The Theory of Organizational Behavior - Essay Example

? LONG TERM PLANNING AND BUSINESS ENVIRONMENT Introduction 3 Discussion 3 Conclusion 7 Bibliography 9 Introduction For long term sustainable growth organization need effective planning and implementation. Hence the emphasis in this globalized business environment is on strategic management. Strategic management involves strategic or long term planning for the organization by taking into account all the external and internal factors in the business environment. There are many methodologies and matrices available for this external and internal environment analysis or audit such as PEST analysis, Porter’s five forces, SWOT analysis etc. Now the question arises is it possible to do long term business planning? Or are we victims of the external environment? This paper aims at analyzing the extent of the ability of the organizations to plan for the future by taking into account all the external factors? Is it possible to predict all external factors affecting the business in the long term and plan accordingly? Can we predict natural calamities such as earthquakes and plan accordingly? Discussion Uncertainties in the environment are unavoidable. Dealing with these uncertainties in the environment requires inclusion of scenario planning in the strategy formulation. The traditional ways of strategy formulation can further be strengthened by inculcating scenario planning in the process by assessing the evolutionary changes in the environment. External environment analysis provides the company with the unique insight into the changes and its implications for the organizations and enables the company to prepare for them, by for example developing the technology and techniques required to understand and respond to these changes. One such technique is scenario planning which studies the relationship between strategy, environment and performance in context of business scope and resource commitment. Organizations can better plan for the future with the help of PESTEL (political, economical, social, technological, ecological and legal forces) analysis, internal resource analysis and the scenario planning. This model helps managers and planners develop a model of external environment in which the business may operate and helps in creation of strategy through which business may retain in its competitive advantage in the changed environment (Fahey, 2000). The theory about formulation of strategy by organizations can be divided into three forms or modes. They are called entrepreneurial mode, adaptive mode and planning mode. Entrepreneurial mode is generally found in the writing of some classical economist and management theorist. According to this mode one bold and risky action by a strong leader on behalf of the organization is strategy. Adaptive mode is the ability and the decision of the organizations to take small steps and adjustments according to the changes in the external environment. Finally the planning mode which is propagated by management science and policy science involves explicit planning for the business based on formal analysis with the aim of integrating strategies for the future. All these modes if combined together and alternatively used by managers according to the changes in the environment can result in a powerful and effective strategy for the business. (Mintzberg, Strategy Making in Three Modes, 1973) There is consensus among all researchers of the theory of organizational behavior and strategic management that changes in the external and external environment results in the ambiguity within and across the organizational structure and hence increases the probability of strategic error. It may even result in economic collapse of the organization. Mintzberg believe that managers within an organization need to develop a CE strategy that top level mangers not only formulate keeping in view the concept of the organization but should also promise minimization of strategic error. The leadership and management of the organization should be prepared for unforeseen or turbulent situations on the contrary the bureaucratic system of the organization, suited for the anticipated events fail to take decisions and respond to unplanned, unanticipated events. Top leaders of the organizations must ensure flexibility and fluidity in the organization to save organizations from failure in the wake of unexpected events. (Mintzberg, 1987) The basic concept behind strategic management is that organizations that by utilizing a powerful set of analytical tools can predict the future of the business and hence can set the strategic direction of the organization accordingly through an appropriate strategy. But the question is that can we always successfully predict future? Will strategy be still good enough and valid if there are drastic changes in the external environment? We cannot deny the existence of uncertainty in the environment. Hence the need arises for an appropriate strategy which takes into account the unexpected changes in the environment. It is believed that managers have the tendency of either underestimating the uncertainty and hence resort to measures like forecasting or they overestimate uncertainty and operate on their instincts instead of a proper strategic planning. There are four discreet levels of uncertainty which any company might face. The organizations have the option of responding to it through their set of generic strategies. The framework provides organizations the analytical tool to think rigorously and systematically about certainty and make informed decisions in the case of strategy. It also helps analyzing the implications of such decisions in the wake of uncertainty (Courtney, 1997). Environmental uncertainty can make any well thought out plan useless. Any business environment that is more certain will lead to more accurate prediction of the environment. Businesses should not only do accurate prediction of the environment but also should have enough flexibility to adapt and respond to environmental changes. Though there is no consensus on the strategy formulations. Opponents of this theory believe that effective strategy is only an imagination since it is impossible to evaluate strategy because of the lack of consensus on evaluation criteria. The inability to link strategy with the result of the war is proposed as another reason to disregard strategy. They believe that it is impossible to predetermine which strategic option is more reasonable and feasible. The result of any strategy depends on so many internal and external factors. They believe that the concerns related to strategic decisions such as chances of success, cost of failure, value of objectives and various strategic options are too many to make it feasible and rewarding only in the case of extremely difficult circumstances. (Akpan, 2007) There can be many types of environmental uncertainties like, changes in legislation, political environment changes such as wars etc, economic uncertainties such as global recession, exchange rate fluctuations etc, ecological changes such as environmental calamities earthquake etc, technological changes. Population ecology explains the phenomenon why certain organization with similar population and organizational structures survive while others collapse. It argues that the survival of any organization is greatly determined and influenced by the environmental stability and capacity of the organization. It is believed that the richer the capacity of the environment, the higher the probability of any organizations to survive. Similarly the more stable the environment the more difficult it is for the new organizations to enter the market and compete and hence is favorable for the existing organizations. This theory put too much emphasis on the environment and hence in a way demeans the importance of strategic planning. (Stephen P. Robbins, 2009) Japan was struck with a massive earthquake and Tsunami on March11, 2011 followed by a nuclear crisis. The Japanese economy has suffered badly due to this natural calamity. The loss for Japan has been both physical and human capital. Physical loss is estimated to be $195 billion to $305 billion. Human loss also is in excess of 2700 hundred people. Japan falls on the high zone area for earthquakes and has a history of it. Hence organizations and people had done some preparations to deal with such calamity and in the past they have recovered from such losses as well. The preparations included special earthquake resistant buildings. Japan had suffered a severe earthquake (6.8 on rector scale) in 1995 in its heavily industrial and densely populated city Kobe. However it was not as devastating as the recent one and the recovery started within a month. The impact of this earthquake on the Japanese firms has been devastating. Japanese famous automobile industry has been struck hard. The twelve auto makers have temporarily stopped production in some of their plants. While other companies such as Hitachi, Renesas Electronics, NEC, Sony and Fujitsu are some of the major companies along with many other that have suspended their operations in certain affected areas (W. H. Cooper, 2011). Now the question arise can organization plan before hand for the external environment change and calamity of such magnitude? The answer perhaps is in negative? Any organization can base its strategic planning by taking into account various external and internal factors and can also make the strategy flexible and fluid enough to adapt according to the changes but the extent of changes in external environment is yet to be determined. Conclusion Various external and internal factors have strong influence on the performance of any organization. Strategic planning helps an organization to prepare for various environmental changes. There are many different tools and methodologies available for environmental analysis for effective strategic planning. The question is what extent of environmental changes can be taken into account in strategic planning and hence appropriate planning. We recently observed the devastation caused by earthquake on Japanese organizations and economy. Business environment may not be as uncertain that we cannot predict and plan accordingly but to the drastic changes in environment brought by the calamities of such magnitude make us victims of the environment. Bibliography Akpan, E. O. (2007). Strategic Alignment: The Business Imperitive for Leading Organizations. Oklahoma: Tate publishing. Courtney, H. K. (1997). Strategy under uncertainty, 75(6). Harvard Business Review , 66-79. Fahey, L. (2000). Scenario learning. Management Review , 29-34. Mintzberg, H. (1973). Strategy Making in Three Modes. California Management Review. 16(2) , 44-53. Mintzberg, H. (1987). The Strategy Concept II: Another Look at Why Organizations Need Strategies. California Management Review,30(1) , 25-32. Stephen P. Robbins, M. M. (2009). Organization Theory: Structure, Design, and Applications. New Delhi: Pearson education. W. H. Cooper, J. D. (2011). Japan's 2011 earthquake and Tsunami: economic effects and implications for USA. Congressional Research Service , 2-9. Read More