4-1 Thomson Learning

2004
Chapter Four
The External Environment
Thomson Learning
2004 4-2
(a) Competitors, industry size and
competitiveness, related issues
(b) Suppliers,
manufacturers, real
estate, services
(c) Labor market,
employment agencies,
universities, training
schools, employees
in other companies,
unionization
(d) Stock markets,
banks, savings and
loans, private
investors
(e) Customers, clients,
potential users of products
and services
(f) Techniques of production, science,
computers, information technology


(g) Recession, unemployment rate,
inflation rate, rate of investment,
economics, growth
(h) City, state, federal laws
and regulations, taxes,
services, court system,
political processes
(i) Age, values, beliefs,
education, religion,
work ethic, consumer
and green
movements
(j) Competition from
and acquisition by
foreign firms,
entry into overseas
markets, foreign
customs, regulations,
exchange rates


An Organizations Environment
(j)
International
Sector
(d)
Financial
Resources
Sector
(e)
Market
Sector
(f)
Technology
Sector
(g)
Economic
Conditions
Sector
(a)
Industry
Sector
(h)
Government
Sector
(c)
Human
Resources
Sector
(b)
Raw Materials
Sector
(i)
Sociocultural
Sector
ORGANIZATION
DOMAIN
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2004 4-3

Market
Sub-environment

Customers Advertising
Competitors agencies

Distribution
system



Manufacturing
Sub-environment

Labor Raw Suppliers
materials

Production
equipment




Scientific
Sub-environment

Scientific Research
journals centers

Professional
associations


Organizational Departments
Differentiate to Meet Needs of
Sub-environments
President
R & D
Division
Sales
Division
Manufacturing
Division
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2004 4-4
Differences in Goals and
Orientations Among Organizational
Departments

Characteristic
R & D
Department
Manufacturing
Department
Sales
Department

Goals
New
developments,
quality

Efficient
production

Customer
satisfaction
Time
Horizon

Long

Short

Short
Interpersonal
Orientation

Mostly task

Task

Social
Formality of
Structure

Low

High

High
Source: Based on Paul R. Lawrence and Jay W. Lorsch,
Organization and Environment
(Homewood, Ill.: Irwin, 1969), pp. 23-29.
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2004 4-5
Environmental Uncertainty and
Organizational Integrators
Industry:
Plastics Foods Container
Environmental
Uncertainty

High

Moderate

Low
Departmental
Differentiation

High

Moderate

Low
Percent of
management in
integrating
roles

22%

17%

0%
Source: Based on Jay W. Lorsch and Paul R. Lawrence,
Environmental Factors and Organizational Integration,
Organization Planning: Cases and Concepts (Homewood, Ill.:
Irwin and Dorsey, 1972), 45.
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2004 4-6
Organization Forms
Mechanistic: Organic:
Tasks are broken down
into specialized, separate
parts.
Tasks are rigidly defined.
There is a strict hierarchy
of authority and control,
and there are many rules.
Knowledge and control of
tasks are centralized at
the top of the
organization.
Communication is vertical.
Employees contribute to
the common task of the
department.
Tasks are adjusted and
redefined through
teamwork.
There is less hierarchy of
authority and control, and
there are few rules.
Knowledge and control of
tasks are located anywhere
in the organization.
Communication is
horizontal.
Source: Adapted from Gerald Zaltman, Robert Duncan, and Jonny Holbek,
Innovations and Organizations (New York: Wiley, 1973), 131.
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2004 4-7
Low Uncertainty

1. Mechanistic structure; formal,
centralized
2. Few departments

3. No integrating roles

4. Current operations orientation;
low speed response

High-Moderate Uncertainty
1. Organic structure, teamwork;
participative, decentralized
2. Few departments, much boundary
spanning
3. Few integrating roles
4. Planning orientation; fast
response
High Uncertainty
1. Organic structure, teamwork;
participative, decentralized
2. Many departments differentiated,
extensive boundary spanning
3. Many integrating roles

4. Extensive planning, forecasting;
high speed response
Low-Moderate Uncertainty
1. Mechanistic structure; formal,
centralized
2. Many departments, some boundary
spanning
3. Few integrating roles
4. Some planning; moderate speed
response
Contingency Framework for
Environmental Uncertainty and
Organizational Responses
ENVIRONMENTAL
CHANGE
STABLE
ENVIRONMENTAL COMPLEXITY
UNSTABLE
SIMPLE COMPLEX
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2004 4-8
Organization Strategies for
Controlling the External
Environment
Establishing
Interorganizational Linkages:
Ownership
Contracts, joint ventures
Cooptation, interlocking
directorates
Executive recruitment
Advertising, public relations
Controlling the
Environmental
Domain:
Change of domain
Political activity,
regulation
Trade associations
Illegitimate activities
Thomson Learning
2004 4-9
Relationship Between Environmental
Characteristics and Organizational
Actions
Environmental
domain
(ten sectors)
High
complexity
Establishment of favorable linkages:
ownership, strategic alliances, cooptations,
interlocking directorates, executive recruitment,
advertising, and public relations
Organic structure and systems with low
formalization, decentralization,
and low standardization to enable
a high-speed response
Many departments and boundary roles
Greater differentiation and more
integrators for internal coordination
High
uncertainty
High rate
of change
Scarcity of
valued
resources
Resource
dependence
Control of the environmental domain:
change of domain, political activity,
regulation, trade associations, and
illegitimate activities
Environment Organization