4-1

Chapter Four
The External Environment
An Organizations Environment
(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,
unions
(d) Stock markets,
banks, savings and
loans, private
investors
(e) Customers, clients,
potential users of products
and services
(f) Techniques of production, science,
research centers, automation new
materials


(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


(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)
Socio-cultural
Sector
ORGANIZATION
DOMAIN
Organizational Departments Differentiate to
Meet Needs of
Sub-environments

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


President
R & D
Division
Sales
Division
Manufacturing
Division
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
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%
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.
Contingency Framework for
Environmental Uncertainty and
Organizational Responses
Low Uncertainty
1. Mechanistic structure; formal,
centralized
2. Few departments

3. No integrating roles

4. Current operations orientation
High-Moderate Uncertainty
1. Organic structure, teamwork;
participative, decentralized
2. Few departments, much boundary
spanning
3. Few integrating roles

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

4. Extensive planning, forecasting
Low-Moderate Uncertainty
1. Mechanistic structure; formal,
centralized
2. Many departments, some boundary
spanning
3. Few integrating roles

4. Some Planning
ENVIRONMENTAL
CHANGE
STABLE
ENVIRONMENTAL COMPLEXITY
UNSTABLE
SIMPLE COMPLEX
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
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
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