Analysis of the External Environment
External environment encompasses all factors that are beyond the direct
control of an organization. It includes factors such as suppliers,
competitions, government, technology and political dynamics. The fact
that these factors are beyond the control of the firm means that they
should be treated with caution since they significantly decide the
competitiveness of a firm. Competition consist of other firms that are
offering similar goods or services and which might be based in the same
location as the firm and serving identical markets or customers (Pfeffer
& Salancik, 2003). Competitive edge of a firm is what keeps it in the
industry or forces it out.
Commanding a huge market share means that a firm is ahead of other firms
in the industry and this is usually translated into higher returns and
profits. Failure to withstand competition inevitably leads to
elimination out of the industry (Davis & Cobb, 2010). Delta airline is
among the largest airlines in US in terms of passage transit it also
offers services such as repair and maintenance. Delta market has been
growing over the last decade and is expected to grow even further
especially after integration with Northwest Airlines. Its main
competitors include the Southwest Airline Company and Air France.
Government regulation also makes an important part of the macro
environment since firms are supposed to adhere to strict guidelines and
policies in their business activities. Government regulation varies from
industry to industry but is similar in a given sector. Policies,
guidelines and rules made by government agencies concerned must be
followed. Regulation are meant to ensure a level playing ground for the
business players and ensure appropriate services and products are
delivered to people and at the same time avoiding hampering or
discouraging investment and development of business (Pfeffer & Salancik,
1978). Regulations made by the National Transportation and safety board
will affect how Delta conducts its business and how its handles matters
related to civilians. Additionally the quality standards, rules, and
policies put in place by the United States Federal Aviation
Administration’s must be adhered without compromise.
The complexity and changing nature of the external environment is what
brings in concept of uncertainty. Uncertainty is the lack of enough
knowledge in the process of decision making due to the existence of
changing and turbulent external factors. Existence of uncertainty leads
to unpredictability of crucial elements that directly or indirectly
affect the operation of the business. Influential elements in the
external environment such as technology, government policies and
political mechanisms all shape the decision making process of managers
because they are an integral part in the operating field (Tidd &
Bessant, 2009) . Uncertainty has three main dimensions that include
Competitive uncertainty which is the lack of knowledge and ability to
correctly ascertain the intensity and extent of competition, the source
of powers of competitors and their current strategies and future moves
all of which increase their competitive edge.
Macro-economic uncertainty which emanates from the macro environment
and includes factors such as economic, political and regulatory factors
Market uncertainty which emanates from lack of enough knowledge of
market mechanisms and its impacts on the general operations of the firm
in the industry
Technological uncertainty uncertainty that stems from the changes
taking place in the technological field and which completely alters the
capabilities of firms in the respective industry
The level of uncertainty will be more in an industry where there are
high environment complexities. The rate at which the various variables
within a given environment are changing will determine the extent of
uncertainty. Therefore complex and dynamic environment will result into
an environment that is hard to predict and thus very uncertain.
Additionally the diversity of elements in a particular external
environment will also have a greater influence on the variables that
make it uncertain (Pfeffer & Salancik, 2003). Uncertainty can be
categorized as low uncertainty, moderate or high uncertainty.
Low uncertainty in this category there are little environmental
variables that affects the uncertainty. In addition, the intricacy of
the business is manipulated by few essentials. In this case, for
example, customer tastes and preferences are usually low as there are
few issues that affect the demand as result of reduced ranks of
uncertainty and thereby it is easier to predict the prospect trends of
Moderate uncertainty under this category, the situation brings into
play lower uncertainties coupled with higher vivacity.
High uncertainty in this case the environment is extremely multifaceted
and there is no clear-cut distinction between environmental mechanism
and the organization itself. This uncertainty level renders decision
making process of the business difficult. For instance, Delta airlines
is encountering an array of uncertainties that relates to technology
coupled with a number of a number of external variables as well as
government regulations. All these uncertainties are difficult to foresee
and thereby it becomes practically impossible to project environment and
come up with workable premeditated decisions.
However, for any organization like Delta airlines its effort to reduce
the effects of uncertainty, there is need to keep in touch with growing
trends in the market by being aggressive in searching for new
opportunities and allocate more resources in developing their products
and services to the customers. There is need to come up with enhanced
research and development strategies that will enable the firm remain
competitive enough in the industry and have ability to meet
sophisticated customer needs and preferences (Tidd & Bessant, 2009). The
firm needs to come up with services that are superior to their
competitors who include the Southwest Airline Company and Air France.
Therefore, Delta airlines need to improve on their service to be able to
remain competitive in the industry and capture a larger market share as
compared to their competitors.
On the other hand, there is need for technological advancement as well
as innovations to meet increasing customer tastes and preferences.
Therefore, Delta airlines must be in the forefront to respond to various
technological innovations that will place their services at upper hand
as compared to those other competing firms in the industry. There is
need for a defender plan that targets an invariable market and tries to
maintain industry niches to protect themselves from the competition.
They need to improve on the quality of their service as well as mode of
delivery of their services as compared to other firms offering similar
services in the industry to command a greater a market share.
Resource Dependency Theory
Resource dependency theory tries to explain how organization’s
external resources affect its behaviour. Acquisition of resources forms
an imperative part of strategic management of any given business.
Resource dependence goes beyond provisions of external organizations
that seek to finance, provide, distribute as well as contend with a
firm. Even though executive decisions form a significant portion of
decision-making process in the firm as compared to non- executive
decisions, collectively the latter has great influence on the
organization. This theory recognizes customers as crucial resource on
which any firm is dependent (Davis & Cobb, 2010).
Davis, G. F. and J. A. Cobb (2010) Resource dependence theory: Past and
future. Stanford`s organization theory renaissance. Bingley, NY: Emerald
Pfeffer, J., & Salancik, G. R. (2003). The External Control of
Orgaizations: A Resource Dependence Perspective. Stanford: Stanford
Pfeffer, J. and Salancik G. R. (1978). The External Control of
Organizations: A Resource Dependence Perspective. New York: Harper and
Tidd, J., & Bessant, J. (2009). Managing Innovation: Integrating
Technological, Market and Organizational Change. West Sussex: John Wiley
& Sons, Ltd.
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