The organizational environment has gained popularity in recent years with initiatives promoted by large technology corporations, the organizational environment is a subject studied since the 1930s and emerged as a direct consequence of the clear influence of the state of mind of workers on the performance of companies.
Tangible assets, such as machinery, supplies, and inventories, are not the only ones responsible for business progress. Undoubtedly, human capital has also become a key factor for the economy.
Philip Kotler, also known as the father of modern marketing, illustrated this change within the concept of Marketing 3.0, in which companies begin to see consumers as human beings, contemplating their needs, values, ideals, and behaviors. This definition also applies to end marketing.
With all this evidence, the proposal of the studies and strategies aimed at the organizational environment is to promote a more pleasant work environment that favors productivity, innovation, and, consequently, the results of an organization.
To understand the organizational environment, let’s suppose the organization is like a swimmer and the environment is like a stream. A swimmer needs to know the condition of water for surviving same as that organization has to do and understand the necessary elements of the environment they have. The environment is a very important factor for an organization. If the environment is friendly for the organization then definitively organization turns towards the desired outcomes which they set. If the environment is not friendly for the organization then the survival of the organization in the environment is very difficult and desired outcomes will not be achieved. So the organizational environment is a necessary factor for the succession of the organization.
Dimensions of the environment and organizational structure
The identification of dimensions that are useful to define the multiple types of environment. In its development a series of difficulties have arisen:
The lack of conceptual clarity when delimiting the different dimensions.
The use of subjective measures to establish the dimensions of the environment.
Most Relevant Environmental Dimensions
The two most elaborated dimensions are stability, complexity, randomness, and resource availability.
1) Environmental stability is the degree to which relevant environmental factors change predictably in magnitude and direction, and the degree to which the relevance of those specific factors remains constant. They can vary based on their frequency, amplitude, and predictability. Environmental stability refers to this last aspect. The dynamic environment is not characterized as a variable environment.
2) Environmental complexity is the number of relevant factors for the organization and the degree of similarity between them. It has two aspects: range and diversity. It is difficult to operationalize complexity, the same environment is perceived by one organization as predictable and complex, while another may see it as static.
3) Environmental randomness, organizational environments differ in the degree of structuring of their elements. This dimension includes the degree of randomness with which these elements are grouped.
4)The availability of resources, an organization needs to incorporate resources from the environment as an essential condition for its survival.
A theoretical model of the relationship between organizational structure and the environment
There are multiple investigations. These models start from the contingency theory assumption that insists that no structural configuration is the best in all situations. The dimensions of complexity and stability have been predominantly considered, which allow four types of environments to be established: simple and stable, complex and stable, simple and dynamic, and complex and dynamic.
1) Simple and stable environments are suitable for the emergence of organizations with bureaucratic and centralized structures, with standardized work.
2) Complex and stable environments are favorable for bureaucratic structures but decentralized both vertically and horizontally.
3) Simple and dynamic environments are for flexible organizations with an organic structure but with centralized power.
4) Dynamic and complex environments are for flexible and organic structures, they favor decentralization and coordination through mutual adjustment between members.
Some investigations developed on the relations between organizations and the environment.
Burns and Stalker studied the relationship between an organization and the environment, the dimensions of the environment addressed were the rate of change in the aspects of technology and the market. It allowed for the establishment of a typology that differentiated between stable environments and unstable, dynamic, or turbulent environments. They distinguished the types of organizations: mechanical and organic.
1) Mechanical organizations, are characterized by the centralization of control and authority, a high degree of specialization, high formalization of roles and rules, and vertical communication.
2) Organic organizations, with a high degree of interdependence between tasks, greater decentralization of control and authority, and greater communication and horizontal interdependence. Less standardization makes them more flexible and adaptable organizations in unstable environments.
Types of the Organization Environment
1. External Environment
a. General Environment
i. The Economic Dimension
ii. The Technological Dimension
iii. The Sociocultural Dimension
iv. The political-legal Dimension
v. The International Dimension
b. Task Environment
i. Competitors
ii. Labor
iii. Suppliers
iv. Customers
2. Internal Environment
i. Owner
ii. Board of Director
iii. Employees
iv. Physical Work Environment
Types of the Organization Environment
There are two types of organizational environment which are the internal environment and the external environment.
1. External Environment
The external environment is those environments that are outside the boundaries of the organization and that affect it. It is divided into two subparts that are general environment and the task environment.
a. General Environment
The general environment means the collection of broad dimensions and forces in its around that design its overall context. It includes economic, sociocultural, technological, international, and political-legal dimensions. Let’s discuss every dimension in detail.
i. The Economic Dimension
The economic dimension means the health and vitality of the overall economic system in which the organization runs. The important factors are economic growth, inflation, interest rates, and unemployment. So these factors are the basic building block for the economic dimension. Every organization needs a good economic dimension. If there is a high inflation rate, interest rate, and unemployment then definitively the survival of an organization is difficult, and it will not get the revenue that it will desire.
ii. The Technological Dimension
The technological dimension means the ways through which we convert resources into finished goods or services. It will be based on organizational knowledge about the production of goods and services. Organizations use advanced technology (machinery) according to their nature of work. If there is any technology change then it will affect the organization’s production unit, so the organization is greatly affected by the changes in any type of technology.
iii. The Sociocultural Dimension
The sociocultural means what is right and wrong in the society where the organization function. It consists of customs, values, mores, norms, behavior, belief, etc. so from the organizational point of view the sociocultural dimension is very important. Production depends on society’s values. If society likes some product and service then the organization must adopt that product or service to survive in that area. If an organization produces those products and services which are against the social culture where they function so how possible is that organization to survive in that society? So sociocultural dimension is important for the organization to understand and run according to it.
iv. The political-legal Dimension
The political-legal dimension means the relationship between the business and the government. The government set rules and regulations for the business that must adopt the organization for functioning their activity. This dimension has three basic reasons. The first is what an organization can and can’t. secondly, what is its activity? The last one is what is planning. The organization needs to fulfill these three points so that it will function easily.
v. The International Dimension
The international dimension means the organization is involved or affected by the business with other countries. If an organization opens its branch in another country, and that government changes the policy for the foreigner. As a result, organizations suffer. so organizations must check this dimension too and then work with that country which will not create difficulties for business in the future.
b. Task Environment
The task environment means a specific group that influences the organization. The task environment includes competitors, customers, suppliers, and labor. Let’s discuss everyone in detail.
i. Competitors
Competitors means the other organizations which compete with us for resources in the same nature of industry or business that provide the same nature of goods and services to the same set of customers. The organization must focus on the competitor and adapt its weakness to its strengths so that’s why they lead competitors in the market.
ii. Labor
Labor means the available people in the market for hiring. Every organization wants to get well-trained and qualified workers. If an organization hire well-trained and qualified worker then its productivity will increase and they get the edge over the competitors.
iii. Suppliers
The suppliers are those people who provide raw materials to the organization. They use raw materials to produce the outputs. If the supplier provides good quality raw materials at a low cost then the organization generates more revenue. So suppliers play a key role in the production unit. Organizations must need to build a friendly relationships with suppliers.
iv. Customers
The customers are the final purchasers or consumers of goods and services. If organizations are producing good qualities product at affordable prices then customers attract to that product or service. So the organization needs to satisfy the customer’s needs, wants, and demands so that customers will be loyal to your product and service.
2. Internal Environment
The internal environment is those environments that are within the boundaries of the organization and that affect it known as the internal environment of the organization. It includes the owner, board of directors, employees, and physical environment.
i. Owner
The owner of the business is the person who has legal rights to that business. The owner may be the person who runs the business or partners who run the business or firm where everyone is the owner who purchases the share of that firm and claims to be an owner.
ii. Board of Director
The board of directors is a governing body elected by the holder of the shares. In every organization, there are 8 boards of directors and one is the owner. The owner is also a board of director members who are elected by the board of directors. The organization needs to build a friendly relationship with the board of directors so that they function healthily.
iii. Employees
The employees are also an important factor in the organization’s function. The person who works under the owner’s instructions is known as an employee. If the employee is productive then the organization generates handsome revenue. Every organization wants well-qualified and trained employees for their functions. Organizations timely upgrade their employees by giving training and development for the future.
iv. Physical Work Environment
The physical environment is also an important factor in the organization’s function. Through a physical environment, employees work hard and the organization achieves its targets. It is very important to run an organization properly.