Manoj.ghadge_OTPR.course [Session 9 - 10]

Organizational Environment

Coordinator & Facilitator

Manoj M Ghadge

Organizational Environment

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External environment

factors, trends and

development

Lead to change in

Internal organizational

structures, processes and

behaviors

Environment

The issues, trends, and events outside the boundary of the organization, which influence internal decision and behaviors.

‘The world out there’ influences ‘the world in here’

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Three major trends affecting most ORGANIZATIONS…

1. Technology – cloud computing, knowledge worker,…. There is rapid development in technology

2. Globalization – ‘the death of distance’… ‘everything is connected’… uneven distribution of globalization… consolidation

3. Demographics – global migration, ‘hourglass economy’ …

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PESTLE – an approach to environmental scanning

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About PESTLE…

Best way to understand PESTLE is to do an analysis

yourself.

The point of the analysis is to identify external

environmental factors, their interrelationships, and

their impact.

It is less important to get them into the ‘correct’

boxes.

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PESTLE

Strengths:

– Consider a range of external factors affecting internal organizational

arrangements.

– A convenient framework for ordering a complex set of factors

Weaknesses:

– Can identify many factors which may not be significant

– It is difficult identify defining events like war, terrorist attack …etc.

– Involve time consuming and expensive data collection. Rapid decision may

not possible.

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PESTLE

PESTLE is used for Scenario Planning.

Scenario planning is done to identify the most probable

future scenario as a basis for planning and action.

Scenario planning is about ‘best case – worst case

scenario’; ‘what if’ situations…

Also called as ‘Shell Method’

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We can update the model…

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Role of … Environment

Organizational Environment(2nd Approach)

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Types of “ENVIRONMENT”

Task environment - Sectors that the organization

interacts with directly to achieve goals

General environment - Sectors that might not have

a direct impact on the daily operations of a firm

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How does the environment influence an organization?

• Environmental Uncertainty – the degree of unpredictable turbulence

and change in the political, economic, social, technological, legal and

ecological context in which an organization operates

• Environmental Complexity – the range of external factors relevant to

the activities of the organization; the more factor, the higher the

complexity

• Environmental Dynamism – the pace of change in relevant factors

external to the organization; the greater the pace of change, the more

dynamic the environment

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Duncan’s typology of organizational environments

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Where on Duncan’s typology are these organizations located ?

Charity Organization

General Hospital

Burger King fast food chain

Car rental company

Marriott International Hotels

Manufacturer of Truth or Dare Perfume by Madonna 14

How do organizations adapt to each level of environmental uncertainty?

Organizations need the right fit between internal structure and the external

environment

– Adding Positions and Departments

– Building Relationships

• Boundary-spanning roles

• Business intelligence

– Differentiation and Integration

– Organic vs. Mechanistic Management Process

– Planning, Forecasting, and Responsiveness

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Environmental Uncertainty and Organizational Response

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Resource Dependence Perspective

Organizations strive to acquire control over resources to minimize their

dependence.

The theory argues that the goal of an organization is to minimize its

dependence on other organization for the supply of scarce resources in its

environment and to find ways of influencing them to make resources

available.

Resource dependence depends on two factors-

how vital the resource is to the organization’s survival

the extent to which other organization control resources

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Strategies for managing Resource Dependence

Two basic types of interdependence causes

uncertainty

Symbiotic interdependencies – between an organization

and its supplier and distributor

Competitive Interdependencies – among organizations

that compete for scarce input and outputs

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Strategies for managing Symbiotic Resource Dependence

1. Developing a good reputation

2. Cooptation

3. Strategic Alliances

i. Long-term contracts

ii. Network

iii. Minority ownership

iv. Joint ventures

4. Merger and Takeover

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Symbiotic Resource Dependence

Representation:

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Informal formal

reputation CooptationStrategic Alliance

Merger and takeover

Informal formal

L T Contract

Network Minority ownership

Joint ventures

Strategies for managing Competitive Resource Dependence

1. Collusion and cartels

2. Third party linkage mechanism

3. Strategic Alliance

4. Merger and takeover

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Population Ecology

Why are new organizational forms appearing in a population ?

• Population: the set of organization competing for the same set of

resources in the environment.

The model is concerned with organizational form

• Organizational form: is organization’s specific technology, structure,

products, goals and personal, which can be selected or rejected by

the environment.

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Variation

• Variation: appearance of new diverse forms in a population of

organizations.

• Factors account for variation:

– As new organizations are founded, there is an increase in

knowledge and skills available to generate similar new

organizations.

– When a new kind of organization is founded it provides a

role model.

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Two factors influencing the birthrate

1. The availability of resources in the environment

for late entrants diminishes

2. Difficulty of competing with existing organization

for resources

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Selection - Retention

Selection: whether a new organizational form is

suited to the environment and can survive

– ‘selected in’

– ‘selected out’

Retention: preservation and institutionalization of

selected organizational form

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Survival Strategies …

Two set of strategies:

1. r-strategy and k-strategy

2. Specialist and Generalist

r – Strategy: a strategy of entering new environment only

k – Strategy: a strategy of entering an environment late, after

other organizations have tested the water

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Survival Strategies …

Specialist – concentrate their skill to pursue a narrow range of

resources in a single niche

Generalist – spread their skills thinly to compete for a broad

range of resources in many niches

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Strategies for competing in Resource Environment

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Institutionalism

How the organizations look so similar?

• The organizations survive through congruence between an

organization and the expectations from its environment.

• Institutional environment – set of norms and values in an

environment that govern the behavior of a population of

organization.

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Organizational Similarity

1. Why is there so much homogeneity in the forms and

practices of established organizations?

- To achieve Legitimacy

2. How does the similarity happens - through three mechanism;

1. Mimetic forces

2. Coercive forces

3. Normative forces

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Reasons for SIMILARITY

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