Impact of the External Environment on the Structure of the Organization - Essay Example

Running Head: External Environment and Organizational Structure External Environment and Organizational Structure Name Institution External Environment and Organizational Structure The external environment and organizational structure Summary Academics and practitioners have tried to analyze and differentiate between the various types of organizational structures that have been made use of in past 25-30 years. It has been noted that during the early part of the aforementioned period the common move was geared towards the universalistic theory that was made use of in the identification of one of the best business organization manner. In light of this; the following structures were made use of; U-form and M-form (Campbell & Craig, 2005). The U-form mode of organization structure was arranged in line with the functional lines while the M-form was organized along the divisional groupings. Among other structures that were identified were; matrix organizations, horizontal grouping and geographical grouping. The universalistic movement did not satisfy proper business management. This propelled the advent of the contingency theory. The contingency theory is summarized by the collection of words “it depends”. The theory states that an organization structure is dependent on its external environment; most specifically the industry in which it is a part of. It is therefore noted that a new industry would have institutions operating within it will structure themselves internally in a manner that facilitates agility. For instance the organization will operate by the formation of a team-based structure. On the other hand a considerably mature industry that is more stable would imply that a firm that operates in its midst will make use of structure such as the M or U form. The downside of the contingency structure is that it only zeros in on the external environment which it makes use of in its decision about the structure of the organization at hand. In reality, an organization’s structure is not arrived on solely by the consideration of its external environment. This has led to the incorporation of the configuration theory. The configuration theory states that the structure of an organization is a complicated relationship that incorporates the following factors; skills of employees, tangible assets, internal organizational routines and organizational culture. Management puts into consideration the aforementioned factors before the implementation of any particular organizational structure (Ulrich & Losey, 2005). Management Thinkers and the Conceptualization of the External Organizational Environment The external environment of an organization is all the outside factors that that influence it. It can be analyzed by the utilization of two different tools. The tools that are mostly made use of are: PEST analysis and the Porter’s five forces which mostly concentrate on the competitive environment. Political, Economic, Socio-cultural and Technological (PEST) is an analysis tool that is made use of in the assessment and the monitoring of the factors that impact on the environment for a long time. The political factors that are mostly considered are: taxation policies, political stability, foreign trade regulations and legal issues which include; competition and employment laws. The economic factors that are considered are those which impact on the economic development, unemployment rate and the wage levels. Other economic factors that are analyzed are the Gross Domestic Profit, GDP, foreign currency and the inflation rate. The social cultural factors that are usually considered are; demographics, education system, income distribution and the dominant religion (Samson & Daft, 2009). Other factors that are considered are technological factors that include; the amount of money that the government makes use of on research, the transportation costs, infrastructure, energy costs, the total amount of novel discoveries and the legislation of intellectual property. Environmental influences and managers in today's organization Managers experience directive and in-directive influences in today’s organizations. The directive influences are the firsthand impacts on organizations. An example is when a new competitor makes an entry in to the market. The in-directly influences have a distant impact on organizations; such as the adoption of new legislation. Management have a responsibility on the following groups of people; owners, suppliers, competitors, customers and employee unions. For example business owners expect managers to take care of their interests and give them a return on their investments. Customers expect satisfaction with the goods and services that they buy and utilize. Suppliers expect ample communication, payment and a robust working relationship to avail the required resources. Competitors present problems as they compete for available customers in the marketplace with synonymous goods or services. Lasty, employees and their unions avail the labor and the representation of the concerns of the work force to the management (Molina & Callahan, 2009). The in-directive influences consist of global, technological, legal, political, economic and socio-cultural. It follows that in-directive influences may cause an impact on one organization as compared to the next organization due to the nature of its business. For instance; a company that is more dependant on technology will be seriously affected by updates on software than will a company that makes use of just a single computer. The indirect influences are vital to the interactive manner of any particular organization. The socio-cultural form of indirect factors is vital as it weighs heavily on the goods, standards and services that are deemed valuable by the society. It includes the demographics and the values of the customer base. Demographics are a measure of the different characteristics of the people and social groups who constitute a given society. The examples of used demographics are; age, income and gender. Values are the beliefs that a group of people hold with regard to various behavioral forms or products. The changes in the manner in which a society regards an item or form of behavior can majorly impact on a given business (Molina & Callahan, 2009). The legal and political dimensions that constitute the external environment are inclusive of the regulatory parameters which make up the operations of an organization. Political parties influence the formulation of laws by which business owners abide by. The examples of political issues are tax policies, minimum wage legislation and trade regulations. The technological part of the external environment weigh heavily on the scientific processes that are made use of in the alteration of inputs; money, labor and resources in relation to the outputs; goods and services. The success of a number of organizations is dependent on their identification and the easy way in which they respond to their external industrial changes. For instance an example of one of the most noteworthy technological dimensions that has been noted in the last couple of years has been that of an increasing affordability and availability of the management information systems (MIS). This new system has facilitated the access to information by managers and has facilitated their improvement of their operational and business management methods. The economic part of the in-directive influences depicts the worldwide financial circumstances. The various economic conditions that are of special concern to any particular organization are the interest rates, gross national product, unemployment rates and the value of the United States dollar in comparison to other currencies that exist in the current market. It is noted that a favorable economic environment is usually presented by numerous growth opportunities in several industries for instance; the sales of clothing, new cars and jewelry. On the other hand a number of businesses traditionally obtain perks from poor economic conditions. For instance; alcoholic beverage industries performs very well in times of economic downturn (Dittmer & Keefe, 2005). The global environment refers to the factors that influence the operations of organizations in the United States. The global environment heavily impacts on any particular industry. It affects the basic management activities of planning, staffing, organizing, leading, and controlling on a worldwide scale. The managers experience risks that pertain to unfamiliarity with language or a problem that is in any particular country which is ultimately a different dynamic from what they would have encountered in their domestic markets. Impact of the external environment on the structure of the organization The structure of an organization is heavily influenced by the external environment since it influences the running of a particular organization. For instance, in a situation where an organization is situated in a new industry then it will be structured in such a way that enables it to be agile. This is because the organization will be heavily influenced with the socio-cultural factors. This is because it is in a new external environment and as such it will have to adopt to the society with regard to its form of behavior. It will be compelled to do this as it will be geared towards conquering the beliefs of the people in their surrounding. The organization in question will most likely than not function as a team-based structure (Campbell & Craig, 2005). On the other hand a considerably mature industry that is more stable would imply that a firm that operates in its midst will make use of structure such as the M or U form. The U-form mode of organization structure was arranged in line with the functional lines (Samson & Daft, 2005). The functional lines were based on varying individual functions in any particular organization. The following are examples of different functional groups; human resource, accounting, research and development, technology among other functional groups. The M-form was organized along the divisional groupings. The divisions might have been made based on the type of products or services that they produce or the type of people that are being managed among other forms of criteria. Reference: Campbell, D.J & Craig, T (2005).Organisations and the Business Environment. Oxford: Elsevier-Butterworth-Heinemann Ulrich, D & Losey, R.M (2005).The Future of Human Resource Management. New Jersey: John Wiley & Sons Inc. Samson, D & Daft, R (2009).Fundamentals of Management. Australia: Cengage. Molina, C & Callahan, J.L (2009) Journal of European Industrial Training: Fostering Organizational Performance: The Role of Learning and Entrapreneurship. Vol. 33. Issue: 5. pp. 388-400. Emerald Group Publishing Limited Dittmer, P.R & Keefe, D.J (2005) Principles of food beverage and labor cost. John Wiley & Sons.London Read More