simple-complex dimension)
organization interacts with and is influenced by only a few similar external elements ex: a family-owned hardware store in a suburban community. store doesnt deal with complex technologies, or extensive government regulations, and cultural and social changes have little impact. hr not problem b/c store run by family -only external elements of importance are a few competitors, suppliers, and customers
uncertainty
organizations must cope with and manage _____ to be effective -means that decision makers do not have sufficient information about environmental factors, and they have a difficult time predicting external changes -increases the risk of failure for organizational responses and makes it difficult to compute costs and probabilities associated with decision alternatives
the need for material and financial resources
organizations try to maintain a balance between depending on other organizations and preserving their own independence. maintain this balance through attempts to modify, manipulate, or control elements of the external environment to meet their needs -two strategies: establish favorable relationships with other organizations and shape the organizational environment
buffering roles
purpose is to absorb uncertainty from the environment -surrounds technical core(helps them function efficiently) and exchanges materials, resources, and money between the environment and the organization -purchasing dept. buffers technical core by handling the uncertainty associated with finding, hiring, and training production employees -human resource department buffers the technical core by handling the uncertainty associated with finding, hiring, and training production employees
economic conditions (general environment/organization's environment)
recession, unemployment rate, inflation rate, rate of investment, economics, growth
stable-unstable dimension
refers to whether the environment in which the organization operates is dynamic
competitive intelligence
related to business intelligence in the boundary of spanning -gives top executives a systematic way to collect and analyze public information about rivals and use it to make better decisions -use techniques such as digging through trash cans or surfing web to find out info on competitors new products, man. costs, or training methods and share it with top leaders
human resources sector (task environment/organization's environment)
significant to every business -china new labor movement is challenging business leaders, with emerging labor activist groups as well as legal aid and support networks at universities promoting workers rights -every worker is a labor worker themselves some people are using internet to complain and they know their rights
information perspective of uncertainty
simple-complex dimension and stable-unstable dimensions
integrators
sometimes called liaison personnel, project managers, brand managers, or coordinators -organizations with highly uncertain environments and a highly differentiated structure assign about 22% of management personnel to integration activities such as serving committees, task forces, or in liaison roles. -in organizations characterized by very simple, stable environments, almost no managers are assigned to integration roles. -as environmental uncertainty increases, so does differentiation among departments thus organizations must assign a larger number of managers to integrating roles
financial resources (general environment/organization's environment)
stock markets, banks, savings and loans, private sectors
raw materials sector (task environment/organization's environment)
suppliers, manufacturers, real estate, services
technology sector (general environment/organization's environment)
techniques of production, science, computers, information technology, e-commerce
resource dependence
the environment is the source of scarce and valued resources essential to organizational survival. research in this area is called _____ perspective -means that organizations depend on the environment but strive to acquire control over resources to minimize their dependence -organizations are vulnerable if vital resources are controlled by other organizations, so they try to be as independent as possible -organizations do not want to become too vulnerable to other organizations because of negative effects on performance
intelligence team
the newest wave of competitive intelligence -cross-functional group of managers and employees, usually led by a competitive intelligence professional, who work together to gain a deep understanding of a specific business issue, with the aim of presenting insights, possibilities, and recommendations to top leaders -can provide insights that enable managers to make more informed decisions about goals, as well as devise contingency plans and scenarios related to major competitive issues -boundary task of sending information into the environment to represent the org is used to influence other people's perception of the organization ex: purchases may call on suppliers and describe purchasing needs
establishing formal relationships
to maintain autonomy, organizations that already have abundant resources will tend not to establish new linkages -organizations that need resources will give up independence to acquire those resources
resource dependence
to maintain autonomy, organizations that already have abundant resources will tend not to establish new linkages -organizations that need resources will give up independence to acquire those resources ex: DHL entered into a partnership with UPS to handle parcels after failing to take over U.S. package delivery market
establish favorable relationships with other organizations and shape the organization's environment
to survive, the focal organization often tries to reach out and change or control its environment two strategies that can be adopted to influence resources in the external environment
mechanistic
when the external environment was stable, the internal organization was characterized by standard rules, procedures, a clear hierarchy of authority, formalization, and centralization -burns and stalker