Managing Environmental Elements

Question 1

Define Risk

Answer 1

Risk is the uncertainty that a company faces and can cause business loss or failure.
It can make it difficult for companies to reach targets.

Question 2

List the types of risk

Answer 2

•strategic risk
•operational risk
•compliance risk
•financial risk

Question 3

Define strategic risk

Answer 3

Refers to the internal and external events that may make it difficult for an organization to achieve their objectives and strategic goals.

Question 4

Define operational risk

Answer 4

Risk of loss because of ineffective or failed internal processes,people, systems or external events which can disrupt the flow of business operations.

Question 5

Define compliance risk

Answer 5

Arises due to non-compliance with laws or other regulations.

Question 6

Define financial risk

Answer 6

Likelihood of losing money in an investment decision.

Question 7

List the three major approaches in attempting to manage environmental uncertainty and it’s potential impact

Answer 7

•adapt to the existing environmental elements (adaptation)
•attempt to influence environmental favor ability (favorability influence)
•shift the domain of operations away from threatening environmental elements towards more beneficial. (Shifting the domain)

Question 8

Describe adaptation as a method of managing environmental elements

Answer 8

Involves changing internal operations and activities to make the organization more compatible with its environment

Question 9

List the four techniques under adaptation

Answer 9

•Buffering
•Smoothing
•Forecasting
•Rationing

Question 10

Define buffering

Answer 10

This is a method used to ensure production does not reach a standstill.
An inventory of raw materials should be kept on hand in case of any fluctuations in the production

Question 11

Define smoothing

Answer 11

This is when a firm reduces demand for its products due to its production capacity being overstrained e.g advertisement withdrawal

Question 12

Define forecasting

Answer 12

This is a technique whereby managers attempt to predict the future characteristics of the organizational environment and hence make decisions that will help the firm deal with the environment of tomorrow.
Budgeting and planning are key activities under forecasting.

Question 13

Rationing

Answer 13

This is providing limited access to a product or service that is in high demand.
It has the advantage of allowing the organization to avoid costs of expanding capacity

Question 14

Define Favorability Influence

Answer 14

This approach involves attempting to alter environmental elements to make them more compatible with the needs of the organization.

Question 15

List the methods is Favorability Influence

Answer 15

•advertising and public relations
•boundary spanning
•recruiting
•contract negotiation
•co-opting and trade associations

Question 16

Explain advertising

Answer 16

This is a means of communicating with the users of a product or service to create awareness.
They are intended to promote ideas,goods or services.

Question 17

Explain on public relations

Answer 17

This is a strategic communication process that builds mutually beneficial relationships between organizations and their publics.
The aim is it create and maintain a positive image by creating a strong relationship with the audience.

Question 18

Explain on boundary spanning

Answer 18

Involves creating roles within the organization that link the organization’s internal networks with external sources of information.

Question 19

Define recruiting

Answer 19

Involves attracting skilled and qualified job candidates who meet the needs of the organization.

Question 20

Define contract negotiation

Answer 20

This is the process of give and take the parties go through to reach an agreement.

Question 21

Describe co-opting

Answer 21

This is the process of absorbing key members of important environmental elements into the leadership or policy making structure of an organization.

Question 22

Define a trade association

Answer 22

This is a not for profit organization made up of a collection of companies and/or individuals with common interests or who work in the same industry.

Question 23

Discuss shifting domains

Answer 23

This approach involves making changes in the mix of products and services offered.
One major technique is to move out of a current products,service or geographic area into a more favorable domain.

Question 24

Discuss a second domain shift approach

Answer 24

Is to expand current domains through diversification