Question

1. Discuss the three factors causing uncertainty in the external environment, and based on that, Discuss the relationship between environmental uncertainty and organizational structure in terms of integration, differentiation, centralization and mutual adjustment.

Answer 1

The three factors of uncertainity which prevails in the external environment of the business are lack of information about the external factors that influences the decision making, lack of knowleedge about if we took the wrong decision and the inability if the decision taker to assess the outcomes.

Based on this, relationship between organisational structure and external environment is presented below:

1. Integration: Integration is a process in which the company tries to integrate various resources of the internal as well as external environment to work together effectively and efficiently to produce a settled output. The structure of the organisation should be designed in such a manner where it can see integrating all of the essential resources to adapt itself with the changing dynamic environment and helps us fight the uncertainity factor for the information.

2. Differentiation: Differentiation is a organisational strategy in which the firm tries to adapt the most different factors to be a market leader and attract customers towards it by offering different and unique value. One can tackle the fact of uncertainity of demand by creating a differential factor by providing the best value in a unique style to attract customers and have knowledge.

3. Centralisation: Centralisation means to focus your decision making areas and techniques into the central authority of your organisation. As we know the environment is dynamic and nothing remains permanent, centralisation helps is saving cost and thus cost based strategy and functional structure could be effectively established where decisions are taken only by the important top management people who are in direct contant with the market making the best decision for the company.

4. Mutual adjustment: At last, Mutual adjustment talks about the ways in which both managers and employees come together and adapt themselves to work in the organisation. This is the most effective way of dealing with the uncertainity of the market factors as it promotes team work and sustainability by making all the resources come together, integrate their efforts and keeping their personal interest aside in favour of organisational benefit for the long run.