Organisational Context

In this topic, the word ENVIRONMENT has been rephrase in terms of business/organisation.

Environment: The surroundings or conditions in which an organisation operates.


The 3 main environmental layers of an organisation is as follows :

• Internal
• Micro (competitive)
• Macro (external)

This week's lecture stressed on the internal environment as well as the micro environment.

The internal environment within an organisation which affects them are as follows :

• Structures
• Objectives
• Cultures
• Power and Authority
• Technology
• Leadership
• Finance
• People

All these points are quite straightforward on how it affects. Additionally, lectures and classes had already clarify how most of these points affects the organisation.

An example would be "Technology", where Eric Trist established the link between social system and technical system and how it would affect communication within a company.

Micro Environment
Micheal Porter revealed that there are 5 forces which affects a micro environment of an organisation.
The five forces include :

• Threat of substitute products
• Bargaining power of suppliers
• Bargaining power of buyers (the organisation's immediate customer)
• Threat of new entrants
• Intensity of rivalry within the industry

We can use porter's 5 forces as a tool to consider the possible threats of the company, which is VERY useful. The picture I've found have given the main points that how each factors affect an organisation.

Multiple heated discussions in the lectures and classes of different organisations have led us to conclude that different organisations have different highs and lows of each aspects of the 5 forces.

Example: Threat of new entry of a coffee shop, is high, however the threat of new entry of aircraft manufacturing is lower because of the big difference of cost to set up the company.

There are also examples of how these forces have led to the downfall of an organisation.
Such as how Kodak did not see the threat of a substitute product of digital camera.

Some companies amalgamate to form new products together such as camera manufacturing with phone companies. Again, Porter's 5 forces have to be considered.



http://www.youtube.com/watch?v=uvwjip3CTMA




Porter's work on this theory is very impressive, however it has some flaws, such as:

• The model assumes relatively fixed marketing structures which hardly the case of our current generation where the markets are ever-changing.
• Technological breakthroughs  have not been may tip the scales of a business, as seen in Kodak and their digital camera rivals
• The relationship between supplies and buyers may form or break within short times

However, the forces are still useful for analytical purposes, revolving around the idea of competition, not in terms of strategic, such as amalgamation of companies. Hence, Porter's 5 forces usefulness has its limits.