Managing Environment

INTERNAL STRATEGIES

Organizations regulate the flows of inputs and outputs to

their central technical cores through such internal
responses as

Domain Choice
Recruitment
Buffering,
Smoothing (leveling),
Forecasting or Environment Scanning
Rationing
Geographical Dispersion
 Organizational Domain

The domain of an organization is the claim it stakes

out for itself with respect to: (1) range of products
offered, (2) markets served, and (3) services rendered.

Domain is closely related to the task environment of the

organization.
 Domain Choice
Take Domain of less environmental
Uncertainty
Select Niche No Competitors
Put Barriers to new entrants
Keep Numerous Suppliers
No unions
Less public Pressure Group
 Recruitment
Appoint employee with greater Versatility
Dont appoint specialist
Poaching
Appoint person more contacts in politics
 BUFFERING
On the input side, buffering usually takes the form of
stockpiling critical resources whose supply is uncertain
or whose price fluctuates widely over time.

On the output side, buffering typically involves building

and keeping up warehouse and distribution inventories.

By buffering, environmental uncertainties are absorbed

because an organizations technical core produces at a
constant rate. Other methods of buffering might include
preventative maintenance and recruiting and training.
 SMOOTHING (LEVELING)
Where buffering absorbs environmental uncertainties,
smoothing involves efforts to manage environmental
uncertainties. Smoothing attempts to protect the technical
core by reducing uncertainties associated with cyclical
variations in product or service demand.

Examples might include differential costs of long distance

telephone calls that are lower during non-peak times,
discount airline fares for off-time flights.
Sabse Sastaa Wednesday campaign of Big Bazaar.
FORECASTING/ Environmental
Scanning
When buffering and smoothing will not effectively protect
an organizations technical core, organizations can often
reduce uncertainty and behave in a logical, rational manner
by developing accurate forecasting capabilities. To the
degree that environmental fluctuations can be predicted,
they can be treated as constraints and adapted to.

Raising Material inventory, TCS recruiting and developing

Bench Strength.
 RATIONING
Finally, when the organization finds that neither buffering,
smoothing, nor forecasting is sufficient to prevent
environmental penetration, organizations can turn to
rationing. The allocation or assignment of resources
according to established priorities can be seen in
restaurant reservations, reserved seats at theaters, etc.,
and rationing (such as gasoline rationing during the
oil embargo). In general, rationing is a less than
satisfactory solution, because it indicates that the
organization is not fully serving its task environment.
It can be costly in terms of lost revenue and customer
goodwill (Atari, Cabbage Patch dolls, etc.)
 EXTERNAL STRATEGIES

Besides strategies for dealing with uncertainty in their

internal environments, organizations also have strategies
for dealing with uncertainty in their external (general)
environments.

The actual relations, or interactions, between organizations

are the responsibility of boundary personnel. The boundary
spanners or gatekeepers, are important because they mediate
the flow of information, products or services, and personnel
between organizations in its environment.
ROLE OF THE BOUNDARY SPANNER
EXTERNAL STRATEGIES II
Thompson identified two direct strategies for managing
external dependencies such as suppliers, customers,
banks, etc.:

COMPETITIVE STRATEGIES
COOPERATIVE STRATEGIES
 COMPETITION

Refers to rivalry between two or more organizations which

is mediated by a third party. In the case of a manufacturer,
the third party might be a customer, distributor, supplier or
potential employee. In each instance, the third party must
select among alternative courses of action (For example,
which of several competing products to purchase).
 Advertising
To reduce competitive pressure
Stabilized Demand
To create Brand Loyalty
 COOPERATION

There are three types of cooperative strategies

available to organizations:

1. Bargaining
2. Co-opting
3. Coalescing
 BARGAINING / Contracting
In an effort to limit the uncertainty caused by competition,
organizations often respond by entering into cooperative
relationship. Bargaining refers to direct negotiations
between organizations for the exchange of goods and
services.

Such contractual arrangements, to the extent that they are

binding and enforceable, serve to reduce environmental
uncertainty. Examples might include long term contracts
with suppliers or customers, labor contracts, etc.
 COOPTING
Is the process of absorbing external elements into the
decision-making or policy-determination structure of
an organization as a means of averting threats to its
stability or existence. This allows for a reduction of
environmental uncertainty, but not its elimination.

Examples might include members of a Board of Directors

chosen from primary groups in the organizations
environment (A banker, a major supplier, a Board member
from a competitor, etc.)
 COALESCING

Is the combination of two or more organizations (groups

or individuals) for a single purpose. It requires a joint
commitment for mutual action.

Examples might include mergers, joint ventures, inter-

locking directorates, price fixing, etc.
 COST of Strategy

Competition, bargaining, cooptation, and coalescing

represent a continuum of increasingly costly methods
of gaining support in terms of decision making power.

Competition is seen to be the least costly method, through

coalescing being the most costly.
 INDIRECT STRATEGIES

Thompson also identified four different indirect strategies

for dealing with external environmental uncertainty:

1. Influencing government regulations and legislation

2. Trade associations and professional organizations
3. Lobbies
4. Political Action Committees