manoj.ghadge_otpr.course [session 9 - 10]
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OrgTRANSCRIPT
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Organizational Environment
Coordinator & Facilitator
Manoj M Ghadge
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Organizational Environment
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External environment
factors, trends and
development
Lead to change in
Internal organizational
structures, processes and
behaviors
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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
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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
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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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