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Impact of Environment on Organization Design - Emerging Trends In Corporate Structure
Management Concepts & Organisational Behaviour - Emerging Trends In Corporate Structure
Impact of Environment on Organization Design - Emerging Trends In Corporate Structure
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Organizations are influenced by the broader environment in which they exist.
Impact of Environment on
Organization Design
Organizations are influenced by the broader environment in which they exist. Government policy, societal values and social norms, economic trends, and the rate of technological change and innovation are general environmental factors that affect virtually any organization. And every business must adjust to its customers, competitors, suppliers and creditors – all of which are part of its immediate environment.
Managers of business design their organizations to take advantage of opportunities that arise in their environment and to respond to changes in the environment. Most of the studies investigated the relationship between organization design and its environment and concluded that the best design for a given organization is contingent on the characteristics of its environment.
In assessing the possible impact of the environment on its design, an organization must consider the amount of variability in its environment – that is, the degree of change with which it must be prepared to cope. It must consider the frequency of change, the magnitude of change, and the predictability of change. An organization’s environment may be stable, changing or turbulent.
A stable environment is one that experiences little or not unexpected or sudden changes. Products require only minor changes, if any, and the market shows very few fluctuations. For whatever reasons, the product attracts neither regulatory attention nor technological innovation. Consequently, organizations in a stable environment remain virtually unchanged for a long time. But stable environments are becoming scarcer. It is difficult to think of many organizations that have made the same product with the same process and sold it in essentially the same way for a long time.
Arms & Hammer is one organization with stable environment. It has been providing baking soda to similar markets for over one hundred years. The markets have grown, outlets for selling baking soda have changed, and additional uses for the product have been found, but the overall level and rate of change in the product and its markets have been minimal.
Dynamic environment is characterized by trends that are predictable. Thus organizations can be prepared to adjust to the changes when they occur. For example, the environment of many service firms could be characterized as changing. Trends in demand for services often depend on the social fabric of society. Values and tastes certainly change over time, but these changes do not usually occur so unexpectedly or so rapidly that service firms cannot adjust to them. The characteristic flexibility of service firms helps them adapt rapidly to such changes. Firms that produce products can also predict trends in the environment. For example, Apple’s decision to position itself more strongly in the business computer market was motivated in part by the overall decline in the student population (Apple’s traditional strength), which resulted from changes in demographic trends that were apparent well before they actually affected the number of students.
Holiday Inn is another example of a company that is adjusting its business to predictable changes. In this case, changes in the social characteristics of potential lodging customers. Specifically, the rising number of women in the work force has created a need to ensure that lodging facilities accommodate female as well as male executives. And the declining number of families has reduced the emphasis on family centered accommodation.
Turbulent environment is marked by swift, frequent, and radical changes that occur with little or no warning. In the early stages of development of an industry, its environment is often turbulent as a new technology quickly emerges to replace an older one, new products or models are rapidly introduced to supersede yesterday’s and (often) regulations are imposed to reign in the rapidly changing industry. Usually this turbulence is temporary, and the industry and its surviving organizations soon settle down into a less volatile state. The computer industry, however, is an exception. It has operated in a turbulent environment for several decades now.
Consumer electronic products constitute one of the most rapidly changing industries worldwide. A model introduced in one season of the year, such as a VCR, Camera, Cell Phone is often rendered obsolete by new models – and even new technologies – available the next season.
Organizations are influenced by the broader environment in which they exist. Government policy, societal values and social norms, economic trends, and the rate of technological change and innovation are general environmental factors that affect virtually any organization. And every business must adjust to its customers, competitors, suppliers and creditors – all of which are part of its immediate environment.
Managers of business design their organizations to take advantage of opportunities that arise in their environment and to respond to changes in the environment. Most of the studies investigated the relationship between organization design and its environment and concluded that the best design for a given organization is contingent on the characteristics of its environment.
Environment Variability
In assessing the possible impact of the environment on its design, an organization must consider the amount of variability in its environment – that is, the degree of change with which it must be prepared to cope. It must consider the frequency of change, the magnitude of change, and the predictability of change. An organization’s environment may be stable, changing or turbulent.
Stable Environment
A stable environment is one that experiences little or not unexpected or sudden changes. Products require only minor changes, if any, and the market shows very few fluctuations. For whatever reasons, the product attracts neither regulatory attention nor technological innovation. Consequently, organizations in a stable environment remain virtually unchanged for a long time. But stable environments are becoming scarcer. It is difficult to think of many organizations that have made the same product with the same process and sold it in essentially the same way for a long time.
Arms & Hammer is one organization with stable environment. It has been providing baking soda to similar markets for over one hundred years. The markets have grown, outlets for selling baking soda have changed, and additional uses for the product have been found, but the overall level and rate of change in the product and its markets have been minimal.
Dynamic Environment
Dynamic environment is characterized by trends that are predictable. Thus organizations can be prepared to adjust to the changes when they occur. For example, the environment of many service firms could be characterized as changing. Trends in demand for services often depend on the social fabric of society. Values and tastes certainly change over time, but these changes do not usually occur so unexpectedly or so rapidly that service firms cannot adjust to them. The characteristic flexibility of service firms helps them adapt rapidly to such changes. Firms that produce products can also predict trends in the environment. For example, Apple’s decision to position itself more strongly in the business computer market was motivated in part by the overall decline in the student population (Apple’s traditional strength), which resulted from changes in demographic trends that were apparent well before they actually affected the number of students.
Holiday Inn is another example of a company that is adjusting its business to predictable changes. In this case, changes in the social characteristics of potential lodging customers. Specifically, the rising number of women in the work force has created a need to ensure that lodging facilities accommodate female as well as male executives. And the declining number of families has reduced the emphasis on family centered accommodation.
Turbulent Environment
Turbulent environment is marked by swift, frequent, and radical changes that occur with little or no warning. In the early stages of development of an industry, its environment is often turbulent as a new technology quickly emerges to replace an older one, new products or models are rapidly introduced to supersede yesterday’s and (often) regulations are imposed to reign in the rapidly changing industry. Usually this turbulence is temporary, and the industry and its surviving organizations soon settle down into a less volatile state. The computer industry, however, is an exception. It has operated in a turbulent environment for several decades now.
Consumer electronic products constitute one of the most rapidly changing industries worldwide. A model introduced in one season of the year, such as a VCR, Camera, Cell Phone is often rendered obsolete by new models – and even new technologies – available the next season.
Tags : Management Concepts & Organisational Behaviour - Emerging Trends In Corporate Structure
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