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The Importance of Understanding the Organization’s Environment

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It is important to understand about the environments that organizations are facing? Yes, it is important to have sound understanding about the environments companies are facing as the external environment has an overwhelming impact on management uncertainly. As in this report writing, I will state important factors, elements and create why the study of the environment is important to us in this fast and changing world we ever live in.

The assessment of external factors analyze outside the physical confines of the enterprise. These factors are beyond the control of the enterprise, and could have significant impact on the planning function of management.

The external assessment is performed at a worldwide level and at general area level. At the international level, the assessment includes economic trends of national and local economies, social trends, government policies of national and local influence, and technological advancements of the world at large. This includes the impact of our global market and technology advancements throughout the world. At the general area level, the assessment includes industry trends, market trends, customer expectations, competitor performance, competitive alternatives, and supplier capabilities.

Early studies examined how organizations adapt to external environment characterized by rules, procedures, and clear hierarchy of control. Conversely, firms in rapidly changing environments had organic structures that were freer and more flexible, and decision making was decentralized. They conclude that an essential part of a top manager’s Job is to interpret correctly the external uncertainties facing the firm, and so decide on the appropriate management structure.

The Environment Uncertainty

The diagram in the following page will state that, in the simple, stable environment, uncertainty is low. There are only a few external elements to contend with, and they tend to remain stable. The complex, stable environment represents somewhat greater uncertainty. A large number of elements have to be scanned, analyzed, and acted upon for the organization to perform well while the external elements do not change rapidly or unexpectedly in this environment.

Even greater uncertainty is felt in the simple, unstable environment. (Rosaline L. Tung, 1979) stated that rapid changes create uncertainty for managers. Even though the organization has few external elements are hard to predict, and they react unexpectedly to organizations initiatives. The greatest uncertainty for an organization occurs in the complex, unstable environment. A large number of elements impinge upon the organization, and they shift frequently or react strongly to organizational initiatives.

Adapting to environment Uncertainty

The traditional approach to coping with environment uncertainly was to establish buffer departments. (James. Thompson, 1967), highlighted the fact that the buffering role is absorbing uncertainty from the environment.

Boundary-spanning roles link and coordinate an organization with key elements in the external environment. Boundary spanning is primarily concerned with the exchange of information to detect and bring into the organization information about changes in the environment and send information into the environment that presents the organization in a favorable light.

For an organization to be “co-aligned” with its environment, the differentiation and integration of the organization as a whole should match its environment. According to Thompson (1967), the fundamental problem facing complex organizations is managing the organizational task environment. He proposes that organizations will vary systematically in structure and behavior to reflect the level of uncertainty inherent in their environments. The more heterogeneous and shifting an organization’s task environment, the more boundary-spanning differentiation it will show, the more attention it will give to environmental monitoring activities and the more it will rely on planning to achieve adaptation.

Another classic study of organizations, (Lawrence and Lorsch 1967) found that the more varied and uncertain the environment confronted by an organization, the more differentiated the organization structure needs to be. At the same time, the more differentiated the structure, the more effort must be given to the integration of the various subunits.

The Responses to Uncertainty

Another perspective views the environment primarily as a source of resources upon which the organization depends. Three structural characteristics of the environment affect resource dependence: munificence or the abundance of resources; concentration, the extent to which power and authority in the environment is widely dispersed; and interconnectedness, the number and pattern of linkages among organizations in the environment.

The degree of dependence would be great when resources are scarce, and when entities in the environment are highly concentrated or interconnected: To survive, organizations require resources. Typically, acquiring resources means the organization must interact with others who control those resources. In that sense, organizations depend on their environments.

(Pfeffer and Salancik 1978, 258), argues that because the organization does not control the resources it needs, resource acquisition may be problematic and uncertain. Others who control resources may be undependable, particularly when resources are scarce. Organizations transact with others for necessary resources, and control over resources provides others with power over the organization and survival of the organization is partially explained by the ability to cope with environmental contingencies; negotiating exchanges to ensure the continuation of needed resources is the focus of much organizational action.

My Conclusion towards the Importance of Organizations Environment

As technology is rapidly changing, and for a business to succeed it must change with the time to adapt to technologies advancements. In today’s society we are so diverse and globalization is on the rise. A company stands to gain more in the global market place when it has the proper tools and techniques in place. With the changes in our world we must be mindful of the global market and do more to understand each other universally.

One should become more familiar with the world that surrounds us, because we do no surround the world. Our global market continues to grow, and we must do everything in our power to keep up. We should always think critically, and have a mission for your company as a manager. A company without a clear understanding of our global market is a company destined to fail.


8. Paul R. Lawrence and Jay W. Lorsch, Organization and Environment (Homewood, Ill, Irwin, 1969).

9. James Thompson, Organizations in Action (New York: McGraw-Hill, 1967).

10. Jeffery Pfeffer and Gerald R. Salancik, “Organizational and Context”, (1978, 258).

11. Rosalie L. Tung, “Dimensions of Organizational Environments”, Academy of Management Journal 22 (1979): 672-93.

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