Introduction to Management

The Firm and Its Environment

There are many kinds of organizations with different goals which do many things. Working in concert, these organizations can do amazing things that only one person could never do.
Even the simplest, low-technology products require the cooperation of many different organizations to reach the consumer. Consider a plain wooden chair that a person bought for her home. That chair was sold to her by a retail store, which is a for-profit organization. Either that same organization or another acted as a carpenter to carve and assemble the wood pieces in that chair. The wood was harvested or recycled by a different organization, which sold it to the carpentry business. This wood was shipped in trucks or by boats that were made by other organizations. Government organizations manage the roads or waterways that the wood was transported on and which the finished goods were delivered across. Other government organizations acted as taxing authorities on these transactions and government organizations which are different from these provide legal support for any purchase transactions. The oil, natural gas, and electricity which were used in the harvest of the wood, its transport, its sale, and its delivery were provided and administered by other organizations as well.
These organizations evolved because of economics, and no one person understands how to harvest lumber, drill and refine oil, sell furniture, build cars, and act as a salesperson. Yet all these roles had to play out to bring that chair to the consumer. This is similar to how different biological organisms evolved to participate in an ecosystem. None of the organisms fully understands how their organs, cells, or biological systems functions (even humans have to break this into different subject areas). With the exception of humans, none of the organisms take classes in environmental science either! They just do what they evolved to do, and nature does the rest to mediate their interactions.
The concept of evolution helps biologists understand how organisms adapt to their environment over time. This same concept helps explain how firms either change or go out of business when confronted with changes in their business environment. For example, organisms found in the desert usually have evolved ingenious ways to conserve water. Similarly, organizations facing similar challenges often find similar ways to meet those challenges. For example, firms in industries with declining sales usually find ways to cut costs to stay afloat. In biology, organisms that adapted to similar environments often appear to be similar. For example, the wings of a bat, a bird, and a pterodactyl have similar skeletal structures, enabling flight. Their wings do not come from a common ancestor: they evolved independently to make flight possible. Many firms in the same industry grow to resemble each other over time as they exploit a common economic niche.
The Firm and Its Environment549The Firm and Its Environment