The External Environment analysis slides.ppt

strategic management ppt /notes for external environment analysis powerpoint presentation for students

1. The External Environment Khursheed Yusuf

2. The External Environment The purpose of this chapter is to develop a framework for assessing environments and how organizations can respond to them. Two important themes of the chapter are either organizations learn & adapt to the environment or can change & control the environment.

3. The External Environment First, we will identify the organizational domain and the sectors that influence the organization. Then, we will explore two major environmental forces on the organization—the need for information (uncertainty) and the need for resources (scarcity) Organizations respond to these forces through structural design , planning systems , and attempts to change and control elements in the environment

4. The Organization Environment 4

5. An Organization’s Environment

6. Types of Environment Task Environment General Environment

7. The Task Environment Sectors that the organization interacts with directly to achieve goals a)Typically the “industry” and market sectors b)Human Resources c)International Sector d)Raw Materials Sector-Suppliers 7

8. General Environment Sectors that might not have a direct impact on the daily operations of a firm Government sector: Rules and regulation Socio-cultural sector: Different Demographic and the green movement Economic conditions: global recession Technology sector: massive and constant changes Financial resources Extremely important to entrepreneurs 8

9. An Organization’s Environment

10. ENVIRONMENTAL UNCERTAINTY

11. The Dimensions of environment 11 Organizations must cope with and manage uncertainty to be effective.

12. Adapting to a Changing Environment Organizations need the right fit between internal structure and the external environment a)Adding Positions and Departments b) c)Differentiation and Integration d)Organic vs. Mechanistic Management Process e)Planning, Forecasting, and Responsiveness 12

13. Adding Positions and Departments As the complexity in the external environment increases, so does the number of positions and departments within the organization Each sector in the external environment requires an employee or department to deal with it. The human resources department deals with unemployed people who want to work for the company. The marketing department finds customers. Procurement employees obtain raw materials from hundreds of suppliers. The finance group deals with bankers. The legal department works with the courts and government agencies. Today, many companies are adding e-business departments to handle electronic commerce and information technology departments to deal with the increasing complexity of computerized information and knowledge management systems.

14. Buffering and Boundary Spanning The traditional approach to coping with environmental uncertainty was to establish buffer departments. The buffering role is to absorb uncertainty from the environment. Boundary-spanning roles link and coordinate an organization with key elements in the external environment. Boundary spanning is primarily concerned with the exchange of information to (1) Research:- detect and bring into the organization information about changes in the environment. (2) Public Relation:- send information into the environment that presents the organization in a favorable light

15. Differentiation and Integration Another response to environmental uncertainty is the amount of differentiation and integration among departments Organization differentiation is “the differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among these departments.” When the external environment is complex and rapidly changing, organizational departments become highly specialized to handle the uncertainty in their external sector More time and resources must be devoted to achieving coordination when attitudes, goals, and work orientation differ so widely. Integration is the quality of collaboration among departments

16. Organizational Departments Differentiate to Meet Needs of Sub-environments 16

17. Different Goals and Orientations among Departments 17

18. Organic vs. Mechanistic Management Process Another response to environmental uncertainty is the amount of formal structure and control imposed on employees. When the external environment is stable, the internal organization is characterized by rules, procedures, a clear hierarchy of authority, centralized, with most decisions made at the top is called Mechanistic organization system. In rapidly changing environments, the internal organization is much looser, free flowing, and adaptive. Rules and regulations often are not written down or, if written down, are ignored. People have to find their own way through the system to figure out what to do. The hierarchy of authority is not clear. Decision-making authority is decentralized is termed Organic of management structure

19. Mechanistic and Organic Forms Tasks are specialized Tasks are rigidly defined Strict hierarchy of authority and control Knowledge and control of tasks are centralized Communication is vertical Employees contribute to the common task of the department Tasks are adjusted and redefined through teamwork Less hierarchy of authority and control Knowledge and control of tasks are located anywhere in the organization Communication is horizontal 19

20. Planning, Forecasting, and Responsiveness The final organizational response to uncertainty is to increase planning and environmental forecasting. When the environment is stable, the organization can concentrate on current operational problems and day-to-day efficiency. Long-range planning and forecasting are not needed because environmental demands in the future will be the same as they are today. With increasing environmental uncertainty, planning and forecasting become necessary. Planning can soften the adverse impact of external shifting. Organizations that have unstable environments often establish a separate planning department.

21. Organizing Strategies for Controlling the External Environment 21