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Companies sometimes utilize pro-active methods to cope with the high uncertainty.Instead of adapting their organizations to the changes, they prefer to change those elements in the environment causing changes. Some tech­niques widely used are: advertising and public relations, political activity and lobbying, and trade associations.

Advertising and Public Relations: Advertising is an effective way to man­age demand for company products. The objective is to influence customers to buy the company’s product by changing their tastes and purchasing behavior. Public relations attempts to influence public opinion about the company itself. Under the influence of advertising and public relations activities administered by the company, customers and the public may change their purchasing behavior toward company’s products and build positive opinions about the company image.

Political Activity and Lobbying: Organizations attempting to influence government legislation and regulations for their interests best describes politi­cal activity. One of the most widely used political activities to affect state legis­lators and other national or local governing bodies is lobbying, that is a political activity operated by professionals In a continuous and professional way. Many organizations pay lobbying companies to express their views to effective gov­ernment individuals and institutions.

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When the level of uncertainty increases due to external factors with respect to political, legal, technological, sociocultural, economical, competition, suppli­ers, customers, etc., business people may use several strategies to adapt to the changes.

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Uncertainty occurs when business people do not have sufficient informa­tion and knowledge about environmental factors. In such circumstances it is not easy for managers to understand and predict the needs and changes in the environment. Two important factors that have a direct effect on the level of uncertainty are the number of factors in the environment that affects the organ­ization and the rate of change in these factors. When there are few factors in the environment that affect the company and if these factors are rather stable and do not change rapidly, the organization faces a low uncertainty. However when the external factors that affect the organization increase in number and if these factors change very rapidly, the organization in those circumstances experi­ences very high uncertainty.

Business people may manage the low uncertainty and draw less attention to external issues. When the level of uncertainty rises then two basic strategies can be implemented: to adapt the organization to changes in the external envi­ronment or to influence the environment to make It more appropriate for organi­zational needs and goals

External environment consists of several forces that cannot be controlled by the organization. These forces are explained in the above paragraphs. The companies cannot directly control them since the above-mentioned forces In the external environment create uncertainty. However the business people should try to manage the uncertain external environment by designing their organiza­tions to adapt to the environment or to influence the environment.

As a part of the external environment, the industry environment is closer to the business people and firms and has a more direct effect on them relative to the general environment. Industry can be described as a group of companies that produce similar products which are close substitutes. These companies fight for the same customer acceptances for their similar products. The impor­tant factors in the industry environment are the customers, suppliers, competi­tors, substitutes and the labor market.

Customers: Customers are the potential buyers of the products that are supplied by the firms in the industry. They acquire the goods and services pro­duced to satisfy their particular needs. Managers and business people consid­er the potential customers together with their particular needs. Three major groups of customers are: consumers, retailers and wholesalers, and Industrial or institutional buyers. The companies monitor the customer needs and wants and select a target market to develop a marketing mix that will eventually satis­fy the customer groups. Read the rest of this entry »