Chapter 6

The Impact of Environment

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 The Organization Environment
• All the elements that exist outside the
boundary of the organization
• Potential to affect all or part of the
organization
– Domain is the chosen environmental field of
action
– Sectors or subdivisions that contain similar
elements

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whole or in part.
 An Organization’s Environment

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whole or in part.
 The Task Environment
• Sectors that the organization interacts with
directly to achieve goals
– Typically the “industry” and market sectors

– Raw Materials

– Human Resources

– also includes International Sector

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whole or in part.
 General Environment
• Sectors that might not have a direct impact
on the daily operations of a firm
– Government sector
– Sociocultural sector
– Economic conditions
– Technology sector
– Financial resources
• Extremely important to entrepreneurs

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 International Environment
• Can directly affect many organizations
• Has grown in importance
• Distinction between foreign and domestic
operations
• All organizations face domestic and global
uncertainty

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whole or in part.
 The Changing Environment
• The dimensions of the environment range:
– Unstable
– Homogeneous Organizations must
cope with and manage
– Heterogeneous uncertainty to be
– Simple effective.
– Complex
• The dimensions boil down to:
– The need for information about the
environment
– The need for resources from the environment
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whole or in part.
 Dimensions of the Environment
• Simple-complex: heterogeneity; the
number of dissimilarity of external
elements

• Stable-Unstable: whether elements in the

environment are dynamic

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whole or in part.
 Framework for Assessing
Environmental Uncertainty

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whole or in part.
 Adapting to a Changing
Environment
• 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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whole or in part.
 Organizational Departments Differentiate
to Meet Needs of Sub-environments

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whole or in part.
 Mechanistic and Organic Forms
• Tasks are specialized. • Employees contribute to the
common task of the
• Tasks are rigidly defined. department.

• Strict hierarchy of • Tasks are adjusted and

redefined through teamwork.
authority and control.
• Less hierarchy of authority
• Knowledge and control of and control.
tasks are centralized.
• Knowledge and control of
• Communication is vertical. tasks are located anywhere
in the organization.
• Communication is horizontal.

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whole or in part.
 Contingency Framework for Uncertainty
and Organizational Responses

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whole or in part.
 Dependence on External Resources
• Resource-dependence perspective
means organizations depend on the
environment
– Strive to acquire control over resources to
minimize dependence
– Organizations are vulnerable if resources are
controlled by other organizations
– Minimize vulnerabilities
– Will team up with others when resources are
scarce

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whole or in part.
 Influencing External Resources

• Balance linkages and independence

• Reach out and change or control elements

in the environment
1. Establish favorable relationships with key
elements of the environment

2. Shape the environment by influencing key

sectors

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whole or in part.
 Organizing Strategies for Controlling
the External Environment
Establish Formal Influencing Key
Relationships Sectors
• Acquire ownership stake • Change where you do
business
• Joint ventures and
partnerships • Use political activity,
regulation
• Lock in key players
• Join in trade associations
• Recruit executives
• Avoid illegitimate
• Tell your story activities

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whole or in part.
 Environmental Characteristics and
Organizational Actions

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whole or in part.
 Design Essentials
 Change and complexity have major implications for
organizations
 Organizational environment differs regarding uncertainty
and resource dependence
 The goal for organizations is managing efficiencies and
survival
 Managers must understand how the environment
influences the structure of an organization
 When risk is great, organizations can attempt to change
or influence the environment
 Organizations can learn and to the environment

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whole or in part.