The Organizational Environment

The Organizational Environment

OverviewOrganizations do not exist in a vacuum. They are constantly being affected by external forces which determine an organizations effectiveness and performance. Therefore, it is imperative for the management of any organization to examine components of their firms external and internal environments to understand the dynamic and far-reaching changes that are occurring. This presentation focuses on the environmental factors that companies need to analyze for developing strategic options. The External Environment(Macro environment)

Internal EnvironmentTask EnvironmentGeneral EnvironmentPolitical / legalEconomicSocio-culturalTechnologicalCustomersLabourCompetitionSuppliersEmployeesManagementCultureOrganizational environmentWe can conceptualize the organization as having two layers:The general environmentThe task environment

The general environmentThe general environment or macro-environment is all those forces affecting the organization indirectly. These external forces are:Political / legalEconomicTechnologicalSocio-culturalPolitical / legal environmentThe general environment is inclusive of government regulations, laws, policies and activities designed to influence organizational performance in an indirect way. Technological forcesTechnological environment includes changes in technology that affect the way organizations operate and service they provide.

Economic dimensions:These forces are most likely to affect an organizations production of goods and services and results in the general state of both domestic and world economy. The components are:

Interest rates and inflationConsumer price indexMonetary and fiscal policytaxesUnemployment ratesWage ratesGDP

Socio culturalThe importance socio cultural factors that companies should analyze are:AgePopulation densityEducational levelsGeographical distributionCultureLifestyles Task environmentThe task environment is inclusive of those sectors that have a direct working relationship with the organization. Critical variables in the tasks environment are:CustomersSuppliersLabourcompetitionLabourLabour markets include the people available for hire. Every organization needs well-trained and qualified workers.Research shows the workers with high level of competencies, knowledge, and training increases the overall performance of the organization.

CustomersCustomers are the final purchasers of a good or service.A study of customers will help managers determine what are the customers needs and wants to be satisfied.Analysis of customer profiles allows the organization to develop it organizational strategy and structure in order to deliver a particular good or service that best suits the needs of the customer.

SuppliersSuppliers are peoples and organizations who provide raw materials the organization uses to produce its output.A suppliers pricing strategy does affect the organizations level of revenue earned.CompetitionCompetitors are other organizations in the same industry or type of business providing goods and services to the same set of customers.

Internal environmentThe internal environment consists of employees, management and the shared organizational culture.Analysis of the internal environment allows top management to assess the strengths and weakness of the organization. This assessment has implications for human resource management policy, procedure, employee training and development.

Importance of the organizational environmentThe unpredictability of the external environment can render an organization ineffective and consequent demise. Careful environmental scanning by management is significant and has implications for planning. It is at this point that managers are able to set goals and design strategy and justify their decisions for taking what ever they see necessary. Not one can be certain; but it is better to be safe than sorry. What forces in an organizational environment do you see influencing the hotel industry in your country?

Adapting to the EnvironmentBoundary Spanning Roles. Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external world.Forecasting & Planning.Adapting to the EnvironmentFlexible StructureOrganic StructureMechanistic StructureFree Flowing; has fewer rules and regulations.Encourages team workDecentralizes decision making to employees dong the work.Rigidly defined tasks; many rules and regulations. Little team work.Centralized decision making.Adapting to the EnvironmentMerger & Joint VentureMerger. A combination of two or more organizations into one.Joint Venture. A strategic alliance or program by two or more organizations.Influencing the Environment Advertising and Public RelationsPolitical ActivityTrade AssociationManaging in a Global Environment

A Borderless WorldDomestic StageInternational StageMultinational StageThe Global StageThe International Business EnvironmentEconomic EnvironmentInternational Financial CrisisChinese centuryRise of BRICSConsumption PatternsExchange RatesGlobal Warming LosesLegal-PoliticalPolitical RisksClash of the CivilizationsGATT WTONew Economic BlocksEUBRICSShanghai FiveASEANThe Socio-cultural EnvironmentHofstedes ResearchPower DistanceUncertainty avoidanceIndividualism and CollectivismMasculinity/femininityFuture orientation

Getting Started InternationallyOutsourcingExportingLicensingFranchisingDirect InvestmentMultinational Corporation AdvantagesCan sell more globallyCan avoid transport costsCan take advantage of different wage levelsCan achieve great economies of scaleHave less chance of going bankruptCan carry out a lot of R & D

Multinational Corporation DisadvantagesMNCs move their factories to wherever it is profitableMNCs may switch their profits between countriesThey may force competing firms out of businessSome MNCs may exploit workersSome MNCs may interfere in the government of a country