Posted at 11.18.2018
Hawley (1950) said that organizations have employed in activities which have adjustment to the environment. Duncan (1971) emphasized that business must adjust to their environment to allow them to be existed. Then Pfeffer and Salancik (1978) have concluded that: "organizations are inescapably destined up with the conditions with their environment". Handel (2003) noted the environment in which the organization operate generated excess uncertainty in what must be achieved, the necessity that something must be done, and main results of whatever is done. Then what is environment of an organization? And just why these factors have a lot impact on organizations?
The notion of environment framework of an organization has been studied from early of the XIX century however the specific idea of organization environment and its components was not made yet till the later of the XIX century (Duncan, 1972). There were many fail try out throughout just how. Pugh et al. (1969) possessed analyzed organizational contexts where in fact the settings of group structure are developed. However, it was not a style of an organization within an environment. Lawrence and Lorsch (1967) has considered environment as a complete entity in their researched but they only viewed the surroundings from the business outward. Till 1972 evaluation, Duncan then finally concluded that environment was the totality physical and cultural factors which were taken directly into concern in the decision-making action of people in the business. With this meaning we could see that factors within the boundaries of the organization must be considered as part of the environment and for that reason differentiate the environment into interior and exterior environment.
The company environment is segmented as below:
Source: Kuratko (2001)
The inside environment involves those relevant physical and social factors within the boundaries of the business.
It is how an organization could achieve the ultimate goal. It demonstrates a proper pathway, instruction to the whole system. The strategy included all parts of the organization, from people, financial aspects, market factors, product feature, etc.
This is the factor that patterns in the view of a business about ethics and establishes various important issues. It assorted depends after each organization, region, area, spiritual, and idea of the business. Handel (2003) consider high productivity does not count much on specialized conditions, such as physical top features of the working environment, real human physical capacities, or economical incentives, but on communal conditions and organizational weather.
This factor is the formal organizing concepts that enable cooperation and guide patterns. It should be suitable and effective to attain the organizational goals. It generates a string of responsibility that affects the whole company and demonstrates the management style. Also, this is actually the factor that identifies the chain of communication. Burns and Stalker (1960) researched British firms in the textiles, heavy industry, electronics industries, and discovered that firm composition varied depending on whether the firm controlled in a well balanced or fast changing environment.
This factor is the formal solution that drives the action of individuals, teams and departments within the business. It identifies the promotion, advancement opportunities to motivate employees. Handel (2003) talked about that the People Relations experts exaggerated worker enjoyment in the experimental groups and minimized the conflicts between management and labor.
This factor is the capability that providing and delivering value. It help business to achieve the final goal easier, quicker. The organization should provide employees with appropriate training in order to make good use of the factors and make the cost effective. Woodward (1982) evaluated the result of different production systems on organizational composition among manufacturing establishments. She discovered that crops using mass production technology were more bureaucratized than those using small collection technologies however, plant life using continuous process technology tended to have significantly more crude framework, and their production jobs contain more responsibility and were more skilled.
This factor is the skill models and mindsets of people that work together to achieve common goals, including employees, partners, suppliers, etc. Making good use of the employees would lead the business to great success cause adding right people in the right job would generate the best productivity. Also appropriate training and development of the human perspective would increase the performance of the complete organization extremely.
This factor is how strategies are executes and how work is performed. It should be controlled directly by quality, responsibility and achievement.
The internal environment of organization
(Source: Kaplan, 2001)
The exterior environment consists of those relevant physical and communal factors outside the boundaries of the organization. Internal environment factors impact directly on the organization performance and could be anticipated and controlled by the management but the exterior environment factors are harder to forecast and require more effort from the organization to conform after. Normally the external environment is divided into two portions as macro-environment and micro-environment (industry). Typically, we could specify the external factors based on the range of analysis like Porter's Five Pushes (rivalry, new entrants, suppliers, buyers, and substitutes), PESTEL (politics, economic, socio-cultural, technological, environmental, and legal). Porter's five forces are elements of micro-environment (industry) which consist of the competition (rivalry) factor, thread of new entrants to the industry factor, bargaining vitality of suppliers, bargaining ability of customers and the thread of other products that can replacement for their products. PESTEL are elements of macro-environment which contain macro factors that group have to adapt after and barely resist. The essential style of these components is below:
(Source: JG marketing, 2010)
Organizations often overlook the environmental factors because of the obvious, sudden and normally hidden characteristic of environmentally friendly factors. Environment influences are sensitive and consistent as well as difficult to recognize and assess. Osborn and Hunt (1974) accepted that as the environment learn to change, the organization must adjust inside structure and operations to keep up their operation and/or increase efficiency. For Webster and Breeze (1972) environment influences are known in four distinctive ways. First, environment identifies the availability of goods and services. This effect reflects typically on physical, scientific, and financial factors.
Second, environment identifies the overall business conditions including the rate of economical growth, the amount of national income, interest rates, unemployment, etc. Economic and politics forces are the main influences on general business conditions. A few of these causes are mainly task variables like economical factors, while some such as political parameters may be hardly happened. Economic environment can be an important aspect of basic environment which consist of inflation, interest, unemployment etc. As these elements immediately affect the business organizations, as well as employees, decisions should only be taken after having deeply studied and examined them. When inflation and interest rate raise the cost of goods therefore improve the price of products and lead to less sale. If the unemployment climb, the demand in buying would lower and also lead to lessen deal. These elements do not stay under control of business. So, the business enterprise organizations cannot affect these elements. Alternatively the organizations are damaged by them.
Third, environmental factors determine the beliefs and norms guiding inter-organizational romantic relationship between purchasers and vendors as well as among competition, and between organizations and other companies such as government and trade organizations. Such prices may be produced into laws and regulations or considered as law. Cultural interpersonal, legal, and politics forces are the main resources of these beliefs. Each change in these factors would bring about directly impact on the business. When the target customer demand for better products and service, the organization would need to up grade their technology, resources in order to satisfy and maintain the customer.
Finally, environmental forces influent the information flows which most significant is the movement of communications among potential suppliers, customers and the organization through media and other personal or impersonal stations. This influence demonstrates a number of physical, technological, economical, and ethnical factors.
Other than those main pushes, Handel (2003) has also mentioned that the living of the legal environment have effects on many areas of an organization's patterns and composition. Webster and Wind flow (1972) has determined environmental affects are exerted through a variety of organizations including business organizations like suppliers, competitors and customers, government authorities, trade unions, politics parties, etc. The type of these establishments would change from one country to another, Asian culture to European culture, etc. These are elements that indirectly impact the organization which are occasionally forgotten because of the lack of acknowledgment. A big change in values, values of different markets can have a great have an impact on on organizations.
Hirsch (1975) argued in an evaluation of the performance within the pharmaceutical sectors that those obtained better profits, manipulated their environments better. A far more concentrated industry; business could restrict entry and take care of their distribution channel more effectively. Although environment factors all have great effect on organizations and change unexpectedly frequently, corporation can still afford to reduce the affect of these factors if indeed they understand the guidelines of environment and flexibly adapt after very quickly. Those with better opportunity and financial base could withstand the higher change in environment with less affect than normall organizations.
Environmental factors of firm are basic, essential and subjected to change any time so in order to make it through, organizations have to be able to adjust to the surroundings changes. You can find two major kind of organization environment that are inside environment and exterior environment. Those segments are defined by the restrictions of the business. Though recognized the importance of environment affects, organizations often overlook environment factors because of the basic and normal characteristics.