1. Factors
affecting
organizational
structure
By – Gayatri Bhatta
Shaktimayee Rout
Sonali
Subhadarshini
Unit – 3

2. Contents
• Organizational environment
• Internal & External environment
• Task environment
• Components of Task environment
o Customers
o Suppliers
o Competitors
o Pressure groups
• General environment
• Components of General environment
o Technological elements
o Economic elements
o Legal political elements
o Socio cultural elements
o International elements
• Information technology
• Knowledge management

3. Organizational environment
• The environment is infinite and includes everything outside the organization.
• However, the analysts considers only the aspects of the environment to which
the organization is sensitive and must respond to survive.
• Thus, organizational environment is defined as all elements that exist outside
the boundary of the organization and have the potential to affect all or part of
the organization.
• According to the analysts, organizational environment is of two types :
o Internal environment
o External environment

4. Internal environment
• An organization's internal environment is composed of the elements
within the organization, including current employees, management, and
especially corporate culture, which defines employee behaviour.
• It exposes the strengths and weaknesses found within the organization.
• Internal environment include the employee behaviour, organization's
culture, mission statement, and leadership styles.

5. External environment
• The external environment comprises of all the entities that exists outside its boundary,
but have significant influence on its growth and survival.
• Organizational environment is defined as all elements that exist outside the boundary of
the organization and have the potential to affect all or part of the organization.
• It determines the opportunity and threat of an organization.
• It is also called as operating environment.
• Includes customers, public opinion, economic conditions, government regulations and
competition, suppliers.

6. Task & General environment
• External environment is divided into two parts :
o General environment or Mega environment
o Task environment or Specific environment

7. Task or specific environment
• Refers to forces and institutions outside the organization with which an
organization interfaces in the course of conducting its business.
• Task environment of each organization is unique and changes with
conditions
• Forces and institutions are directly relevant to :
o Achievement of the organizational goals
o Direct and immediate impact on decisions and actions of the
management

8. Important constituents of task environment
• Customers – refers to those individuals and organizations that purchases its products and services.
They posses potential uncertainty to an organization’s success because of their changing tastes,
preferences, lifestyle.
• Suppliers – those people or organizations that supplies raw materials, goods and services. Suppliers
also includes provider of financial inputs.
• Competitors – organizations the either offer or have a potential to offer rival products or services.
• Pressure groups – special interest groups that attempts to influence the actions of organizations.
E.g., MADD, PETA

9. General or Mega environment
• Refers to broad trends and conditions in the society within
which an organization operates.
• Such elements are beyond the ability of a single organization
to affect or alter them.
• They cannot be influenced in short run.

10. Important constituents of general
environment
• Technological elements – refers to current state of knowledge about the production
of goods and services. Technological environment can positively or negatively affect
the overall success of an organization.
• Economic elements – economic factors such as inflation, rate of interest, changes in
per capita income, stock market fluctuation etc., affects the profitability and success
of an organization.
• Legal political elements – refers to the legal and governmental system within which
an organization must function.

11. Contd…
• Socio cultural elements – includes customs, norms, behavior, societal values,
beliefs, etc. it is necessary to monitor the prevailing trend from time to time as such
changes might offer new opportunities or significant threat. (CSR, CG)
• International elements – the political, social, cultural and economic situations of
one country are significantly different from another. Development of a country
outside of an organization’s home country has great influence on the success of the
organization.

12. 10 sectors affecting
the organizational
environment

13. Information Technology
Information technology (IT) is dramatically changing the business landscape.
• Areas which are affected by IT are :
• Business Strategy : IT creates new opportunities for innovation in products and services.
Key levers are :
o Resequencing: including parallel processing of data-bases (HRIS- human resourse
information system
o Simultaneity: making information instantly available in several systems (e.g., via OLE)
o Time extension: offering 24 hour a day; 365 days a year service
o Portability: taking service and products closer to the user
• Organization Culture :
Newer types of IT such as electronic mail and groupware are creating significant changes in the
way that information flows around group ware, and between them and their customers and
suppliers. Organization are following a common notion, i.e., "information is power“.

14. Contd…
Organization structure :
IT ensures more flexible and fluid structures - networked structures, dispersed team and teams that
come and go as needs change (as in the virtual corporation).
IT enables a greater variety of structures
Management Processes :
IT is rapidly entering the era where it supports unstructured management processes as well as
highly routinized business processes. It provides more effective ways of accessing information from
multiple sources, including use of external information on databases and the Internet.
Work :
There are few offices where professional do not make use personal computers. Many jobs involving
extensive information and knowledge based work, the use of the computer is often a core activity.
Now a days organisation needs hybrid managers - people who are competent at both their
discipline and IT.
The Workplace :
IT diminishes the effect of distance, i.e., it can provide more flexibility in the office, allowing desk
sharing and a degree of location independence within a building. It permits the dispersion of work
teams, thus saving costs of relocation and travel.

15. Knowledge management
• Knowledge management (KM) as an emerging set of strategies and approaches to create,
safeguard, and use knowledge assets (including people and information), which allows
knowledge to flow to the right people at the right time so they can apply these assets to create
more value for the enterprise.
• The success of a KM initiative depends on many factors. These are :
o Leadership : Leadership plays a key role in ensuring success in almost any initiative within an
organization. Its impact on KM is even more pronounced because this is a relatively new
discipline.
o Culture : Culture is the combination of shared history, expectations, unwritten rules, and
social customs that compel behaviours. It is the set of underlying beliefs that, while rarely
exactly articulated, are always there to influence the perception of actions and
communications of all employees.
o Structure : It is a combination of a centralized and decentralized approach.
o Information technology infrastructure : (ERP) Without a solid IT infrastructure, an
organization cannot enable its employees to share information on a large scale.

16. Knowledge
management
Organizational
structure
Centralization
Formalization
Complexity
Integration
Utilize
Share
Create
Organizational environment
integration

17. Organizational structure favorable for KM
• It is expected that when the organizational structure is less formalized, less centralized, more
complexity, and more integrated, KM is more favourable :
o Centralization effect on KM negatively.
o Formalization effect on KM negatively.
o Complexity effect on KM positively.
o Integration effect on KM positively.
• Decentralization facilitates internal communication, adoption of innovation, and higher levels of
creativity.
• Formalization is the extent to which employee behaviour is guided by rules and procedures. Too
much of rules leads to a barrier to KM.
• Complexity refers to the degree to which different functions are distinguished with respect to
goals, task orientation, and degree of autonomy.
• Integration describes the degree to which the activities of separate players in the organization
can be coordinated through formal coordination mechanisms.