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116 Part One Organizations, Management, and the Networked Enterprise

Organizational Environments
Organizations reside in environments from which they draw resources and
to which they supply goods and services. Organizations and environments
have a reciprocal relationship. On the one hand, organizations are open to,
and dependent on, the social and physical environment that surrounds them.
Without financial and human resources—people willing to work reliably
and consistently for a set wage or revenue from customers—organizations
could not exist. Organizations must respond to legislative and other require-
ments imposed by government, as well as the actions of customers and com-
petitors. On the other hand, organizations can influence their environments.
For example, business firms form alliances with other businesses to influence
the political process; they advertise to influence customer acceptance of their
products.
Figure 3.5 illustrates the role of information systems in helping organizations
perceive changes in their environments and also in helping organizations act
on their environments. Information systems are key instruments for environ-
mental scanning, helping managers identify external changes that might require
an organizational response.
Environments generally change much faster than organizations. New tech-
nologies, new products, and changing public tastes and values (many of which
result in new government regulations) put strains on any organization’s cul-
ture, politics, and people. Most organizations are unable to adapt to a rapidly
changing environment. Inertia built into an organization’s standard operating
procedures, the political conflict raised by changes to the existing order, and the
threat to closely held cultural values inhibit organizations from making signifi-
cant changes. Young firms typically lack resources to sustain even short periods
of troubled times. It is not surprising that only 10 percent of the Fortune 500
companies in 1919 still exist today.

FIGURE 3.5 ENVIRONMENTS AND ORGANIZATIONS HAVE A RECIPROCAL
RELATIONSHIP

Environments shape what organizations can do, but organizations can influence their environments
and decide to change environments altogether. Information technology plays a critical role in helping
organizations perceive environmental change and in helping organizations act on their environment.

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