Module 3:

THE COMPLEX ENVIRONMENT

OF MANAGEMENT AND
ORGANIZATIONS

Facilitator: Dr. Bangi, Y. I

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Learning Objectives
1. Meaning of Environment
2. Types of environment and the factors that
influence Managerial roles and duties
3. Managerial and organizational responses
to the environment.
4. Reasons for an organization to adapt the
environment.

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Types of Organizational Environment

Organizational environment: set of

forces surrounding an organization
•May affect its operation and access to
scarce resources

The organization environment is made up of all

those forces that have the potential to influence
the organization and its performance.

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Organizational Environments
External environment – everything outside
an organization’s boundaries that might
affect it.
General environment
Task environment

Internal environment – the conditions and

forces within an organization.
Not all parts of the environment are equally
important to all organizations.

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Figure 1 Organization and Its Environment

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The External Environment
General environment is the set of broad
dimensions.
International dimension – e.g. foreign supplier of
resources
Technological dimension - expertise, knowledge,
procedures, techniques and systems used by organizations
Political-legal dimension - governmental and legal
policies, laws, and institutions influences.
Socio-cultural/demographic dimension - affects the
behaviour of both people and their organizations
Economic dimension - national income, savings,
investments, prices, wages, employment etc.
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The External Environment. . . (continued)

Task environment consists of

specific components that influence
an organization.
Competitors – resources & customers.
Customers – change of tastes, needs …
Suppliers – provide resource for other
organization (McDonald vs Coca-Cola)
Strategic partners (Allies) – Tata Holdings
& I &M Bank in Tanzania
6/14/2020 Regulators – TRA, TBS, TCRA, NACTE, etc.
Organizational Environment 7
The Internal Environment
Internal Environment consists of:

Owners – individuals, partners, companies, share

holders
Board of Directors - Governing body elected by a
corporation's stockholders as overseers
Employees - The nature of the workforce is
changing in terms of gender, ethnicity, age, etc.
Physical Work Environment – office buildings and
open space
Organizational Culture - A set of values, beliefs,
behaviors, customs and attitudes. Shapes the mgt.
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behaviour Organizational Environment 8
Organization-Environment Relationships

Three basic perspectives can be

used to describe how environments
affect organizations:
1. Environmental change and complexity
2. Competitive forces
3. Environmental turbulence

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1. Environmental Change and Complexity
James D Thompson theorized that organizational
environment can be described along two
dimensions:
Degree of change – the extent to which the
environment is relatively stable or relatively dynamic.
Degree of homogeneity – the extent to which the
environment is relatively simple (few elements, little
segmentation) or relatively complex (many elements,
much segmentation).
These two dimensions interact to determine the level
of uncertainty faced by the organization.

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Environmental Change and Complexity. . . (continued)

Uncertainty – unpredictability created

by environmental change and
complexity.
Least environmental uncertainty is faced by
organizations with ‘stable’ and ‘simple’
environments.
Organizations with ‘dynamic’ but ‘simple’
environments generally face a moderate degree
of uncertainty

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Environmental Change and Complexity. . . (continued)

Moderate amount of uncertainty results in

organizations with stability and
complexity.
Very dynamic and complex environmental
conditions create a high degree of
uncertainty.

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2. Competitive Forces
Michael E. Porter proposes that
managers should view the
organizational environments in terms of
five competitive forces:
The threat of new entrants – Barriers to enter.
Competitive rivalry – Vodacom Vs Tigo
The threat of substitute products – Coca – Cola vs
Azam Cola
The power of buyers – ability to influence
suppliers
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The power of Organizational
suppliers Environment
- influencing potential
13

buyers
3. Environmental Turbulence
Environmental change or turbulence which
occurs with no warning at all.
Most common is an organizational crisis of some
sort.
Workplace violence – unhappy or dismissed
workers assault other workers.
Spread of computer viruses that can shut down
businesses around the world. [Love Bug virus in 2000]
Too few organizations have developed crisis plans
and special teams to deal with such events.

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How Organizations Adapt to
Their Environment
Basic Techniques for Adapting

Information Technology
Strategic Response
Mergers, Acquisitions and Alliances
Direct Influence
Community Social Responsibility (CSR)

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1. Adapting – Information Technology

Important when forming an initial

understanding of the environment and
watching for signs of change.
Boundary Scanner is an employee
[sales rep or purchasing agent] who
spends much time in contact with
others outside the organization. Can
keep up with what is going on in other
organizations.

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2. Adapting – Information Technology

Environmental Scanning – managers

monitor the environments through
observation and reading.
Management Information Systems
[MIS] within the organization must
gather and organize information
valuable to all managers or specialists.

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3. Adapting – Strategic Response

Strategic Options may include:

 Simply do nothing, or at least pause long
enough to further analyze the situation.
 Proceed with caution, keeping a way eye on the
developing situation.
 After their existing strategy, to pursue new
markets for old products, to introduce new
products to old markets or to introduce new
products to new markets
 Cut back operations or get out of competition
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4. Mergers, Acquisition & Alliances

Mergers - Combining two or more

companies to form one name.
Acquisition - one company taken over by
the other. (PUMA & BP companies).
Alliance - two or more firms undertake a
venture together, but each keeps its own
identity (KQ & KLM).

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5. Direct Influence

 Suppliers may be influenced to sign long-

term contracts with fixed prices.
 Companies may become their own suppliers
(Azam Owns Transport Services)
 Advertising new products/services, finding
new customers, taking customers from
competitors etc.
 Lobbying and bargaining with government
and other regulating agencies

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6. Corporate Social Responsibility (CSR)

Today many successful & profitable

companies spend large amounts of money
and time on fulfilling their social
responsibilities.
CSR provide a competitive advantage to an
organization.
It encourages good practices - donating at
least 1% of pre-tax profits (e.g. NMB
donating mosquito net to MNH).
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Pyramid of CSR
 Reasons for an Organization to
Adapt the Environment
Helps to identify opportunities and get
advantage.
Helps to identify threats and warning
signals and act accordingly.
Build the image towards the changing
environment.
To analyze the competitor’s strategy and
formulate own strategy.
Identify firm’s strengths and weaknesses.
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