Management Essay - External Environment

Identify at least three important forces in the external environment creating uncertainty for organisations today. How do they create uncertainty and do they typically arise in the task environment or the general environment?

Environmental uncertainty has been a dominant challenge facing managers for centuries and nowadays managers face unprecedented levels of uncertainty due to forces that arise in the external environment. The external organizational environment includes all elements existing outside the boundary of the organisation that have the potential to affect the organisation (Daft, 1995; Samson & Daft, 2012, pg. 88)). The external environment comprises of two parts: the general environment and the task environment. The general environment is the outer layer that includes five major factors that affect the organisation indirectly and includes economic conditions, technological development, political-legal environments, socio-cultural influences and international trends. These events do not directly change day-to-day operations, but they do affect all organisations eventually (Samson & Daft, 2012, pg. 88). The task environment includes factors that are closer to the organisation such as competitors, suppliers and customers that directly influence day-to-day operations. Organisations must manage environmental uncertainty to be effective (Samson & Daft, 2012, pg. 99). This can be challenging because it is hard to predict changes that occur in the environment. Environmental uncertainty is the degree of change and complexity in an organisation. The forces in the task environment would generate greater uncertainty for firms than forces in the general environment because task factors tend to change more rapidly, be more complex and affect an organisation’s performance on a day-to-day basis.

Environmental uncertainty means managers must increase information processing to quickly identify opportunities and threats, and implement necessary strategies and structural change. Samson and Daft (2012) define uncertainty as when managers know what goal they wish to achieve, but information about alternatives and future events is incomplete. The concept of environmental uncertainty is recognized as a fundamental element of strategic management (Kreiser, 2002) and has been present for decades. Kreiser (2002) explains that uncertainty arises from a lack of perfect information about the environment. When an organisation deals with only a few external factors and these factors are relatively stable, managers experience low uncertainty. There are two dimensions of uncertainty; the first one is the degree of change in an organisation’s environment, whether it is dynamic or stable. In a dynamic environment, components of the environment change frequently and there are a high level of uncertainty. If change is minimal the environment is known to be stable. The second dimension of uncertainty is the degree of complexity in an organization’s environment, this looks at the number of components in an organisation’s environment and the extent of the knowledge an organisation has about those components. If the number of components and the need for sophisticated knowledge is minimal, the environment is classified as simple. If a number of dissimilar components and a high need for sophisticated knowledge exist, the environment is complex. When external factors change rapidly, the organisation experience very high uncertainty and firms must make efforts to adapt to these changes (Samson & Daft, 2012, pg.100). Two basic strategies for coping with high environmental uncertainty are to adapt the organisation to changes in the environment and to influence the environment to make it more compatible with organizational needs.

As businesses are facing more rapid change, they also face high levels of uncertainty than ever before. The single most powerful driving force in the economy is the emergence of consumers who use information far more intensively to meet their economic needs (Shaw, 2002). Samson & Daft (2012) define customers are people and organisations in the environment who acquire goods or services from the organisation. Customers are extremely important as they are the ‘recipients to the organisation’s output’ and they ‘determine the organisation’s success (Samson & Daft, 2012, pg. 95). Due to the digital revolution, the consumer has access to new informational technologies, which means they can use information more intensively to make commercial decisions. Consumers are starting to use information differently, as they begin to search for information in more channels and more frequently. With the help of social media and smart technology, information is readily available at the touch of a button instantly. Thus, uncertainty levels will rise as it becomes increasingly challenging to meet individual customer expectations and needs (Shaw, 2002). Many companies have designed special promotions and advertising campaigns in order to reach out to consumers and expand their customer base. The Internet has become a big outlet for organisations to target teens and generation Y, and online social networks such as Facebook and Instagram are becoming increasingly popular way to advertise at a low cost and reach a huge population instantly. Customers today have greater power because of the Internet, which presents threats as well as opportunities for managers (Samson & Daft, 2012, pg. 96). Nowadays consumers have the power to directly affect the organisation’s reputation and success because they can voice their opinions and experiences for a large network to see. There is always be a great sense of uncertainty present when it comes to consumers as they hold the control and decision on whether to purchase a good or utilise a service. Without a solid and loyal customer base, a firm cannot operate successfully and will struggle with their day-to-day operations.

Another importance force in the

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