THE EXTERNAL ENIVIRONMENT:

Constraints and challenges

ENVIRONMENT:
Institutions or forces that are outside the organization and potentially
affect the organizations performance.
ENVIRONMENTAL UNCERTINITY:
The environmental uncertainty refers to the degree of change and
degree of complexity in an organization.
• Dimension of environmental uncertainty:
There are two dimensions of environmental uncertainty,
1)Degree of change (Stable and dynamic).
2)Degree of complexity (Complex and simple).
ENVIRONMENTAL UNCERTANITY MATRIX
• The first dimension of uncertainty is the degree of change. If the components in an organization’s
environment change frequently, it’s dynamic environment. If change is minimal, it's stable one. A
stable environment might be one with no new competitors, few technological breakthroughs by
current competitors.
For instance zippo manufacturing, best known for its zippo lighters, faces a relatively stable
environment , with few competitors and little technological change .The main external concern for
the company is probably the declining numbers of tobacco smokers and the increased popularity of e
–cigarettes, which rely on lithium batteries rather than fire.
In contrast ,the recorded music industry faces a dynamic (highly uncertain and un predictable )
environment. Digital formats and music-downloading sites turned the industry upside down and
brought high levels of uncertainty .And now, music streaming services such as spotify and pandora
have added doubt to the equation.
• The second dimension of uncertainty describes the degree of environmental complexity, which
looks at the number of components in an organization’s environment and the extent of the
knowledge that the organization has about those components. An organization with fewer
competitors, customers, suppliers, government agencies, and so forth faces a less complex and
uncertain environment. Organizations deal with environmental complexity in various ways.
For example, the Hasbro toy company simplified its environment by acquring many of its
competitors ,like parker brothers and Milton Bradley.