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  1. 1. ORGANIZATION AND ENVIRONMENT Chapter 3 ByAbhyuday Shah
  2. 2. Figure 3.1 The Organization in its Environment ENVIRONMENT Inputs ORG Outputs
  3. 3. Modernist Levels of the Environment Interorganizational network General environment International environment
  4. 4. Organizational Environment Modernist theory, the environment … lies outside the boundary of the organization. provides the organization with resources and absorbs its products and services. imposes constraints upon and demands adaptation from the organization.
  5. 5. Organizational Environment Symbolic-Interpretivists suggest environments … are social constructions. organizational members construct environmental features they think are significant. different organizations construct their environments differently based on management’s interpretation.
  6. 6. Organizational Environment Postmodernists see environment as… fragmented boundaryless image-driven simulacra
  7. 7. NETWORK Regulatory Unions Agencies ORG Suppliers Figure 3.2 Special interests Customers Partners Competitors
  8. 8. Managing the Environment Buffering Protecting the internal organizational environment from environmental shocks. Example: Material, labour, or capital shortages.
  9. 9. Managing the Environment Boundary Spanning – Environmental monitoring activities. – Representing the organizational interests to the environment. • • • • Public relations Advertising Sales Recruiting efforts
  10. 10. Stakeholder theory Organizations operate under a social contract that guarantees certain rights to those who have a stake in the organization’s activities or outcomes. Those attending to stakeholder demands will be more successful.
  11. 11. Interorganizational Network Stakeholders: Any actor that affects or is affected by the organization. Network actors: Investors, competitors, employees, media, suppliers, distributors, government, the physical environment, etc.
  12. 12. Figure 3.3 Interorganizational Network
  13. 13. General Environment Culture Political Figure 3.4 GENERAL ENVIRONMENT Social Legal Network ORG Physical Economy Technology
  14. 14. Some trends in the General Environment Legal Culture surveillance pluralism Political terrorism Physical TASK ENV global warming ORG Economy globalization Social diversity Technology broadband
  16. 16. International Environment The economic, political, sociocultural, legal, technological, and physical interconnections that allow for permeable borders between nations.
  17. 17. Table 3.1 Contribution of Environmental Sectors Sector Contribution to Global Change Technology Personal computers, internet, digital cameras, cell phones, etc. Economic Global capital markets, technology exchanges, worldwide trade, etc. Political/Legal Breakdown of nation-state authority, erosion of territorial borders, etc. Social/Cultural Global media coverage, popular culture, consumerism, etc Physical Population growth, loss of biodiversity, global warming, etc.
  18. 18. Legal Culture Network Physical Political Social Figure 3.6 GLOBAL ENVIRONMENT Economy Technology
  19. 19. Environmental Contingency Theory Resource Dependence Theory Population Ecology
  20. 20. Environmental Contingency Theory Successful organizations match their internal structure to environmental characteristics (dynamic or stable). (Burns & Stalker, Lawrence & Lorsch)
  21. 21. Environmental Contingency Theory Stable Environments • • • Routine activities Strict lines of authority Distinct areas of responsibility Rapidly Changing Environments • Flexibility • Application of skill where needed • Changing work patterns
  22. 22. Environmental Contingency Theory Information Perspective on Uncertainty Uncertainty is experienced by individuals when they make decisions, rather than in the environment itself.
  23. 23. Fig. 3.7 Environmental Uncertainty low low Rate of change high Low uncertainty Moderate uncertainty Moderate uncertainty High uncertainty Complexity high
  24. 24. Fig. 3.8 Links Between Conditions low low Rate of change high Needed information is known and Available. Constant need for new information. Information Overload. Not known what information is needed. Complexity high
  25. 25. Responding to Uncertainty The Law of Requisite Variety (General Systems Theory) For one system to deal effectively with another it must be of the same or greater complexity. Isomorphism The organization takes on the same form as its environment.
  26. 26. Resource Dependence Theory Analysis of the interorganizational network can help the organization understand the power/dependence relationships that exist between it and other network actors.
  27. 27. Power and Dependence An organization depends on resources controlled by the environment. The environment therefore has power over an organization and can influence decision making.
  28. 28. Fig. 3.9 Applying Resource Dependence Theory Knowledge & equipment inputs Capital inputs (investors) Raw material inputs (suppliers) (technology sector) Outputs Org Labor inputs (employees) (customers)
  29. 29. Managing Power/Dependence Pfeffer and Salancik suggest prioritizing dependence elements according to : Criticality The estimate of the importance of a particular resource Scarcity The estimate of resource availability
  30. 30. Other Dependence Management Strategies • Vertical integration • Horizontal integration • Developing personal relationships • Establishing formal ties with other firms *Your job as a manager: find the right mix of • Lobbying • Marketing counter-dependencies you can create with those on whom you depend for critical, scarce, non-substitutable resources.
  31. 31. Population Ecology Organizations within an ecological niche are competitively interdependent and compete for survival. Study how & why some organizations survive. • Variation • Selection • Retention • Operation at the level of the environment
  32. 32. Population Ecology The portion of the environment studied by population ecology is an ecological niche. Consisting of the resource pool upon which a group of competitors depends. *Your job as a manager is to help your firm find a pool of resources over which it can compete successfully with other firms for its survival.
  33. 33. Darwin and Organizations Darwin’s survival of the fittest principle helps to explain the dynamics of populations of organizations: Variation: Entrepreneurial innovation that gives birth to new organizations as well as adaptation of existing firms. Selection: Organizations that best fit the needs and demands of their niche are supported with resources. Retention: Organizational survival and fitness are maintained through the flow of resources.
  34. 34. Domain of Institutional Theory Legal Cultural TASK ENV Physical Political Domain of Resource Dependence Theory Economic Social Technological Domain of Pop Ecology Theory
  35. 35. Institutional Theory The Enacted Environment Ambiguity Theory
  36. 36. Institutional Theory (Selznick) Organizations adapt to both the values of the internal groups and external society
  37. 37. Institutional Theory (DiMaggio & Powell) An organization is institutionalized by the following contexts: 1. Technical, Economic, or Physical e.g. production and exchange of goods in a market 2. Social, Cultural, Legal, or Political e.g. conforming to norms, values, rules, and beliefs upheld by society.
  38. 38. Institutional Pressures Coercive: Pressure to conform that comes from the government in the form of rules or laws. Normative: Pressure from cultural expectations. Mimetic: The desire of one organization to look like another. Usually used as a response to uncertainty.
  39. 39. Social Legitimacy Institutional environments reward organizations for adopting acceptable practices and structures. Without this acceptance, organizations can be driven out of business. Your job as a manager is to to help your firm mimic practices indicated by the institutional environment through coercion or normative expectation in order to ensure its social legitimacy.
  40. 40. Fig. 3.10 Social Legitimacy as an Organizational Resource Inputs • raw materials • labor • capital • equipment • social legitimacy Transformation Process Outputs
  41. 41. Enacted Environment The conditions of the environment cannot be separated from managers perceptions of those conditions. When decision makers respond to their perceptions they enact the environment they anticipated. (Weick)
  42. 42. Ambiguity Theory Encouraging multiple interpretations of goals, vision, and actions to produce different strategies.
  43. 43. Deconstruction Trace discursive and non-discursive influences over time Fragmented environment
  44. 44. Burns’s Three Phases of Industrialization Phase 1: Simple manufacturing – British textile factories Phase 2: Complex manufacturing – clothing, food, chemical processing, iron and steel factories Phase 3: Supply outstrips demand, competition increases, search for global markets puts focus on consumer, all employees must contribute to economic success
  45. 45. Phases of Industrialization Phase 1: The Factory System Productivity through machines and routinization. (Burns)
  46. 46. Phases of Industrialization Phase 2: Greater product variety, more complex production processes, growth in bureaucracy - Control, routine, and specialization. - Development of management structure
  47. 47. Phases of Industrialization Phase 3 Production overtakes domestic demand - customer sensitive - stimulated consumption - internationalization - technical developments
  48. 48. Post-Industrialism Society is organized around the creation of knowledge and uses of information. Society is shaped by its method of acquiring and distributing knowledge. (Bell)
  49. 49. Avoiding Hegemony Hegemony is the practice of interpreting the interests of the ruling class as universal. - Surface language that implies the dominance of one group over others. - Give voice to others.