Chapter 15 Environment, Strategy & Technology

Transcription

1 Chapter 15 Environment, Strategy & Technology External Environment Events and conditions surrounding an organization that influence its activities Ex. 9/11 & SARS Organizations as Open Systems Organizations open systems Ł take inputs from the external environment, transform some of them, and send them back into the environment as outputs Environment Inputs Transformation output Environment Inputs = capital, energy, materials, info, tech, people Outputs = products/services Inputs can be transformed = knowledge This process sensitizes us to the need for organization to cope with demands of environment Components of the External Environment The Economy Organizations that only Sell g/s can suffer economics downturn and profit from upturn Downturn competition for customers ^, unemployment ^, Some companies thrive in poor economic condition (welfare offices) Customers Organizations must be sensitive to changes in customer demands Successful firms sensitive to customer reactions Suppliers Labour, raw materials, equipment, components parts Shortages can cause difficulties Changed to more exclusive relationship with suppliers Competitors Compete for resources customers & suppliers Hypercompetitive aggressive competition o Must become flexible to respond quick to changes Social/Political Factors changes in public attitude towards ethnic diversity, age of retirement, environment, csr, must cope with legal regulations fair employment practices, proper competitive activities, clients rights, environment protectionism Technology Can be machinery or ability to adopt the proper technology should enhance effectiveness Can be computer system/production technique Interest groups o Parties/organizations other than direct competitors that have some vested interest in how an organization is managed

2 Resource Dependence The dependency of organizations on environmental inputs, such as capital, raw materials, and human resources Organizations vary in how resource dependent they are (high to low) Some environments have a lager amount of readily accessible resources The degree of resource dependency is a function of environmental uncertainty Dealing with one issue does not necessarily have an affect on the other Competitors, regulatory agencies, and various interest groups can have a considerable stake in how organizations obtains & transforms resources Organization might be indirectly resource dependent on these bodies Must develop strategies for managing both resource dependence and environmental uncertainty Environmental Uncertainty A condition that exists when the external environment is vague, difficult to diagnose and unpredictable What makes an organization s environment uncertain? Rate of change/stability (dynamic vs. static) o Static fairly stable over time (small radio station plays same music format, relies on same audience. Advertisers) No environment is completely static o Dynamic high constant state of change (unpredictable and irregular, not cyclical) Complexity (simple vs. complex) o Simple relatively few factors which are all similar o Complex large number of dissimilar factors that affect the organization Strategy for Uncertainty and Resource Dependence The process by which top executives seek to cope with the constraints and opportunities that an organization s environment poses Strategy formulation involves determining the mission, goals, and objectives of the organization No single correct strategy Relationship between environment and strategy Objective/Org Environ (Uncertainty, Resources) (Managerial experience and personality) Perceived org environ (perceived uncertainty, perceived resources) Strategy Formulation Strategy implementation (structure, vertical integration, merger/acquisition, director interlocks, establish legitimacy, technology) organizational effectiveness Organizational structure as a Strategic Response How could an organization use their organization structure as a strategic response to the environment? Look at environmental sectors o Sales market environment o Production technical o Research scientific There s a range of uncertainty across the subenvironments faced by various departments Demonstrates close connections among environment, structure and effectiveness Strategy always determines structure Other Forms of Strategic Responses Vertical integration

3 The strategy of formally taking control of sources of organizational supply and distribution E.g., Starbucks: importer, roaster, packager, seller Can reduce risk for an organization When environment becomes very turbulent reduce flexibility ad increase risk Mergers and acquisitions Merger joining together of two organizations Acquisition the acquiring of one organization by another When they occur in the same industry, they can reduce the uncertainty prompted by competition E.g., Two giant phone companies merging When they occur across different industries, the goal is often to reduce resource dependence E.g., Paper manufacturer buys a timber company Strategic alliances Actively cooperative relationships between legally separate organizations E.g., Wedding cake baker promotes florist Properly designed alliances reduce risk and uncertainty for all parties and recognize resource independence Joint venture 2 or more organizations form an alliance in the creation a new organization entity o To create new products and services or to enter new/foreign markets Risks: (half fail) Interlocking directorates When one person serves on two or more boards of directors E.g., Peter George on Board of Governors Board Member of the Ontario Institute for Cancer Research Legally prohibited when firms are direct competitors Establishing legitimacy The appearance of being strategically correct E.g., good deeds taking actions that conform to prevailing norms and expectations management will appear to be rational and providers of resources will feel comfortable achieving legitimacy: o associating with higher status individuals/organizations o doing good deeds in community Technologies of Organizations technology The activities, equipment, and knowledge necessary to turn organizational inputs into desired outputs Organizational technology has been defined, conceptualized, and measured in dozens of different ways. Three well known classifications of technologies Charles Perrow s Routineness James D. Thompson s Interdependence Joan Woodward s Production Processes (Perrow s) Technological Routineness The key factor that differentiates various technologies is the routineness of the transformation task that confronts the department/organization Technological routineness The extent to which exceptions and problems affect the task of converting inputs to outputs 2 factors:

4 Exceptions standardized or varied inputs and outputs o Technology becomes less routine as exceptions increase Problems programmed or non programmed decision making o When expectations occur, are problems easy or difficult to analyze? o Technology becomes less routine as problems become more difficult to analyze technology becomes less routine as exceptions increase problems become more difficult to analyze (these dimensions can be arranged to produce a matrix of technologies) Perrow s Matrix of Technologies Exceptions Few Many Problems Difficult Analysis Craft Tech. (e.g. cabinet making, public school) Non routine Tech. (e.g. research unit; psych. hospital) Easy Analysis Routine Tech. (e.g. assembly line; vocational Engineering Tech. (e.g. heavy machinery construction; health spa training) Craft Technologies o Fairly standard inputs/outputs o When exceptions are encountered (special order/slow learner) analysis of the correct action might be difficult Routine Technologies o Standardized inputs/outputs o When exceptions occur (new product line, new subject to teach), correct response is obvious Non routine technologies o Frequently deal with exceptional inputs/outputs, analysis is difficult Engineering technologies o Many exceptions of inputs/outputs, can be dealt with by using standardized responses Thompson s Interdependence Interested in the way in which work activites are sequences (put together) during the transformation process A key factor is technological interdependence the extent to which organizational subunits depend on each other for resources, such as raw materials or information. Increasing interdependence 3 classifications of technology Pooled Interdependence o Org subunits are dependent on pooled resources generated by other subunits(but are otherwise independent) o Mediating technologies operate under pooled E.g., Bank Branches; Faculties at McMaster (e.g., Business, Engineering, Social Sciences Sequential Interdependence o Org subunits are dependent on the resources generated by units that precede them in a sequence of work o o Long linked technologies operate under sequential Each unit in the technology is dependent on the activity of the unit that proceeded it in sequence

5 o the transformed unit becomes resource/raw materials for next unit E.g., assembly line Reciprocal Interdependence o Org subunits must engage in considerable interplay and mutual feedback to accomplish a task o Intensive technologies operate under reciprocal o Considerable interplay and mutual feedback must occur between the units performing the task to accomplish it properly o Each task is unique and the intensive technology is this a customized technology E.g., hospital Woodward s Production Processes Study of the relationship between technology and structure Examined the technology, structure and organizational effectiveness of 100 firms in England Began as an attempt to test the argument that mechanistic structures will prove most effective test failed Following classification from top to bottom, reflects both increasing smoothness of production and increasing impersonalization of task requirements: Unit (production of single units or small batches) E.g., Engraved jewelry with your name on it Mass (production of large batches or mass production) E.g., Pens that you get from Titles Continuous (process) (input transformed as an ongoing process) E.g., chemical plants and oil refineries Less and less personal intervention is necessary as machines control more and more of the work Incorporates aspects of Perrow s routine technology and Thompson s long linked technology Her unit technology seems to cover Perrow s craft and engineering technologies and some aspects of Thompson s intensive technology Structuring to Cope with Technology How does technology affect organizational structure? According to Perrow: Routine technologies should function best under mechanistic structures. Non routine technologies call for more organic structures. According to Thompson: Increasing technological interdependence must be accompanied by increased coordination or integration mechanisms. Mediating and long linked technologies require mechanistic structures. Intensive technologies require an organic structure that permits the free and ready flow of information among units. According to Woodward: Structures should vary with technology and the variance should be related to organizational effectiveness Successful firms with unit and process technologies relied on organic structures. Successful firms that engaged in mass production relied on mechanistic structures.