Organizations are influenced by the broader environment in which they exist.
Impact of Environment on
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
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.
Tags : Management Concepts & Organisational Behaviour - Emerging Trends In Corporate Structure
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