Organizational Environment

All elements existing outside the organization’s boundaries that have the

potential to affect the organization

The External Organizational Environment

• The external organizational environment includes all elements existing outside the boundary of the organization that have the potential to affect the organization.

• The environment includes: competitors, resources, Technology, and economic conditions that influence the organization

• The organizational external environment can be conceptualized as having two layers: General and Task environment

• The general environment is the outer layer that is widely dispersed and affects organizations indirectly

• It includes Social, demographic, and economic factors that influence all organizations about equally

• The Task environment

• It is closer to the organization and includes the sectors that conduct day to day transactions with the organization and directly influence its basic operations and performance

• It is generally considered to include competitors, Suppliers, and customers

• The organization also has an Internal environment, which includes the elements within the organizations boundaries.

• The internal environment is composed of current employees, Management, and especially corporate culture, which defines employee behavior in the internal environment and how well the organization will adapt to the external environment

General Environment

• Technological Environment

• The dimensions of the general environment that includes scientific and technological advancement in the industry and society at large

Socio-cultural

• The socio-cultural dimensions of the general environment represents the demographic characteristics as well as the norms, customs, and values of the general population

• Important socio cultural characteristics are geographical distribution and population density, age, and education levels.

• Today’s demographic profiles are the foundation of tomorrows workforce and customers

• The socio-cultural dimensions also includes Societal norms, and values.

Economic

• The economic dimension represents the general economic health of the country or region in which the organization operates.

• Customer purchasing power, the unemployment rate, and interest ratesare part of an organization economic environment

Legal Political

• The legal political dimension includes government regulations at the local, provincial levels as well as political activities designed to influence company behavior.

Task environment

• Customers; Those people and organizations in the environment who acquire goods or services from the organizations are customers

• As the recipients of the organization’s output, customers are important because they determine the organization’s success

• Competitors: Other organizations in the same industry or type of business that provide goods or services to the same set of customers are referred to as customers

• Suppliers: The raw materials the organization uses to produce its output are provided by suppliers.

• Labor Market: The labor market represents people in the environment who can be hired to work for the organization.

• Every organization needs a supply of trained, qualified personnel

• Unions, Employee Associations, and the availability og certain classes of employees can influence the organization’s labor market

Organization-Environment Relationship

• Environmental uncertainty

• Organizations must manage environmental uncertainty to be effective

• Uncertainty means that managers do not have sufficient information about environmental factors to understand and predict environmental needs and changes

Adapting to the environment

• If an organization faces increased uncertainty with respect to competition, customers, suppliers or government regulation, managers can use several strategies to adapt to these changes, including boundary spanning roles, inter-organizational partnerships, and mergers or ventures

Culture

• Culture can be defined as the set of key values, beliefs, understandings, and norms shared by members of an organization

• Culture is a pattern of shared values and assumptions about how things are done within the organization

• This pattern is earned by members as they with cope external and internal problems and taught to new members as the correct way to perceive, think and feel.

• The culture can be analyzed at three levels

• At the surface level: visible artifacts, which includes such things as manner of dress, patterns of behavior physical symbols, organizational ceremonies, and office layout

• At a deeper level are the expressed values and beliefs; which are not observable but can be discerned from how people explain and justify what they do.

• These are values that members of the organization hold at a conscious level

• They can be interpreted from the stories, language and symbols organization members use to represent them

• Some values become so deeply embedded in a culture that members are no longer consciously aware of them

• These basic underlying assumptions and beliefs essence of culture and subconsciously guide behavior and decisions

• In some organizations a basic assumption might be that people are essentially lazy and will shirk their duties wherever possible. Thus, employees are closely supervised and given little freedom and colleagues are frequently suspicious of one other.

Symbols

• A symbol is an object, act, or event that conveys meaning to others.

• Symbols associated with corporate culture convey the organizations important values.

Stories

• A story is a narrative based on true events that is repeated frequently and shared among organizational employees

• Stories are told to new employees to keep the organization’s primary values alive

The omnipotent view

• This view reflects a dominant assumption in management theory

• The quality of an organization’s managers determines the quality of the organization itself.

• It’s assumed that differences in an organization’s effectiveness or efficiency are due to the decisions and actions of its managers

• Good managers anticipate change, exploit opportunities, correct poor performance, and lead their organizations toward their goals which may be changed if necessary

• When profits are up managers take the credit, and reward themselves with bonuses , stock options, and the like.

• When profits are down top managers are often fired in the belief that new blood will bring improved results

• The view of managers as omnipotent is consistent with the stereotypical picture of the take-charge business executive who can overcome any obstacle in carrying out the organization’s goals

Symbolic view

• The symbolic view says that a manager’s ability to affect outcomes is influenced and constrained by external factors.

• In this view it’s un reasonable to expect managers to significantly affect an organization’s performance

• Instead, an organization’s results are influenced by factors outside the control of managers.

• These factors include, for example, the economy, customers, governmental policies, competitors’ actions, industry conditions, control over proprietary technology and decisions made by previous managers.

• According to the symbolic view, managers symbolyze control and influence.

• How they create meaning out of randomness, confusion, and ambiguity or try to innovate and adapt.

• Because they have a limited effect on organizational outcomes

• a managers actions involve developing plans, making decisions, an engaging in other managerial activities which they do for the benefit of the stockholders, customers, employees and public.

The organization’s culture

• Every person has a unique personality. – a set of relatively permanent and stable traits that influence the way we act and interact with others.

• When we describe someone is warm, open, relaxed, shy or aggressive we are describing person’s traits.

• An organization too has a personality which we call its culture

What is organizational Culture?

• It is a system of shared meaning and beliefs held by organizational members that determines, in large degree how they act toward each other and outsiders