Chapter ObjectivesAs discussed in Chapter 1 that for a manager

to perform well, there is a requirement of Knowledge base and Skills

In this chapter we will be studying that an effective manager require knowledge of both: The organization`s Internal Environment

&External Environment

Organizational EnvironmentsExternal Environment:Major Forces outside the organization with

the potential to influence the success of the product or its failure.

Internal Environment:Current Conditions that exist within an

organization

Types of External Environments1) Mega Environment: Also called general environment that highlights

the broad conditions and trends in societies within which an organization operates.

An organization has a minute or negligible power to influence the mega environment;

but an organization gets a great deal of influence from these elements

The organisation

Sociocultural element

Legal-political element

International element

Technological element

Economic element

2) Task EnvironmentSpecific external elements with which an

organization interfaces in the course of conducting its business

Task environment is made up of specific elements an organization faces in operating.

Suppliers

Competitors

Government & regulators

The employment market

Public pressure groups

THE TASK ENVIRONMENT

The Organisation

Customers/clients

Analysing Environmental ConditionsPerspectives:

Population ecology model: Highlights the fact that organizations have little control over environmental factors influencing them and managers have little opportunity to affect their organization`s fate.

Resource dependence model: Highlights that organizations are dependent on the environment for resources, arguing that organizations manipulate their environment to reduce dependence .

For Example:General Motors:Buys spare parts and raw material from other

manufacturers. So by forming relationships with other organizations, General Motors will solve many resource problems.

BUTThis will create a dependency on other

organizations and will restrict the decision making of the company (In this Case General Motors)

Therefore organizations try to be independent by controlling their critical resources or developing alternatives.

Characteristics of the Environment:

Environmental uncertainty: Occurs when an organization`s future environmental

circumstances can not be assessed or predicted accurately. More the uncertainty; more to do:

Degree of Environmental uncertainty results from two major factors: Environmental complexity- no of elements Environmental dynamism- rate of predictability of

change of elements

Managing Elements of the EnvironmentNow willingly or unwillingly managers have

to deal with these environmental factors, for which they have few APPROACHES such as:

Adaptation:An approach which involves changing

internal operations and activities to make the organization and its environment more compatible.

Managing Elements of the Environment

Adaptation:Buffering: Stockpiling inputs or outputsSmoothing: taking actions to reduce the impact of

uncertaintiesForecasting: predicting based on trends and habitsRationing: providing limited access to a product or

service in high demand

2nd Approach: Favourability influenceIn contrast to adaptation approach, there is

another approach which means to try to alter the environmental elements to make them more compatible with the organization`s needs.

Instead of accepting environmental elements as given; this approach holds that some environmental aspects can be influenced to a certain extent by the government through:

2nd Approach: Favourability influence

Advertising & PR- communicating through media to gain favourable publicity for products and services

Boundary spanning- agents, lawyers, specialists etcRecruiting- people with more extensive knowledge

and connectionsNegotiating contracts- Co-opting- involving key members of the society in

policy and decisions makingStrategic alliances- Trade associationsPolitical activity

3rd Approach: Domain ShiftChanges in product and service mix offered

so an organization will interface with more favorable environmental elements

The Internal Environment: Organisational CultureDefinition: “… a system of shared values,

assumption, beliefs and norms uniting organisational members” (Smircich 1983; Kilman et al 1986)

“The way we do things around here”

Organisational Culture: Manifestations/ signs/ expressions Symbols

Stories

Rites and ceremonies

Changing Organisational CultureOrganizational culture can be difficult to change.1.Surfacing actual norms- discussions to list out

actual norms that organizational members believe to be influenced by.

2.Articulating new directions- Organizational members discuss the new directions and behaviours necessary for organizational success

3.Establishing new norms- listing new norms which can make a positive impact on organizational effectiveness

1. Identifying culture gaps- identifying areas where there is a major difference (culture gap) between norms and those that would positively influence organizational effectiveness

2. Closing culture gaps- agreeing on new norms and making plans to reinforce them positively.

SUMMARY OF ‘UNDERSTANDING INTERNAL AND EXTERNAL ENVIRONMENTS’Types of external environment

Mega : technological, economic, legal/political/sociocultural, international elements

Task environments: Government & regulators, competitors, customers/clients, suppliers, public pressure groups, the employment market

Analysing environmental conditionsPerspectives: Population ecology, resource

dependenceCharacteristics: Environmental uncertainty -

complexity & dynamism

SUMMARY OF ‘UNDERSTANDING INTERNAL AND EXTERNAL ENVIRONMENTS’ - Cont.Managing elements of the environment:

Adaptation - buffering, smoothing, forecasting, rationing

Favourability: Advertising & PR, boundary spanning, etc.

Domain (product/service) shift The internal environment: Organisational culture

Organisational culture - “The way we do things around here”

Organisational culture: Manifestations: Symbols, stories, rites & ceremonies

Changing organisational cultures - 5 step process

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