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Environment

Environment defined
Environment is defined as everything outside an organizations boundaries

The general environment encompasses condition that may have an impact on the organization but their relevance is not overtly clear
The specific environment is that part of an enviornment that is directly relevant to the organization in achieving its goals consists of critical constituents Includes customers, suppliers, competitors, govt regulatory agencies, labour unions etc Domain refers to the claim that the organization stakes out for itself with respect to the range of products or services offered and markets served
It identifies the organizations niche Eg Reva Electric Car and Maruti Suzuki

Actual Vs. Perceived Environment


It the perceptions not reality that lead to the decisions that managers make regarding organization design It is through the perceived environment that managers respond and make decisions

UNCERTAINTY IN THE ENVIRONMENT


Simple
Small number of external elements. Elements remain the same or change slowly DEGREE OF HOMOGENEITY Large number of external elements. Element remain the same or change slowly Large number of external elements. Elements are in continuous change. Small number of external elements. Elements are in continuous change

Complex

Stable
DEGREE OF CHANGE

Dynamic

UNCERTAINTY IN THE ENVIRONMENT


Simple
LEAST UNCERTAINTY DEGREE OF HOMOGENEITY MODERATE UNCERTAINTY MOST UNCERTAINTY MODERATE UNCERTAINTY

Complex
Stable
DEGREE OF CHANGE

Dynamic

UNCERTAINTY IN THE ENVIRONMENT


Simple
Soft drink bottlers, beer distributors, container manuf., local utilities Personal computers, fashion clothing, music industry, toy manufacturers

DEGREE OF HOMOGENEITY

Universities, hospitals, Insurance companies

Complex
Stable

American Airlines, oil companies, electronic firms, aerospace firms

Dynamic
DEGREE OF CHANGE

ORGANIC ORGANIZATION
Organic organizations are relatively flexible and adaptable. They rely on lateral communication rather than vertical communication. Influence is based upon expertise and knowledge rather than on authority of position. Responsibilities are defined loosely rather than rigid job definitions. Emphasis is on exchanging information rather than on giving direction.

MECHANISTIC ORGANIZATION

Mechanistic structures are characterized by high complexity, formalization and centralization. They perform routine tasks, rely heavily on programmed behaviors, and are relatively slow in responding to the unexpected.

Environmental uncertainty
Characteristic Task Definition Mechanistic Rigid Organic Flexible Lateral Low Expertise Diverse

Communication Vertical Formalization Influence Control High Authority Centralized

EMERY & TRIST


Offered a model that identifies four kinds of environments that organizations might confront: 1. 2. 3. 4. Placid-randomized Placid-clustered Disturbed-reactive Turbulent-field

Placid-randomized is least complex, Turbulent-field is the most complex.

PLACID-RANDOMIZED ENVIRONMENTS

This environment is relatively unchanging. Therefore, environmental uncertainty is low. Environmental demands are distributed randomly, and change slowly. Managerial decision making does not give much attention to the environment.
Employees state insurance corporation

PLACID-CLUSTERED ENVIRONMENT

Environment changes slowly, but threats are clustered, not random. The forces in the environment are linked, and pose a higher threat than randomized changes. These organizations use long-range planning and forecasting to learn as much as possible about their environments. Structures will tend to be centralized. Public sector units

DISTURBED-REACTIVE ENVIRONMENTS
A more complex environment than either placid one. Many similar organizations seeking similar ends. One or more may be large and have ability to influence the environment.

Two or three large companies can dominate an industry.


Organizations in this type of environment used planned tactical initiatives, calculate reactions by other, and develop counteractions. This requires flexibility and a structure with some decentralization.

Steel, Aluminium, Automobiles, Tobacco

TURBULENT-FIELD ENVIRONMENTS
The most dynamic of the environments and has the highest level of uncertainty associated with it. Environmental elements are increasingly organized and interrelated. Major, dynamic shifts can occur in the environment as one, or a small group of large companies change the rules of competition. Here planning is not effective. Telecommunications

STRUCTURAL IMPLICATIONS
Emery and Trist did not recommend specific structural configurations associated with each environmental type. However, the two placid environments should be responded to with mechanistic structures, whereas the disturbed and turbulent environments require more organic structures.

As the environment becomes more volatile, increasing flexibility is needed to cope with or manage the uncertainty that increases.

LAWRENCE & LORSCH


Studied ten firms in three industries: plastics, food and containers.
The underlying hypothesis was that internal environments of the firms must match the external environmental requirements. The better the match, the more successful the firm.

DIFFERENTIATION & INTEGRATION


Differentiation and integration was posied as the variables to examine to determine the state of the internal environment.
Differentiation, closely resembles the traditional definition of horizontal differentiation, but in addition to task segmentation, suggested that managers will differ in their: (1) time frame, (2) interpersonal orientation, and (3) goal orientation Integration is the quality of collaboration needed to overcome differentiation and achieve unity of effort among units.

STRUCTURE VS ENVIRONMENT

ENVIRONMENT AND ORGANIZATION DESIGN CHARACTERISTICS Environment Simple Stable Complex II Low Many High High I Design Characteristics Low Few High Low Funct./ Mech. Funct./ Mech. w/T/T.F. Product/ Organic Matrix & Combos
Degree of Degree of Quad- Decentral- Span of Formal- Complexity Design Change Complexity rant ization Control ization Strategy

Simple
Dynamic

III

High Few

Low

Low

Complex IV

High

Many

Low

High

The Population Ecology View


In general, population ecologists ascribe to an evolutionary view of organizational change It argues that the environment selects certain types of organizations to survive and other to perish based on the structure-environment fit Assumptions Focuses on a groups of population of organizations Defines organizational effectiveness simply as survival Environment is totally determining, managers are perceived as impotent observers Carrying capacity of the environment is limited

Limitations of Population-Ecology View The theory ignores managerial motives and abilities Management can choose the domains or niches it wants to compete in and, especially in the long-term, change its domain This view has limited application to large and powerful organizations This is applicable best to the small and powerless business organizations

Implications
More stable the environments, the harder it is for new organizations to enter and compete The truly ineffective organizations are not studied because they died too soon

The environment structure relationship


The dynamic environment has more influence on structure than a static environment Environment and complexity: High environmental uncertainty tents to lead to greater complexity Differentiation Environment and Formalization Stable environments should lead to high formalization Dynamic organizations can also maintain low formalization of boundary activities while having high formalization within other functions Environment and Centralization: More complex the environment, more decentralized it is

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