What are the two dimensions used to measure the level of uncertainty in an organizations external environment?

Q: Which of the following factors is an economic component of an organizations external environment?

Hence the range of disposable income of a firms customers is an example of the economic component of the external environment.

SOCI110 Module 4 - THE EXTERNAL ENVIRONMENT

0. OBJECTIVES

In this module you will learn

the meaning of various concepts associated with the organizational environment
the 2 dimensions of environmental uncertainty (complexity and stability)
strategies used by organizations to cope with environmental uncertainty
how organizations depend on the environment for scarce resources
strategies used by organizations to minimize their dependence on the environment for resources

1. THE ENVIRONMENTAL DOMAIN

Exhibit: An organization's environment (Daft E4.1 p. 131)

A bunch of concepts to describe the environment of organizations (see exhibit for specifics):

the organizational environment consists of all elements outside the boundary of the organization that can affect it
environmental sectors are subdivisions of the external environment that contain similar elements; the 10 principal sectors are shown in the exhibit above
an organization's domain is its chosen environmental field of action or niche; it consists of external sectors with which the organization interacts to accomplish its goals
the task environment includes sectors with which organization interacts directly and that have a direct impact on the organization; it typically includes industry, raw materials, market, and sometimes human resources and international sectors. (Task environment and organizational domain overlap a great deal.)
the general environment includes sectors that influence the organization more indirectly; it may include government, sociocultural, and technology sectors

The international environment has become increasingly important for many organizations.

Q - The industry sector includes: potential users of the organization's products (Y/N), competitors (Y/N), employment agencies (Y/N)?

Inhaltsverzeichnis Show

SOCI110 Module 4 - THE EXTERNAL ENVIRONMENT
0. OBJECTIVES
1. THE ENVIRONMENTAL DOMAIN
2. ENVIRONMENTAL UNCERTAINTY
3. ADAPTING TO ENVIRONMENTAL UNCERTAINTY
4. FRAMEWORK FOR ORGANIZATIONAL RESPONSE TO UNCERTAINTY
5. RESOURCE DEPENDENCE
6. INTERORGANIZATIONAL LINKAGES
7. CONTROLLING THE ENVIRONMENTAL DOMAIN
8. SUMMARY OF ORGANIZATIONAL RESPONSES TO THE ENVIRONMENT
What are two environmental factors facing organizations quizlet?
Which of the following is the assessment of internal and external conditions that affect the organization?
Which of the following is considered part of an external business environment?
Which of the following factors is an economic component of an organization's external environment?

Q - During the late 1970s and into the 1980s, power companies were faced with a great deal of uncertainty generated by groups protesting the use of nuclear power. These events contributed to instability in what sector of the organizational environment of power companies?

Q - "An organization's domain is the buildings and grounds that are owned or leased by the organization and in which inputs are transformed into outputs." (TRUE/FALSE?)

The basic outline for this module is the idea that the environment affects the organization in 2 essential ways, through

the need for information -> the need to adapt to absence of information, which is uncertainty -> See Sections 2, 3, 4
the need for resources -> the need to minimize resource dependence -> See Sections 5, 6, 7

We review the various strategies that organizations use to achieve these 2 goals.

2. ENVIRONMENTAL UNCERTAINTY

Environmental uncertainty is the absence of full information about the environment

There are 2 dimensions of environmental uncertainty:

environmental complexity (simple environment <---> complex environment) = heterogeneity (or number and dissimilarity) of external elements relevant to the organization's operations
environmental stability (stable environment <---> unstable environment) = extent to which the environment is changing rapidly and unpredictably

EX:

university: complex but stable environment
beer distributor: simple and stable environment
fashion industry: simple but unstable environment
hospital: complex but stable environment (barring a major catastrophe like an earthquake)

The complexity and stability dimensions can be combined into a 2-dimensional framework for environmental uncertainty.

Exhibit: Framework for assessing environmental uncertainty (Daft E4.2 p. 138)

(Note that the framework assumes that instability is a worse source of uncertainty than complexity.)

Q - The two dimensions of environmental uncertainty are ___ and ___ ?

Q - "Environmental stability refers to the number and dissimilarity of external elements that have an impact on the organization." (TRUE/FALSE?)

3. ADAPTING TO ENVIRONMENTAL UNCERTAINTY

Organizations utilize a number of strategies to adapt to environmental uncertainty.

1. Positions & Departments

The organization creates departments that specialize in dealing with a specific sector of the environment.
As a result there is a relationship

environmental complexity -> internal complexity

2. Buffering & Boundary Spanning

Buffering = absorbing environmental uncertainty to protect the technical core, the departmentthat performs the primary production activity of the organization; EX: a purchasing department
Boundary spanning = linking the organization to key outside elements; EX: market research, competitive intelligence

Exhibit: Representation of buffer departments protecting the technical core (Daft old edition)

Minicase: Tommy Hilfiger (Daft p. 142). The company sends researchers into music clubs to keep in touch with fashion trends among the youth, and gives free clothing to MTV stars.

Q - "Buffer departments attempt to insure that the technical core operates as an open system." (TRUE/FALSE?)

Q - Sophie Lorimer is a researcher in the R&D department of a major chemical company. Part of her job is to read technical and scientific journals, and to attend conferences to find out what new developments are occuring. That part of her job corresponds to a (MAINTENANCE/BUFFERING/BOUNDARY SPANNING?) role.

3. Differentiation & Integration

The classical research of Paul Lawrence and Jay Lorsch on differentiation and integration processes is especially important.

Differentiation = differences in cognitive and emotional orientations, and in formal structure, among different functional departments
Integration = quality of collaboration among departments

Lawrence and Lorsch found that organizations in more uncertain environments tend to both

be more differentiated internally
place more emphasis on integrating roles (EX: liaisons, coordinators)

The following exhibits summarize the Lawrence & Lorsch approach

Exhibit: Departments differentiate to adapt to specific subenvironments (Daft E4.3 p. 143)
Exhibit: Resulting differences in goals and orientations among R&D, manufacturing, and sales departments (Daft E4.4 p. 143)
Exhibit: L&R's comparison of the plastics, foods, and container industries showing that greater environmental uncertainty entails both greater differentiation and greater integration effort (Daft E4.5 p. 144)

Q - Paul Lawrence and Jay Lorsch argue that an organization is more likely to need a number of specialized departments that have different cognitive and emotional orientations when the environment is highly (Choose one: STABLE/UNCERTAIN/DYNAMIC/MECHANISTIC)?

Q - "According to Paul Lawrence and Jay Lorsch, high differentiation in an organization implies that coordination between departments is problematic." (TRUE/FALSE?)

Q - The study of differentiation and integration processes in organizations is closely associated with the names of (Choose one: CHEECH & CHONG/SONNY & CHER/LAWRENCE & LORSCH/BONNY & CLYDE/PAUL & VIRGINIE)

4. Organic versus Mechanistic Control

Tom Burns and G. M. Stalker have emphasized the distinction between mechanistic and organic forms of organization

a mechanistic organization has many rules and procedures, well defined tasks, a clear hierarchy of authority
an organic organization has a looser structure, fewer written regulations, hierarchy not clear, more horizontal communication

The next exhibit compares the features of mechanistic and organic organizations

Exhibit: Organic vs. mechanistic organizational forms (Daft E4.6 p. 144)

Organizations tend to adopt a position on the Mechanistic <---> Organic continuum that corresponds to the degree of environmental uncertainty they face, so that greater uncertainty corresponds to a more organic control structure, and vice-versa.

5. Planning & Forecasting

Organizations facing greater uncertainty will tend to increase their planning and forecasting effort. (This is pretty obvious if you ask me!)

6. Institutional Imitation

(Institutional imitation is discussed more fully in Module 5 as part of the institutional perspective.)

The institutional perspective argues that under high uncertainty, organizations tend to imitate others in the same institutional environment. Consequences of institutional imitation

organizations in the same industry tend to "look alike"
organizations are highly susceptible to fads, such asdownsizing, setting up a web page on the internet, etc.

4. FRAMEWORK FOR ORGANIZATIONAL RESPONSE TO UNCERTAINTY

This framework summarizes organizational responses to uncertainty discussed in Section 3.

Exhibit: Contingency framework for organizational responses to environmental uncertainty (Daft E4.7 p. 147)

5. RESOURCE DEPENDENCE

The resource dependence perspective views organizations as dependent on the environment for scarce resources (material and financial) and as striving to acquire control over the sources of these resources to minimize dependence on the environment.

The 2 general strategies to minimize resource dependence are

establishing interorganizational linkages; this typically requires a trade-off between resources and organizational autonomy
controlling the environmental domain through direct manipulation

Various ways to implement these 2 general strategies are summarized in the next exhibit

Exhibit: Strategies for controlling the external environment (Daft 4.8 p. 149)

These organizational strategies to minimize resource dependence are examined in detail in the next 2 sections.

6. INTERORGANIZATIONAL LINKAGES

1. Ownership

Various degrees of ownership are achieved through part ownership, controlling interest, acquisition, or merger.

horizontal integration = acquired organization is in the same industry (EX: Maytag bying Magic Chef)
vertical integration = acquired organization is a supplier or distributor (EX: soft drink company buys a bottle maker)

2. Contracts & Joint Ventures

Includes license agreements, supplier arrangements (EX: McDonald buys a whole crop of potatoes), and joint ventures.

a joint venture is a new organization independent of the parent organizations

3. Cooptation & Interlocking Directorates

cooptation = leader from important sector of the environment is made part of the organization (EX: politician sitting on UNC board of directors)
interlocking directorates = two organizations are linked when the same person is a member of the boards of both

4. Executive Recruitment

executive recruitment = interorganizational contact through the transfer or exchange of executives (EX: the "revolving door" in which retired generals are hired by the aerospace industry)

5. Advertising & Public Relations

Minicase: Toshiba (Daft p. 151). Toshiba already engaged in high-tech strategic aliance in the early 1900s when it contracted with GE to make light bulb filaments. They are currently involved in more than two dozens major partnerships and joint ventures. Toshiba illustrates the range of strategies that an be used to reduce resource dependence.

Exhibit: Toshiba's alliances (Daft E4.9 p. 152)

Q - Roderick Cleaver is a militant member of a faculty union at a medium-sized college. When the unions's Negotiating Committee is reporting to a meeting of the faculty, he always find fault with the work of the committee and strongly advocates striking. When a member the the Negotiating Committee resigns because of illness, the union's Executive Committee appoints Roderick to take his place. This is an instance of what organizational linkage strategy?

Q - McDonnell-Douglas hired a retired Air Force general for a top management position. This is an instance of what organizaitonal linkage strategy?

7. CONTROLLING THE ENVIRONMENTAL DOMAIN

1. Change of Domain

An organization can change its domain through acquisition and/or divestment (EX: Reynolds acquiring Nabisco)

2. Political Activity & Lobbying

To influence legislation and obtain favorable regulations.

3. Trade Associations

Trade associations of organizations with similar interests (EX: National Association of Manufacturers).

4. Illegitimate Activities

If all else fails, let's try using some bribes, kickbacks, payoffs to foreign officials, illegal political contributions, industrial espionage, price fixing, etc.

Q - What's the most direct way for an organization to change its domain?

8. SUMMARY OF ORGANIZATIONAL RESPONSES TO THE ENVIRONMENT

The next exhibit summarizes most of the discussion on the response of organizations to environmental uncertainty and their effort to minimize resource dependence. This "big picture" illustrates the "top down" approach to understanding the materials in the course.

Exhibit: organizational responses to environmental uncertainty and resource dependence (Daft E4.10 p. 154)

Last modified 5 Sep 2001

What are two environmental factors facing organizations quizlet?

The external environment includes these six broad external conditions that may affect the organization: economic, political/legal, sociocultural, demographic, technological, and global conditions.

Which of the following is the assessment of internal and external conditions that affect the organization?

A SWOT analysis is conducted to assess internal factors that affect your business. A PESTEL analysis focuses solely on external factors.

Which of the following is considered part of an external business environment?

The external environment includes political, economic, and environmental factors. Why is the external environment important? The external environment of a business, also known as the macro environment, includes all factors outside the reach of the business, that can impact the operations of the business.