How Does The Environment Interact With Organizations?

The second framework of environmental influence relates to environmental interaction. In the systems theory of organizations, managers interact with the environment to obtain resources as inputs for the transformation process and to distribute outputs. As they analyze the organization's interaction with the envi¬ronment, managers consider two aspects: the availability of resources and how dependent the organization is on these resources.

Environmental munificence refers to the level of resources available and the degree of sustained growth and stability that the organizational environment can support. When resources are plentiful, organizations can grow and set aside a cushion of resources such as extra cash or materials to use when resources become scarce. When resources are scarce, organizations must be more innova¬tive in using available resources and often use alliances with other organizations to obtain resources. General Motors' Delco Electronics division, which makes automotive sound systems and engine controls decided to speed up new-product development on integrated circuits as one way of managing sales and profits during a recent economic recession. Delco cut the development time from 42 to 18 months so it can get new products out more quickly, bringing in faster sales and profits.

It's not enough for managers simply to monitor their environments for infor¬mation about uncertainty and interaction. They also need to recognize the direc¬tion of environmental trends so that they can predict where the organization is likely to stand in the future and be able to respond to anticipated environmental changes and interaction.