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ENVIRONMENT, CHAPTER STRATEGY, AND TECHNOLOGY
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LEARNING OBJECTIVES
Discuss the components of an organization's external environment. Explain how environmental uncertainty and resource dependence affect what happens in organizations. Understand how organizational structure can serve as a strategic response to environmental demands.
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Explain how vertical integration, mergers, acquisitions, strategic alliances, interlocking directorates and the establishment of legitimacy reflect strategic responses. Describe the basic dimensions of organizational technology. Explain how organizations must match organizational structure to technology. Discuss the impact of advanced information technology on job design and organizational structure.
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THE EXTERNAL ENVIRONMENT OF ORGANIZATIONS
Events and conditions surrounding an organization that influence its activities.
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ORGANIZATIONS AS OPEN SYSTEMS
Systems that take inputs from the external environment, transform some of them and send them back into the environment as outputs.
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OPEN SYSTEMS
RI
ENVIRONMENT Ro
ORGANIZATION
Ro
RI
Ro
RI
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THE ORGANIZATION AS AN OPEN SYSTEM
INPUTS
ENVIRONMENT
TRANSFORMATION
ENVIRONMENT
OUTPUTS
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COMPONENTS OF THE EXTERNAL ENVIRONMENT
The General Economy Customers Suppliers Competitors
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Social/Political Factors Technology Interest Groups
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ENVIRONMENTAL UNCERTAINTY
A condition that exists when the external environment is vague, difficult to diagnose and unpredictable.
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ENVIRONMENTAL UNCERTAINTY
Depends on: the environment's complexity
simple versus complex
the environment's rate of change
static versus dynamic
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TYPES OF ENVIRONMENTAL UNCERTAINTY
SIMPLE ENVIRONMENT Relatively few factors that are fairly similar to each other. COMPLEX ENVIRONMENT A large number of dissimilar factors that affect the organization.
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STATIC ENVIRONMENT Fairly stable over time. DYNAMIC ENVIRONMENT A constant state of change which is unpredictable and irregular, not cyclical.
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PREDICTABLE EFFECTS OF UNCERTAINTY ON THE ORGANIZATION
As uncertainty increases, cause-and-effect relationships become less clear. Agreement on priorities becomes more difficult. Increased amount of information to be processed by the organization.
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RESOURCE DEPENDENCE
The dependency of organizations on environmental inputs, such as capital, raw materials and human resources. Develop strategies for managing resource dependence and environmental uncertainty.
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WHAT IS STRATEGY?
The process by which top executives seek to cope with the constraints and opportunities that an organization's environment poses.
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ENVIRONMENT, STRATEGY, AND ORGANIZATIONAL EFFECTIVENESS
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WHAT IS INVOLVED IN STRATEGY FORMULATION?
Determining the mission, goals and objectives of the organization. Determining the organization's orientation toward the perceived environment.
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Choosing strategy that corresponds to the constraints and opportunities of the environment. Selecting appropriate managers for the task and employing appropriate techniques for implementing the strategy.
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VERTICAL INTEGRATION
The strategy of formally taking control of sources of organizational supply and distribution. To buffer the organization against uncertainty of resource control is to use an inventory policy of stockpiling both inputs and outputs.
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When the environment becomes turbulent, it can reduce flexibility and actually increase risk. Managerial inefficiencies can develop as a result of control and coordination difficulties and bureaucratic costs can result.
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MERGERS AND ACQUISITIONS
Pursued for vertical integration. In the same industry, it is to reduce the uncertainty of competition. Across different industries, it is a diversification strategy with the goal to reduce resource dependence on a particular segment of the environment.
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STRATEGIC ALLIANCES
Actively cooperative relationships between legally separate organizations. Organizations retain their own cultures with true cooperation. Reduce risk and uncertainty, and resource interdependence is recognized.
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WHAT TYPES OF RELATIONSHIPS ARE DEVELOPED IN STRATEGIC ALLIANCES?
With competitors for research and development. With suppliers and customers to reduce friction and build trust and cooperation.
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With companies and unions to be innovative. With global partners for joint venture consortiums.
Difficult to manage because of cross-cultural differences.
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INTERLOCKING DIRECTORATES
A condition existing when one person serves on two or more boards of directors.
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Provide subtle but effective means of coping with environmental uncertainty and resource interdependence.
The director's expertise and experience with one organization can provide valuable information for another.
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THE TECHNOLOGIES OF ORGANIZATIONS
The concept of technology and environment are related.
The inputs that are transformed by the technology come from various segments of the environment.
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Organizations choose technologies based on a desired strategy. Different parts of the organization rely on different technologies.
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PERROW'S ROUTINENESS
The extent to which exceptions and problems affect the task of converting inputs into outputs.
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It is the function of two factors:
Exceptions based on the presence or absence of standardization of inputs and outputs. Problems that arise are easy to analyze or difficult to analyze.
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A MATRIX OF TECHNOLOGIES
CRAFT TECHNOLOGIES Fairly standard inputs and outputs. ROUTINE TECHNOLOGIES Deal with standardized inputs and outputs, but when exceptions occur, the correct response is fairly obvious.
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NON-ROUTINE Frequent exceptions with inputs or outputs, and the analysis of these exceptions is often difficult. ENGINEERING TECHNOLOGIES Many exceptions of input or required output, but exceptions are managed by using standardized responses.
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THOMPSON'S INTERDEPENDENCE
TECHNOLOGICAL INTERDEPENDENCE The extent to which organizational subunits depend on each other for resources, raw materials or information.
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THOMPSON'S CLASSIFICATIONS OF TECHNOLOGY
MEDIATING TECHNOLOGIES Operate under pooled interdependence
A condition in which organizational subunits are dependent on the pooled resources generated by other subunits but are otherwise fairly independent.
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LONG-LINKED TECHNOLOGIES Operate under sequential interdependence
A condition in which organizational subunits are dependent on the resources generated by units that precede them in a sequence of work. The transformed product of each unit becomes a resource or raw material for the next unit.
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INTENSIVE TECHNOLOGIES Operate under reciprocal interdependence
A condition in which organizational subunits must engage in considerable interplay and mutual feedback to accomplish a task. All services in a hospital providing for the care and treatment of patients.
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THOMPSON'S TECHNOLOGY CLASSIFICATION
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HOW DOES TECHNOLOGY AFFECT ORGANIZATIONAL STRUCTURE?
PERROW'S findings indicate: Routine technologies are associated with mechanistic structures.
Non-routine technologies are associated with organic structures.
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Where there are few exceptions and easily analyzed problems, there is high formalization and centralized decision making. Where there are many exceptions and difficult problems, decision making is decentralized.
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THOMPSON'S findings indicate: Increasing technological interdependence is accompanied by increased coordination or integration mechanisms.
This is reflected in structural differences across the technologies.
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Mediating technologies are coordinated by standardization of rules, regulations and procedures.
This formalization is characteristic of a mechanistic structure.
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Long-linked technologies are structured mechanistically, but increased demand for coordination by sequential interdependence is achieved by planning, scheduling and meetings.
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Intensive technologies require intensive coordination achieved by mutual adjustment and an organic structure that permits free and ready flow of information among units.
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WOODWARD'S findings indicate: Unit and process technologies relied on organic structures.
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Unit production involved custom-building complete units to customer specifications. There is a reliance on skilled labour, team work and coordination by mutual adjustment and standardized skills.
The
work is not machine-paced and mechanistic.
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Process production is totally automated. Workers are skilled technicians who monitor and maintain the system. They tend to work in teams.
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While
the machinery operates according to a rigid schedule, workers can monitor and maintain it at their own pace. relationships with supervisors replace close control.
Informal
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Mass production firms relied on mechanistic structures. There was more specialization of labour, controls and greater formalization.
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ADVANCED INFORMATION TECHNOLOGY
The generation, aggregation, storage, modification and speedy transmission of information made possible by the advent of computers and related devices.
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