Introduction
There are many theories and strategies that managers used to achieve business success. The strategy research and ‘practical’ models assumes that organizations are able to adapt to their environment. However that is not necessarily the case as there are many examples of mainstream approach that has been criticised for not taking into account how environments can also constrain individuals and organisations. Mainstream approach such as organizational ecology and institutional theory is argued for not considering on how environments are also one of the factors that constrain individual and organisations which are also known as task environment. Task environment is the external environment of an organization which affects its
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Examples of strategies that have been used that do not take environment into account are such as organizational ecology and institutional theory.
Organizational ecology is the combination of organizational demography and the population ecology of organization which focus on scientific analysis and study of interactions among organisms and their environment. Organizational ecology utilizes the insights from biology, economics, and sociology, and employs statistical analysis to try to understand the conditions under which organizations emerge, grow, and die. This strategy analyse the effects of the environment on organization structure population. According to the organizational ecology theory by (Dimaggio & Powell, 1983) the strategy research and practical models assume that organizations are able to adapt to their environment. However this is not always true as the theory did not take account of economics problems such as sunk costs caused by environmental changes such as the case of The Celler-Kefauver Act of 1950 was just such a shock, in that it opened horizontal and vertical mergers to federal scrutiny and encouraged firms to spend excess capital on other kinds of acquisitions. Other factors such as not enough information as they
environment are able to become main forces for transform in the competitive environment. (Henry, 2011)
When manipulating a business’s strategy, it is important to focus on the external factors in the environment. An external analysis is where a business conducts environmental scanning that present a company with the key external forces influencing the organization. The facets of external forces examined are the business environment, remote environment, or the competitive environment. A business environment is all of the external factors in the general environment that a firm cannot control, but can affect their strategy. The remote environment is the forces that affect most firms. Lastly, a competitive environment is the firm’s specific industry and its entirety. The external analysis is pertinent to a company called Dick’s Drive- In; without it, Dick’s would not be a thriving popular business today.
An organization’s external environment is terribly important and must be studied and understood for the organization to truly succeed. Through such study and understanding, a manager would be able “mitigate threats and leverage opportunities” that are caused by the six segments identified as macro-level external forces: (1) political, (2) economic, (3) sociocultural, (4) technological, (5) ecological, and (6) legal (Rothaermel, 2013, pp. 56-57). Since the manager’s decisions, or firm effects, have a greater impact than those external forces mentioned only when the manager accounts for them and builds a strategy around them, the manager must be aware of and understand these forces to be
Organizations must not overlook the environmental factors that are outside of the organization, as they can leave a detrimental imprint on the organization and their attempts to achieve various goals. According to the textbook, “Domain defines the organization’s niche and defines those external sectors with which the organization will interact to accomplish its goals” (Daft, 2013, p. 142). Some of the external sectors include human resources, technology, economic conditions, and financial resources (Daft, 2013). Changing the organization’s domain is a feasible strategy for coping with a threatening environment because it allows the organization to remain competitive when the market changes. Organizations are constantly shifting and doing so in a rapid manner, which makes it even more likely for organizations to become unstable if action is not taken when threating environmental factors occur. Although the process may be difficult, organizations should look into changing the domain to keep up with the speed and volatility of the market. Mergers and acquisitions are two plausible options for organizations to partake in to reduce uncertainty (Daft, 2013). An organization can either purchase an organization to further their operations or merge with another organization to form a more powerful and dynamic organization. For example, Sirius and XM Radio were rivals back in the day, but merged together to provide consumers with Sirius and XM Radio for their vehicles.
The environment of any organization consists of internal and external factors. An organization should conduct a scan of its environment in order for it to determine development, and a forecast on the factors that may influence the success of the organization. Scanning the environment refers to the possession and utilization of the information that an organization has about trends, patterns, occasion and the external and internal relationship that are within an organization. A scan of the environment may assist the management team of an organization in making a decision about the future path of the
Business environment is all about the combination of internal and external factors that may influence a business’ ways of operating such as: clients, suppliers, its competitors... stakeholders decide to start a business for many reasons: to pursue an interest or a hobby, mainly: to be their own boss. In other terms, people think that being your own boss, mainly as a sole trader gives you many opportunities although there are drawbacks as well. They also have interest in business they want to be successful.
According to population ecology, environment plays a vital role in deciding the survival of organizations. Since the importance of environment and the scarcity of environment resources, only those whose organization form and population fit the environment can survive.
In the diversity Australian environment, business finds that itself experiences a rapidly change and the awareness of putting environmental factors into management is becoming necessary. Thus, for Coles supermarket, when planning strategically, it is important to take the interaction of organization and it environment into management. In so doing, long- term planning becomes geared toward future events and it brings planning more systematic and integrated (Gideon Nieman, Alf Bennett, 2006, pp.27). The business environment includes all the internal and external variables which exert affect on the operation of the business. In addition, the management cannot be carried out effectively and efficiently without taking external factor into consideration. And the internal environment, on another hand, which encompass many areas such as the strategy, business function, management task, setting goals, resource abilities and expectations of interest group must be taken into account.
Every organization has to analyze its business environment before making policies and strategies for its day to day operations, marketing and promotional efforts, and competing with the industry rivals (Loudon, Stevens, & Wrenn 2004). The key factors of the business environment that affect the business operations of a company include political, economic, technological, environmental, cultural, and demographical factors. In addition to these factors, an analysis of the competitive forces is also essential in order to assess the potential threats and intensity of rivalry present in the industry (Ritchie & Crouch 2003). If an organization does not give importance to the analysis of its business environment, it may not be able to compete in the industry for a long period of time (Hill & Jones 2007).
A business organization cannot survive in its industry if it does not keep an eye on what is happening in its internal and external business environment. The analysis of business sector or environment acquaints an organization with the issues, challenges, and external factors that have a direct or indirect impact on its business operations and profitability. On the basis of this analysis, the organization can formulate its future strategies and compete in the industry in a more effective and vigilant manner (Cadle, Paul & Turner 2010).
These chapters provide you the large analytical tools and terminology to collect and analyze trends.
In this term of our discussion we’re talking about business environment. It’s like an overview of the whole business environment. Simply environment of a business means the external forces including the business decisions. They can be forces of economic, social, political and technological factors.
In today's world, no business operates in isolation without interacting with the environment where it operates. Irrespective of the nature of business whether public or private organization; manufacturing; service industry; local or international firm, its operations are inhibited by the environment in which it operates.
The second view in the environmental school of thought is the Population Ecology view. Followers of this view believe that the basic structure and character of an organization is fixed shortly after its creation where early action of managers in areas of investments, equipment, and personnel create passivity for future actions. The theory is viewing the organizations in terms of their collective behavior but the organizations' individual survival depends on their ability to acquire an adequate supply and resources. According to the population ecology view, each environment has a finite amount of resources which they refers to as ”fixed carrying capacity” where in a rapidly growing new industry, carrying capacity might support most existing organizations but already in the maturity stage, the carrying capacity may decline and the demand for products will decreases. In such cases, organizations should hold resources in reserve for future emergencies.
Organizational Environment: those forces outside its boundaries that can impact it. Forces can change over time and are made up of Opportunities and Threats. (7)