1. The External Environment
Chapter Four
The External Environment
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2. Relationship Between Environmental Characteristics and Organizational Actions
Organization Response
Number of departments (complexity)
Degree of differentiation and
integration for internal coordination
Complexity
Uncertainty
(Information)
Organic vs. Mechanistic: formalization, decentralization, standardization, etc.
Stability
Forecasting & Planning
Forecasting & Planning necessary
Environmental
Sectors
Establishment of favorable linkages:
ownership, strategic alliances, co-optations,
interlocking directorates, executive recruitment,
advertising, and public relations
Resource
dependence
Scarcity
(Resources)
Control of the environmental domain:
change of domain, political activity,
regulation, trade associations, and
illegitimate activities
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3. An Organization’s Environment
(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,
unionization
(d) Stock markets,
banks, savings and
loans, private
investors
(e) Customers, clients,
potential users of products
and services
(f) Techniques of production, science,
computers, information technology
(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 by
foreign firms,
entry into overseas
markets, foreign
customs, regulations,
exchange rates
International Context
(j)
International
Sector
(a)
Industry
Sector
(i)
Sociocultural
Sector
DOMAIN
(b)
Raw Materials
Sector
(c)
Human
Resources
Sector
(h)
Government
Sector
ORGANIZATION
(g)
Economic
Conditions
Sector
(d)
Financial
Resources
Sector
(e)
Market
Sector
(f)
Technology
Sector
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4. Diagnostic Framework for Environmental Uncertainty
Low Uncertainty
Simple + Stable
Food Processor
Soft drink bottler
High-Moderate Uncertainty
Simple + Unstable
Fashion designer
Music / Toys
High Uncertainty
Complex + Unstable
Electronics firm
Airline
Low-Moderate Uncertainty
Complex + Stable
University
Chemical company
STABLE
ENVIRONMENTAL
CHANGE
Uncertainty
UNSTABLE
SIMPLE
COMPLEX
ENVIRONMENTAL COMPLEXITY
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5. Customers Advertising
Organizational Departments Differentiate to Meet Needs of Sub-environments
President
Scientific
Sub-environment
Scientific Research
journals centers
Professional
associations
Manufacturing
Sub-environment
Labor Raw Suppliers
materials
Production
equipment
Market
Sub-environment
Customers Advertising
Competitors agencies
Distribution
system
R & D
Division
Manufacturing
Division
Sales
Division
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6. Differences in Goals and Orientations Among Organizational Departments
Characteristic
R & D
Department
Manufacturing
Sales
Goals
New developments, quality
Efficient production
Customer satisfaction
Time
Horizon
Long
Short
Interpersonal
Orientation
Mostly task
Task
Social
Formality of
Structure
Low
High
Source: Based on Paul R. Lawrence and Jay W. Lorsch,
Organization and Environment
(Homewood, Ill.: Irwin, 1969), pp
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7. Environmental Uncertainty and Organizational Integrators
Industry:
Plastics
Foods
Container
Environmental
Uncertainty
High
Moderate
Low
Departmental
Differentiation
Management in integrating roles
22%
17% 0%
Source: Based on Jay W. Lorsch and Paul R. Lawrence,
“Environmental Factors and Organizational Integration,”
Organization Planning: Cases and Concepts (Homewood, Ill.:
Irwin and Dorsey, 1972), 45.
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8. Managing the OrgEnv Interface
Buffering: Protects the technical core from the environment – ex: raw materials inventory – out of fashion
Boundary-spanning: Links the organization to the environment – ex: R&D and market research – competitive intelligence
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9. 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 the top of the organization.
Communication is vertical.
Employees contribute to the common task of the department.
Tasks are adjusted and redefined through teamwork.
There is less hierarchy of authority and control, and there are few rules.
Knowledge and control of tasks are located anywhere in the organization.
Communication is horizontal.
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10. Planning, Forecasting & Responsiveness
Low Uncertainty means ‘No surprises’ so focus is internal and current.
As Uncertainty increases, managers begin to think about what could happen and plan for possible needed changes
Further Uncertainty triggers creation of planning specialists and departments that attempt to forecast events and develop alternate scenarios of the future
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11. High-Moderate Uncertainty Low-Moderate Uncertainty
Contingency Framework for Environmental Uncertainty and Organizational Responses
Low Uncertainty
1. Mechanistic structure; formal,
centralized
2. Few departments
3. No integrating roles
4. Current operations orientation;
low speed response
High-Moderate Uncertainty
1. Organic structure, teamwork;
participative, decentralized
2. Few departments, much boundary
spanning
3. Few integrating roles
4. Planning orientation; fast
response
High Uncertainty
2. Many departments differentiated,
extensive boundary spanning
3. Many integrating roles
4. Extensive planning, forecasting;
high speed response
Low-Moderate Uncertainty
2. Many departments, some boundary
4. Some planning; moderate speed
STABLE
ENVIRONMENTAL
CHANGE
Uncertainty
UNSTABLE
SIMPLE
COMPLEX
ENVIRONMENTAL COMPLEXITY
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12. Organization Strategies for Controlling the External Environment
Establishing Interorganizational Linkages:
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
Thomson Learning
© 2004

13. Relationship Between Environmental Characteristics and Organizational Actions
Organization Response
Number of departments (complexity)
Degree of differentiation and
integration for internal coordination
Complexity
Uncertainty
(Information)
Organic vs. Mechanistic: formalization, decentralization, standardization, etc.
Stability
Forecasting & Planning
Forecasting & Planning necessary
Environmental
Sectors
Establishment of favorable linkages:
ownership, strategic alliances, co-optations,
interlocking directorates, executive recruitment,
advertising, and public relations
Resource
dependence
Scarcity
(Resources)
Control of the environmental domain:
change of domain, political activity,
regulation, trade associations, and
illegitimate activities
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© 2004

14. Genesco (p. 149)
Assess the amount of Environmental Uncertainty that Genesco faces using the Framework in Exhibit 4.2. Use examples from the case to argue why it is as simple/complex and stable/unstable as you suggest.
Are the buyers at Genesco performing a buffering or boundary spanning role? Explain. What about the other role? Who might do it? What would it look like? Would it be useful?
Now that you know the amount of uncertainty that Genesco faces (Ex. 4.2), you are ready to consider what the theory says about what an organization in that ‘box’ should do to succeed. Is that what Genesco is doing? Give examples.
Even if Genesco is certain about what its customers want, it will still be in trouble if it can’t get product into its stores. Identify what aspect of resource dependence theory (Ex 4.8) this relates to and give the supporting example from the case
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