2 Learning ObjectivesAfter studying this chapter, you should be able to:Discuss the nature of the organizational environment and identify the environments of interest to most organizations.Describe the components of the general and task environments and discuss their impact on organizations.Identify the components of the internal environment and discuss their impact on organizations.Identify and describe how the environment affects organizationsIdentify and describe how organizations adapt to their environment.
3 The Organization’s Environment External EnvironmentGeneral environment: everything outside an organization’s boundaries—economic, legal, political, socio-cultural, international, and technical forces.Task environment: specific groups and organizations that affect the firm.Internal EnvironmentConditions and forces present and at work within an organization3
5 The External Environment The General EnvironmentThe set of broad dimensions and forces in an organization’s surroundings that create its overall context.Economic dimensionTechnological dimensionSociocultural dimensionPolitical-legal dimensionInternational dimension7
9 The Internal Environment Conditions and stakeholder forces within an organizationOwners.Board of directorsEmployeesPhysical work environment11
10 REGULATORSPotential to control, legislate, or influence the organization’s policies and practices.Regulatory Agency – Created by Government and has the ability control and legislateInterest Group - A group formed its own individual members to attempt to influence business.
11 How Environments Affect Organizations Change and ComplexityEnvironmental change occurs in two ways:Degree to which change in environment is occurringDegree of homogeneity or complexity of the environmentUncertaintyA driving force that influences organizational decisions.17
12 How Environments Affect Organizations (cont’d) Competitive ForcesPorter’s Five Competitive ForcesThreat of new entrants into the marketCompetitive rivalry among present competitorsThreat of substitute productsPower of buyersPower of suppliersEnvironmental TurbulenceUnexpected changes and upheavals in the environment of an organization.17
14 Porter’s Five Competitive Forces Threat of new entrantsExtent to and ease with which competitors can enter market.Competitive rivalryCompetitive rivalry between firms in an industry.Threat of substitute productsExtent to which alternative products/services may replace the need for existing products/services.Power of buyersExtent to which buyers influence market rivals.Power of suppliersExtent to which suppliers influence market rivals.16
15 Figure 3.5: How Organizations Adapt to Their Environments
16 How Organizations Adapt to Their Environments (cont’d) Information Management in OrganizationsBoundary spannersEnvironmental scanningInformation systemsStrategic ResponseMaintaining the status quo, altering the current strategy, or adopting a new strategy.Mergers, Acquisitions, AlliancesFirms combine (merge), purchase (acquisition), or form new venture partnerships or alliances with another firm.21
17 How Organizations Respond to Their Environments (cont’d) Organizational Design and FlexibilityAdapting to environmental conditions by incorporating flexibility in its structural design.Mechanistic firms operate best in stable environments.Organic firms are best suited for dynamic environments.Direct Influence of the EnvironmentAttempting to change the nature of the competitive conditions in its environment to suit its needs.Pursuing new or changed relationships with suppliers, customers, and regulators.21