Environmental uncertainty in organization.

Topics: Environment, Environmental science, Natural environment Pages: 8 (1914 words) Published: November 7, 2003
Define environmental uncertainty and resource dependence. Describe the major ways in which managers can deal with high environmental uncertainty and resource dependence.

A good answer would base the analysis of environmental uncertainty on Duncan's approach, which characterises uncertainty in the stable-unstable and simple-complex dimensions. It should identify buffering, boundary spanning, organisational differentiation and integration as responses to growing uncertainties. As to management of resource dependence, the student should refer to inter-organisational linkages (ownership, strategic alliances, interlocking directorates, executive recruitment) and boundary spanning.

The modern organizations do not live in the vacuum. They are open systems, which must interact with the environment. It must continuously change and adapt to the environment.

Organizational environment is defined as all elements that exist outside the boundary of the organization and have the potential to affect all or part of the organization.

The environment of an organization can also be understood by analysing its domain within external sectors. An organization's domain is the chosen environmental field of action. Domain defines the organization's niche and defines those external sectors with which the organization will interact to accomplish its goals.

The environment comprises several sectors or subdivisions of the external environment that contain similar elements. Ten sectors can be analysed for each organization: industry, raw materials, human resources, financial resources, market, technology, economic conditions, government, socialcultural an d international.

The environment influences the organization by two essential ways, first, the need for information about the environment; second, the need for resources from the environment.

The environmental condition of complexity and change create a greater need to gather information and to respond based on that information. The organization also is concerned with the scarce material and financial resources provided by the environment and with the needs to ensure the availability of resources.

Environmental uncertainty means that decision makers do not have sufficient information about environmental factors and they have a difficult time predicting external changes.

Uncertainty increases the risk of failure for organizational responses and makes it difficult to compute costs and probabilities associated with decision alternatives.

Characteristics of the environmental domain that influence uncertainty are the extent to which the external domain is simple or complex and the extent to which events are stable or unstable.

1.Simple and complex dimension

The simple-complex dimension concerns environmental complexity, which refers to heterogeneity, or the number and dissimilarity of external elements relevant to an organization's operations.

In a complex environment, many diverse external elements interact with and influence the organization. While in a simple environment, as few as three or four similar external elements influence the organization.

MBS is good example for the organization in a complex environment. It must cope with the customers, which is the potential students, competitors, which is the other business school such as LBS, Cranfield, and it must cope with government as well. We can also add alumni, MBA association... to this list. In a word, a large number of external elements thus make up the organization's domain, creating a complex environment. Comparing with MBS, a community middle school is rather living in a simple environment. As in the same community there are no other competitors, it also need not to attract potential students for all the students are assigned to this school.

2.Stable-unstable dimension

The stable-unstable dimension refers to whether elements in the environment are dynamic.

An environmental domain is stable if it...
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