1. The External Environment Alandra Telschow Dylan Dubois Mahilet Asfaw

2. EnvironmentGoalsStrategyStructure

3. Domain and Sector Domain: area an organization uses for its products services and market Sectors: are divisions within the environment

4. Task Environment Task environment – the sectors that organization’s interact directly with and that have a direct impact on the organization’s ability to achieve its goals – includes the industry, raw materials, and market sectors, human resources and international sectors.

5. Task Environment Task environment – Very important to organizations because it has ability to change goals, strategies and structure – Ex. Students no longer apply to kings. Kings wants to create a vital academic community (goal). Students are a task environment in their strategy. If no students no need for profs to teach and guidance counselor. Changes structure of organization

6. Task Environment Task environment – Task environments may not always be needed if organization is well prepared and has substitutes – Some organizations don’t have substitutes, that’s when task environment is important –Ex. Dairy farmers, fashion industry

7. General Environment – Sectors that don’t have direct impact on daily operations, but indirect influence. – Involves government, sociocultural, technology and economy

8. General Environment – Can dictate the strategy that organization uses. – Snow and Miles typology organization in highly influential environments should prospector Innovative Risk taking Flexible Decentralized – Constant change in the technological world

9. General Environment -Theory looks at how general environment impacts organizations - but many big organizations have impacts on general environments - ex. tax reductions for big corporations

10. Environmental Uncertainty – Deals with sectors that businesses interact with on daily basis. Involves task environment. – 2 dimensions of environmental uncertainty Simple-complex dimension Stable-unstable dimension

11. Simple-Complex Dimension complex dimension – The more external factors that influence organization and more organizations in domain the more complex

12. Simple-Complex Environments complex dimension – Highly complex environments is a country Divisional structure- organizing people together according to what firm produces or their goals

13. Simple-Complex Dimension Simple dimension – In simple dimension the organization interacts and influenced by few external elements – Defender strategy is what organization may use Efficiency orientation Centralized authority Specialized tasks Strict hierarchy

14. Simple-Complex Dimension Simple dimensions - Coming future simple environments may longer exist - World has become so complex and intertwined with globalization and technology - EX. Dairy farmers over history

15. Stable-Unstable Dimension Stable dimension – Environment is stable if remains the same over months or years, and experiences predictable change

16. Stable-Unstable Environment Stable dimension – Organizations functioning in stable environments can use a mechanistic design Vertical Structure Routine Tasks Rigid Culture Competitive Strategy Formal Systems Mechanistic System Design Stable Environment Efficient Performance

17. Environmental Uncertainty Stable-unstable dimensions – For unstable environments elements shift abruptly and unexpectedly. Instability may stem from competition

18. Environmental Uncertainty Stable-unstable dimensions – For unstable environments organic systems designs are best – Ex. daycare

20. Adapting to Environmental Uncertainty –Learn how organizations can adapt to environmental uncertainties –Internal operations vary greatly depending on level of uncertainty Operations in a stable market –Focus on internal operations & efficiencies Operations in an unstable market –Focus on external environment and adapting operations –Finding the right fit between internal structure and the external environment by using theories and guidelines

21. Positions & Departments –As environmental complexity increases, number of positions and departments likely will increase –Each sector of the environment will have an employee or department to handle it Legal, HR, Finance, Global, Technology New departments E-commerce & Information Technology Sometimes not economical for smaller organizations to have many departments – Increases internal complexity

22. Buffering Roles – Buffering departments absorb and assimilate uncertainty from the environment, protecting the technical core Technical core performs the primary production activity of an organization

23. Buffering Roles – Buffering roles exchange materials, resources & money between the environment and the organization Example: logistics deals with shipping products to customers and suppliers

24. Buffering Roles Pros: – well connected to customers & suppliers – getting information straight from the source – less chance of miscommunication – can get to root of problems quicker Cons: – weakens internal efficiency – decrease in quality – more time consuming – less specialized ○New approach being used is to drop buffering roles to expose technical core

25. Boundary Spanning –Boundary spanning roles: link and coordinate an organization with crucial elements in the external environment Primarily concerned with the exchange of information between the organization and environment 1) detecting changes in the environment and bringing information into the organization 2) sending information into the environment that presents the organization in a favourable light

26. Boundary Spanning –97% of competitive failures resulted from a lack of attention to market changes or failure to act on vital information –Boundary personnel scan the environment and bring in important information Market research department scan for trends in consumer taste Advertising departments takes favourable information and portrays it to the public

27. Buffering Roles & Boundary Spanning Buffering roles primarily focused on RESOURCES Boundary spanning primarily focused on INFORMATION Which jobs are associated with which roles?

28. Boundary Spanning or Buffering? HR manager PR manager Purchasing agent Sales person R&D Supply management

29. Buffering & Boundary Spanning –These roles prevent organization from falling behind the competition and keep them informed of most important changes –For these positions to be effective, every level of employee has to be involved

30. Business Intelligence –New approach to boundary spanning –Set of techniques and tools used for transformation of raw data into meaningful and useful information for business analysis purposes –Technology used is capable of handling large amounts of data to identify, develop and create new strategic business opportunities to provide businesses with a competitive advantage reporting, analytics, business performance management and benchmarking

31. Competitive Intelligence –Related to business intelligence –Act of gathering and defining useful intelligence about products, customers, competitors, techniques and any aspect of the environment needed to support managers making strategic decisions –Information can be collected from internet searches to digging through trash cans –CI is an invaluable asset because of the exponential increase in competition resulting from globalization – Thin line between legal and illegal

32. Differentiation –Organizational differentiation is the difference in cognitive and emotional orientations among managers in different functional departments and the difference in formal structure among these departments –Difference in corporate culture among different departments compared to the company as a whole

33. Differentiation –Unstable environment leads to high differentiation among departments Highly specialized – Pros: highly specialized and knowledgeable departments can devise solutions quicker more efficient – Cons: coordination among departments becomes difficult more departments = more complex messages can become misconstrued different goals and strategies can become confusing more time and resources devoted to achieving coordination

34. Integration –Organizational integration is the quality of collaboration among departments and how they collaborate to coordinate their operations for the good of the organization –Formal coordinators are sometimes required –Highly integrated companies have strong connections between departments or product lines

35. Integration –A cohesive set of rules and strategies making integration process simpler –As environmental uncertainty increases, so does differentiation among departments more people should be employed in integrating roles organizations perform better when level of differentiation and integration match the level of uncertainty in environment

37. Mechanistic Vs Organic Structure –Mechanistic Structure –Management structure used in an organization with a stable environment Hierarchy Rules Detailed procedures Centralized decision making –Does not best facilitate constant communication and change –More efficient, faster decision making

38. Mechanistic Vs Organic Structure –Organic Structure –Horizontal management structure generally used in an unstable environment Adaptive Teamwork Free-flowing Decentralized decision making –Conducive environment for high levels of change and uncertainty –Not forced to follow rules and procedures –Best for group work and collaboration –Can make for inefficient operations

39. Planning, Forecasting & Responsiveness –Combining integration and organic structure enhances ability to face uncertain environments –Planning helps coordinate organization and teaches them to work together cohesively –Also decreases response time to changes

40. Planning, Forecasting & Responsiveness –Globalization has been the largest force in creating uncertain external environments –Created a need for planning departments Scenario building –Planning is not a substitute for other organizational controls

41. Environmental Uncertainty & Organizational Response Low UncertaintyLow-Moderate Uncertainty -Mechanistic structure; formal, centralized -Few departments -No integrating roles -Current operations orientation; low-speed response -Mechanistic structure; formal, centralized -Many departments, some boundary spanning -Few integrating roles -Some planning; moderate-speed response High-Moderate UncertaintyHigh Uncertainty -Organic structure, teamwork: participative, decentralized -Few departments, much boundary spanning -Few integrating roles -Planning orientation; high-speed response -Organic structure, teamwork: participative, decentralized -Many departments differentiated, extensive boundary spanning -Many integrating roles -Extensive planning, forecasting; high-speed response Stable Unstable SimpleComplex

42. Resource Dependence Organizations depend on the environment for resources Goal is to not be dependent for resources or decrease this dependency – Competitive environments will have more parties competing for similar resources

43. Resource Dependence Type of environment will impact your organization's goals – High resource uncertainty - major goal will be to acquire resources (mining companies) – Low resource uncertainty - can focus on other goals such as efficiency (furniture manufacturers)

44. Resource Dependence Finite resources dictate goals – This resource dependency may bring about sub goals – Shell is a good example of this (innovation of biofuel and hydrogen fuels)

45. Controlling Environmental Resources Interorganizational Linkages – Establish favourable linkages with key elements in the environment Controlling the environmental domain – Changing or shaping the environment to benefit your organization

46. Interorganizational Linkages Ownership – Organizations use this to establish linkages by buying a part of or a controlling interest This allows for access to resources (technological, products, other resources) Mergers and acquisitions Can be costly, not feasible for small businesses

47. Interorganizational Linkages Formal strategic alliances – Occurs when companies have high complementarity between products or services Can be accomplished through contracts or joint ventures Companies can secure suppliers (reduces uncertainty)

48. Interorganizational Linkages Cooptation – Important leaders from the environment sit on the board of the organization These individuals then take the goals of the organization into consideration Can this create unethical situations?

49. Interorganizational Linkages Interlocking directorate – Member of a board of one organization sits on the board of another organization Allows for influence on policies and decisions Direct interlock

50. Interorganizational Linkages Interlocking directorate – Member of a board of one organization sits on the board of another organization Allows for influence on policies and decisions Indirect interlock

51. Interorganizational Linkages Executive recruitment – Transferring or exchanging of executives Allows for broader communication network for the organization Some valuable information could be restricted by previous organization

52. Controlling The Environmental Domain Change of domain – Changing the environment that your organization operates in Can be costly, not efficient Alternative - expanding domain Hudson’s Bay Company

53. Controlling The Environmental Domain Political activity/regulation – Techniques to influence legislation and regulation Can include organizations combining resources to create change Uber ride sharing - http://london.ctvnews.ca/video?clipId=70607 9&binId=1.1137796&playlistPageNum=1 http://london.ctvnews.ca/video?clipId=70607 9&binId=1.1137796&playlistPageNum=1

54. Controlling The Environmental Domain Trade associations – Work with other organizations to influence the external environment Contact Lens Manufacturers Association Gum Busters - niche market

55. Controlling The Environmental Domain Illegitimate activities – Can be created by high pressure from management to meet operative goals Mechanistic organization would produce this with hierarchy Can impact public image - https://youtu.be/VJjqiQ_pvRE https://youtu.be/VJjqiQ_pvRE

56. Conclusion Time to test what you’ve learned over the course of this presentation with a group activity