MANAGER’S RESPONSE TO ENVIRONMENTAL FACTORS
Managers essentially have three major option of responding to the environmental factors that influence the activities of an organization-adapt to the existing environmental elements, attempt to influence environmental favourability, and/or shift the domain of operations away from threatening environmental elements and toward more beneficial ones.
The feasibility of any or all of these approaches depends on the situation, but prospects are enhanced if the environment offers high munificence or if the organization has built a cushion of resources.
i. ADAPTATION
This involves changing internal operations and activities to make the organization more compatible with its environment. This strategy essentially accepts the existing environment as given and seeks to develop some rational process for adjusting to it. Four common methods used by organisations to adapt to environmental fluctuations are:
• Buffering-involves stockpiling either inputs into or outputs from a production or service process in order to cope with environmental fluctuations. Buffering by stockpiling units is used when it is difficult to line up reliable sources of inputs, such as supplies. Conversely, buffering by maintaining inventories of finished products is used when wide fluctuations in market demand make it difficult to produce outputs efficiently as they are ordered. Buffering is not always feasible because of high expense, perishability of materials, or the difficulty of stockpiling services, such as
customer service in a restaurant. Furthermore, substantial buffering of inputs and finished products can lead to obsolescence before the items are used or sold.
• Smoothing-involves taking actions aimed at reducing the impact of fluctuations, given the market .e.g. utilities often discount their rates during certain time periods to encourage use of energy in designated low-demand periods. Department stores may run sales promotions during slow months. Restaurants often offer coupons that can be used only on certain weekday nights when business is typically slow. Such actions may avoid the inefficiencies that occur when expansion to meet peak demands results in underutilized resources during non-peak times.
• Forecasting-the process of making predictions about changing conditions and future that may significantly affect the business of an organization. To the extent that it is possible to predict future conditions with a reasonable level of accuracy, it may be possible to prepare in advance to meet the fluctuations. e.g. on the basis of customers’ shopping habits, grocery stores frequently hire part-time cashiers to supplement regular staff during expected busy periods. For situations such as this, forecasts based on experience with patterns may be reasonably accurate. When environmental fluctuations are related to more complex and dynamic factors, such as trends in the economy, more sophisticated forecasting techniques may be required. Many companies have staff economists and/or subscribe to services that provide economic forecasts based on elaborate econometric models.
• Rationing-this is providing limited access to a product or service that is in high demand. e.g. many colleges and universities ration slots for popular programmes by establishing cut-off points such as the achievement of a certain mean grade or percentage score at the time of entry. By rationing, the organization can avoid having to expand capacity to meet temporary upward swing in demand. This is advantageous, since fixed costs associated with capacity expansion (e.g., extra plants, equipment, or classroom buildings) continue to be incurred during downward demand swings. Rationing is also used when demand exceeds forecasts or when new production expands slowly (e.g., because of heavy costs and considerable risk if forecasted demand does not materialize).Rationing does have a disadvantage, however in denying a consumer a product or service, the organization is turning away potential business.
ii. FAVORABILITY INFLUENCE
In contrast to adaptation strategies, the favourability influence approach involves attempting to alter environmental elements in order to make them more compatible with the needs of the organization. Rather than accepting environmental elements as givens, this approach holds that at least some aspects of the environment can be changed by the organization in advantageous ways.
There are a number of major methods that organizations can use in attempting to influence significant environmental elements. These include:
• Advertising and public relations-Advertising, the use of communications media to gain favourable publicity for particular products and services is a means of influencing the environment. Closely aligned to advertising is public relations, the use of communications media and related activities to create a favourable overall impression of the organization among the public. In combination, advertising and public relations can help promote a positive feeling toward an organization among environmental elements. e.g. in addition to regular advertising, many major companies sponsor such events as Breast Cancer Awareness, Heart to Heart Run, and donate money to a variety of groups including colleges and universities.
• Boundary spanning-This refers to the creation of roles within the organization that interface with important elements in the environment. Boundary spanners, the people in these roles can fulfil two different functions.
- They can serve an information processing function by collecting information from the environment, filtering out what is important, and transmitting it to those inside the organization who can act on the information.
- They can perform an external representation function by presenting information about the organization to those outside. Boundary spanners include salespersons, purchasing specialists, personnel recruiters, admissions officers, shipping and receiving agents, receptionists, lawyers, and scientists who maintain close ties with developments in their fields.
• Recruiting-this is the process of finding and attempting to attract job candidates who are capable of effectively finding job vacancies. This tool can be used for environmental influence when organizations seek job candidates who have a knowledge of and close ties to a significant element of the environment. e.g. organizations often hire executives from specific companies or in particular industries because of their environmental knowledge and connections.
• Negotiating contracts – this involves agreeing on terms of service.