The document discusses organizational environments and how organizations interact with their environments. It covers several theories on organizational environments including: - Environmental contingency theory which states that organizations must match their structure to stable or dynamic environments. - Resource dependence theory which examines how organizations depend on other organizations for resources and how this creates power dynamics. - Population ecology theory which looks at how organizations compete for survival within their ecological niche. - Institutional theory which argues that organizations must conform to social norms and values to maintain legitimacy. The document provides frameworks for analyzing an organization's task environment, general environment and international environment. It also discusses strategies for managing dependencies and uncertainties in the external environment.

1. ORGANIZATION AND
ENVIRONMENT
Chapter 3
ByAbhyuday Shah

2. Figure 3.1
The Organization in its Environment
ENVIRONMENT
Inputs
ORG
Outputs

3. Modernist Levels of the Environment
Interorganizational network
General environment
International environment

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. 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. Organizational Environment
Postmodernists see environment as…
fragmented
boundaryless
image-driven
simulacra

7. NETWORK
Regulatory
Unions
Agencies
ORG
Suppliers
Figure 3.2
Special
interests
Customers
Partners
Competitors

8. Managing the Environment
Buffering
Protecting the internal
organizational environment from
environmental shocks.
Example: Material, labour, or capital shortages.

9. Managing the Environment
Boundary Spanning
– Environmental monitoring activities.
– Representing the organizational interests to the
environment.
•
•
•
•
Public relations
Advertising
Sales
Recruiting efforts

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. 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. Figure 3.3
Interorganizational Network

13. General Environment
Culture
Political
Figure 3.4
GENERAL
ENVIRONMENT
Social
Legal
Network
ORG
Physical
Economy
Technology

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

15. GENERAL
GENERAL
TASK
TASK
ORG
ORG
GENERAL
TASK
TASK
TASK
ORG
GENERAL
GENERAL
ORG
ORG
GENERAL
TASK
Figure 3.5
INTERNATIONAL
ENVIRONMENT
ORG
GENERAL
TASK
ORG

16. International Environment
The economic, political, sociocultural, legal, technological,
and physical interconnections
that allow for permeable
borders between nations.

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. Legal
Culture
Network
Physical
Political
Social
Figure 3.6
GLOBAL
ENVIRONMENT
Economy
Technology

19. Environmental Contingency Theory
Resource Dependence Theory
Population Ecology

20. Environmental Contingency Theory
Successful organizations match their internal
structure to environmental characteristics (dynamic
or stable).
(Burns & Stalker, Lawrence &
Lorsch)

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. Environmental Contingency Theory
Information Perspective on
Uncertainty
Uncertainty is experienced by individuals
when they make decisions, rather than in the
environment itself.

23. Fig. 3.7
Environmental Uncertainty
low
low
Rate of change
high
Low
uncertainty
Moderate
uncertainty
Moderate
uncertainty
High
uncertainty
Complexity
high

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Domain of
Institutional
Theory
Legal
Cultural
TASK ENV
Physical
Political Domain of Resource
Dependence Theory
Economic
Social
Technological
Domain of
Pop Ecology
Theory

35. Institutional Theory
The Enacted Environment
Ambiguity Theory

36. Institutional Theory (Selznick)
Organizations adapt to both the values of
the internal groups and external society

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. 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. 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. Fig. 3.10
Social Legitimacy as an
Organizational Resource
Inputs
• raw materials
• labor
• capital
• equipment
• social legitimacy
Transformation
Process
Outputs

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. Ambiguity Theory
Encouraging multiple interpretations of goals,
vision, and actions to produce different
strategies.

43. Deconstruction
Trace discursive and non-discursive
influences over time
Fragmented environment

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. Phases of Industrialization
Phase 1:
The Factory System Productivity through
machines and routinization.
(Burns)

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. Phases of Industrialization
Phase 3
Production overtakes domestic
demand
- customer sensitive
- stimulated consumption
- internationalization
- technical developments

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. 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.