Chapter Four

The External Environment

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

4-1

An Organization’s Environment
(a) Competitors, industry size and (g) Recession, unemployment rate, competitiveness, related issues inflation rate, rate of investment, (j) (a) (b) Suppliers, economics, growth International Industry manufacturers, real (h) City, state, federal laws Sector Sector estate, services and regulations, taxes, (c) Labor market, services, court system, (i) (b) DOMAIN Socio-cultural Raw Materials employment agencies, political processes Sector Sector universities, training (i) Age, values, beliefs, schools, employees education, religion, (h) (c) in other companies, work ethic, consumer Government Human Resources unions and green ORGANIZATION Sector Sector (d) Stock markets, movements banks, savings and (j) Competition from (g) (d) loans, private Economic Financial and acquisition by Conditions Resources investors foreign firms, Sector Sector (f) (e) (e) Customers, clients, entry into overseas Technology Market potential users of products markets, foreign Sector Sector and services customs, regulations, (f) Techniques of production, science, exchange rates research centers, automation new ©2000 materials South-Western College Publishing
Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Organizational Departments Differentiate to Meet Needs of Sub-environments
President

R&D Division Scientific Sub-environment
Scientific journals Research centers

Manufacturing Division Manufacturing Sub-environment
Labor Raw Suppliers materials Production equipment

Sales Division Market Sub-environment
Customers Advertising Competitors agencies Distribution system

Professional associations

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Differences in Goals and Orientations Among Organizational Departments
Characteristic Goals Time Horizon Interpersonal Orientation Formality of Structure

R&D Department
New developments, quality Long Mostly task Low

Manufacturing Department
Efficient production Short Task High

Sales Department
Customer satisfaction Short Social High

Source: Based on Paul R. Lawrence and Jay W. Lorsch, Organization and Environment (Homewood, Ill.: Irwin, 1969), pp. 23-29.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Environmental Uncertainty and Organizational Integrators
Industry:
Environmental Uncertainty Departmental Differentiation Percent of management in integrating roles
Source: Based on Jay W. Lorsch and Paul R. Lawrence, “Environmental Factors and Organizational Integration,” Organization Planning: Cases and Concepts (Homewood, Ill.: Irwin and Dorsey, 1972), 45.

Plastics High

Foods Moderate

Container Low

High

Moderate

Low

22%

17%

0%

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Organization Forms Mechanistic: Organic:
  

Tasks are broken down into specialized, separate parts. Tasks are rigidly defined. There is a strict hierarchy of authority and control, and there are many rules. Knowledge and control of tasks are centralized at the top of the organization. Communication is vertical.

 


Source: Adapted from Gerald Zaltman, Robert Duncan, and Jonny Holbek, Innovations and Organizations (New York: Wiley, 1973), 131.

Employees contribute to the common task of the department. Tasks are adjusted and redefined through teamwork. There is less hierarchy of authority and control, and there are few rules. Knowledge and control of tasks are located anywhere in the organization. Communication is horizontal.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Contingency Framework for Environmental Uncertainty and Organizational Responses
Low Uncertainty
1. Mechanistic structure; formal, centralized 2. Few departments 3. No integrating roles

Low-Moderate Uncertainty
1. Mechanistic structure; formal, centralized 2. Many departments, some boundary spanning 3. Few integrating roles

STABLE

ENVIRONMENTAL CHANGE

4. Current operations orientation

4. Some Planning

High-Moderate Uncertainty
1. Organic structure, teamwork; participative, decentralized 2. Few departments, much boundary spanning 3. Few integrating roles 4. Planning orientation

High Uncertainty
1. Organic structure, teamwork; participative, decentralized 2. Many departments differentiated, extensive boundary spanning 3. Many integrating roles 4. Extensive planning, forecasting

UNSTABLE

SIMPLE

ENVIRONMENTAL COMPLEXITY ©2000

COMPLEX

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Organization Strategies for Controlling the External Environment

Establishing Interorganizational Linkages: • Ownership • Contracts, joint ventures • Cooptation, interlocking directorates • Executive recruitment • Advertising, public relations

Controlling the Environmental Domain:
• Change of domain • Political activity, regulation • Trade associations • Illegitimate activities

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Relationship Between Environmental Characteristics and Organizational Actions
Environment
High complexity High uncertainty High rate of change Environmental domain (ten sectors)

Organization
Many departments and boundary roles Greater differentiation and more integrators for internal coordination Organic structure and systems with low formalization, decentralization, and low standardization Establishment of favorable linkages: ownership, strategic alliances, cooptations, interlocking directorates, executive recruitment, advertising, and public relations

Scarcity of valued resources

Resource dependence

Control of the environmental domain: change of domain, political activity, regulation, trade associations, and illegitimate activities

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e