Chapter 2: The External Environment

Question 1

The Environmental Domain:

Answer 1

refers to everything outside of the organization

Question 2

Organizational environment

Answer 2

all elements that exist outside the boundary of the organization and have the potential to affect all or part of the organization

Question 3

Green environment

Answer 3

the natural environment

Question 4

Domain

Answer 4

an organization’s chosen environmental field of activity
- Defines an organization’s niche, and defines the external sectors with which the organization will interact to accomplish its goals

Question 5

Sectors

Answer 5

subdivisions of the external environment that contain similar elements

Question 6

List of the sectors

Answer 6

• industry, raw materials, hr, financial resources, market, technology, economic conditions, governemnt, sociocultural, international

Question 7

Industry sector

Answer 7

Competitors, industry size and competitiveness, related issues

Question 8

Raw Materials Sector

Answer 8

Suppliers, manufacturers, real estate, services

Question 9

Human Resources Sector

Answer 9

Labour market, employment agencies, universities, training schools, employees in other companies, unionization

Question 10

Financial Resources Sector

Answer 10

Stock markets, banks, savings and loans, private investors

Question 11

Market Sector

Answer 11

Customers, clients, potential users of products and services

Question 12

Technology Sector

Answer 12

Techniques of production, advances in science, computers, info technology

Question 13

Economic conditions Sector

Answer 13

Recession, unemployment rate, inflation rate, rate of investment, economics, growth

Question 14

Government Sector

Answer 14

City, province, federal laws and regulations, taxes, services, court system, political processes

Question 15

Sociocultural Sector

Answer 15

Age, values, beliefs, education, religion, work ethic, consumer and green movements

Question 16

International Sector

Answer 16

Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rates

Question 17

Task enviornment

Answer 17

• Or “core” environment, sectors that organizations deal with directly, have a direct impact on the org
• Includes: industry, raw materials, market sectors

Question 18

General Environment

Answer 18

• Sectors that have an indirect impact on the organization
• Includes: government, sociocultural, technology, financial resources, and economy

Question 19

Environmental Uncertainty

Answer 19

Environment influences organizations: (1) the need for information about the environment (2) the need for resources from the environment

Question 20

Uncertainty

Answer 20

• occurs when decision makers do not have sufficient information about environmental factors and have a difficult time predicting external changes
• Organization should focus on task sector
• Environmental uncertainty is a function of (1) degree of complexity (2) degree of stability

Question 21

Simple Complex - Dimension

Answer 21

• The number and dissimilarity of external elements relevant to an organization’s operation
• Organization interacts with and is influenced by numerous diverse and different external elements

Question 22

Stable-Unstable Dimension

Answer 22

Whether elements in the environment are dynamic,
- rate of change or degree of predictability of change

Question 23

Adapting to Uncertainty

Answer 23

1. Differentiation and integration between departments
2. Add positions and departments
3. Buffering and boundary spanning roles
4. Mechanistic vs. organic management (efficiency vs learning)
5. Planning, forecasting, and responsiveness

Question 24

Differentiation

Answer 24

the cognitive and emotional differences among managers in various functional departments of an organization, and formal structure differences among these departments

Question 25

Integration

Answer 25

the quality of collaboration between departments of an organization

Question 26

Add positions and departments

Answer 26

As the uncertainty in the external environment increases, the number of positions and departments increase, which increases internal complexity

Question 27

Buffering roles

Answer 27

- activities that absorb uncertainty from the environment Ex - stockpiling supplies and raw materials

Question 28

Boundary-spanning roles

Answer 28

- Activities that link and coordinate an organization with key elements in the external environment - Primarily concerned with the exchange of information to (1) detect and bring into the organization information about changes in the environment and (2) send information into the environment that presents the organization in a favourable light Ex - BI

Question 29

Mechanistic

Answer 29

- an organization system marked by rules, procedures, a clear hierarchy of authority, and centralized decision making

Question 30

Organic

Answer 30

an organization system marked by free-flowing, adaptive processes, an unclear hierarchy of authority, and decentralized decision making

Question 31

Planning, forecasting, and responsiveness

Answer 31

The goal of increasing internal integration and shifting to more organic processes is to enhance the organization's ability to quickly respond to sudden changes in an uncertain environment

Question 32

Resource Dependence

Answer 32

a situation in which organizations depend on the environment, so they: - Strive to acquire control over resources to minimize their dependence - Try to minimize vulnerabilities - May team up with others when resources are scare (interorganizational linkages)

Question 33

Address resource dependence through:

Answer 33

1. Controlling resources 2. Controlling Enviornment

Question 34

Controlling resources

Answer 34

- ownership - formal strategic alliance - cooptaion, interlocking directorates - executive recruitment - advertising and PR

Question 35

Ownership

Answer 35

- Buying part of or controlling interest in another company, gives the company access to technology, products or other resources it doesn’t currently have - Increase ownership through M&A

Question 36

Formal Strategic Alliance

Answer 36

High level of complementarity between the business liens, geographical positions, or skills of the two companies form a strategic alliance through contracts and joint ventures

Question 37

Joint venture

Answer 37

result in the creation of a new organization that is formally independent of the parents, although the parents will have some control, organizations share the risk and cost associated with large products of innovations - contracts and joint ventures, gives rights to use and asset/supplier arrangment

Question 38

Cooptation

Answer 38

when leaders from important sectors in the environment are made part of an organization

Question 39

Interlocking directorate

Answer 39

a formal linkage that occurs when a member of the board of directors of one company sits on the board of another company

Question 40

Direct interlock

Answer 40

a situation that occurs when a member of the board of directors of one company sits on the board of another

Question 41

Indirect interlock

Answer 41

a situation that occurs when a director of one company and a director of another are both directors of a third company

Question 42

Executive Recruitment

Answer 42

Transferring or exchanging executives

Question 43

Advertising and Public Relations

Answer 43

Advertising is important in highly competitive consumer industries and in industries that experience variable demand - PR - case the org in a favourbale light

Question 44

Controlling the environment

Answer 44

- change of domain - political lobbying - trade associations - illegitimate acitivites

Question 45

Change of Domain

Answer 45

The organization decides which business it is in; the market to enter; and the suppliers, banks, employees, and location to use - and this domain can be changed

Question 46

Political Lobbying

Answer 46

Political strategy can be used to erect regulatory barriers against new competitors or to quash unfavourable legislation

Question 47

Trade associations

Answer 47

Work to influence the external environment is accomplished ny jointly with other organizations that have similar interests

Question 48

Illegitimate activities

Answer 48

Represent the final technique companies sometime use to control their environmental domain - Certain conditions such as low profits, pressure from senior managers, or scarce environmental resources may lead managers to adopt behaviours not considered legitimate