Organizational Environment

Enacting Environmental Change

An organization's environment consists of everything outside the organization. Suppliers, customers and competitors are part of an organization's environment, as are the governmental bodies that regulate its business, the financial institutions and investors that grant it funding, and the labor market that provides it with employees. In addition, general factors such as the economic, geographic and political conditions that impinge on the firm, are part of its environment. 

Environmental Change

Environmental change concerns the extent to which conditions in an organization's environment change unpredictability. At one extreme, an environment is stable if it does not change at all or if it changes only in cyclical and predictable ways. An example of a stable environment is the one that surrounds many of the small firms in Amish communities throughout the mid-western United States. Amish religious beliefs require the rejection of modern conveniences, such as automobiles, televisions and gasoline-powered farm equipment. So Amish blacksmiths, carpenters, farmers and livestock breeders have conducted business in much the same way for generations. Another stable environment surrounds firms that sell Christmas trees. The retail market for cut evergreen trees is predictably strong in November and December but weak at other times of the year.

At the other extreme, an environment is dynamic when it changes over time in an unpredictable manner. Because the popular style of dress changes so frequently in North America, the environment surrounding companies in the fashion industry is quite dynamic. Similarly, the environment surrounding companies in the consumer electronics industry has changed dramatically. New products create entirely new markets.

Enacting a Favorable Environment

Sometimes environmental coordination and information-processing requirements are as much the consequence of an organization's actions as they are the result of unchanging external forces. Consider the happy plight of Levi's, the San Francisco based manufacturer of casual clothing. Following a 1992 study commissioned by the company that found that businesses were growing increasingly receptive to casual attire in the office, Levi's began a direct mail campaign to corporate human resource directors in which it pitched the company's Dockers brand as a fashionable yet relaxed alternative to the traditional dresses-and-suits code of attire. As a follow-up, Levi's shot a "how to dress business casual" video, which it distributed to over 7,000 companies, and began conducting fashion seminars for various corporations and trade associations in the United States

and Canada.

Once dependent on the faddish market for denim jeans and accessories, Levi's is now a major player in the comparatively stable market for office apparel. Organizations as diverse as Charles Schwab and Company, Nationwide Insurance and The New England Employee Benefits Council have sent employees to Levi's presentations, and Levi's has built a database of attendees for use in future promotions. The company's earnings shot up like a rocket. in an industry that was other wise languishing. Dockers shops sprouted up in regional malls and outlet centers to respond to rapidly growing demand, Levi's enacted an environment that has favored the company for years, and will probably continue to do so for the years to come.

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