The S-O-R Model
• What is the S-O-R Model?
o It is a model that can provide a framework for analyzing a case
o It can help one understand and put into context, the environmental influences
o Helps to relate a firm’s strategies and actions to specific environmental influences
o Model views the firm as primarily responding to various the STIMULI (S) in its environment
o The environment serves as a stimulus to the organization by creating perceived opportunities and threats
o The organization may choose to respond or to not respond to the stimuli
o Different firms may choose to respond differently to the same stimulus because the organizations themselves are different
o An organization’s internal environment, its strengths and weaknesses will be important factors in how a firm chooses to respond
o The specific RESPONSE (R) to a stimulus will, therefore, be moderated by the internal environment of the firm
o Depending on the unique characteristics of the organization- its owners, board or directors, employees and culture, the ORGANIZATION (O) acts as an intervening or moderating factors that will influence the firm’s decision as to how to respond to its perceived opportunities and threats
• Stimuli
o Almost anything in a firm’s environment may serve as a stimulus for action
o Changes in the general environment, such as new technology, changes in the law, shifting political orientations, or changing social trends may serve as opportunities or threats to the firm
o Changes in the firm’s task or operating environmental such as, increased or decreased competition, shifts in customer preferences, decreasing number of customers, supplier screw-ups, stock holder demands, etc. may also create opportunities/threats for organizations
o The astute firm will keep abreast of important changes in its environment, which may serve as stimuli
o Environmental changes are constantly occurring, regardless of whether or not the firm recognizes the potential impact of the changes
o While not all changes in the environment may be salient to an individual firm, through some process, the firm must decide to which changes (stimuli) it should respond
• Organization
o The internal environment of the organization (o) will be instrumental in determining if and how a firm will respond to a particular stimulus
o Perhaps the firm is short on cash, in this situation the firm may not be able to take advantage of the latest in technology, even though it may be aware of the benefits
o The demographics, characteristics, orientations and values of the employees, board of directors, and owners will, in most cases have some influence
o For example, if the people are young, ambitious risk-takers, the firm is likely to respond very differently than if the people involved are older, conservative, and risk adverse
o The employees of the firm may or may not have the skills and abilities required to take advantage of certain opportunities
o On the other hand, it is possible that the employees have many skills
o The culture of the firm, its dedication to social causes and its social responsibilities may also influence how it will respond
• Responses
o How an organization responds to a stimulus is it response
o The firm may choose to “do nothing”; This is strategic response, which is typical of firms who view the stimulus as a “passing fad” but not something to which the firm needs to have an active response
o Other firms may take a “wait-and-see” approach, which means they do nothing as an immediate response, but keep monitoring the situation to determine the appropriate action
o The monitoring of the stimulus is considered an information management response
o This may include environmental scanning, using boundary spanners to acquire more information, hiring expert consultants, conducting formal research studies, or other actions that may give the firm more concrete information on which to base its decision
o Strategic responses include a variety of active responses in addition to the “do nothing” response
o Deciding to introduce a new product line, changing the pricing strategy, the distribution strategy or developing an entire new strategic approach
o The range of possible strategic responses is limited only by one’s imagination
o Some firms, however, may try to influence or change the stimuli in its environment, this approach is referred to as direct influence on the environment, a good example of this is firms who lobby congress or other legislative bodies to get specific laws changed
o If a new law is perceived as a threat to the firm, the firm will likely want to try to get the law changed
o In other cases the firm may try to influence regulators, their customers, or their suppliers
o A firm may also wish to change or reinvent itself in response to environmental changes
o For example, a firm may decide to try to automate its production facilities in response to shortage of skilled labor
o The firm may, in some cases, decide to redesign its organizational structure such as decentralizing, or reorganizing by geographic regions or product lines
o These types of responses are called organizational design responses
o Another classification of responses is mergers, takeovers, acquisitions, and alliances (mtaa)
o In response to fierce competition, many firms choose to merge or acquire their competition rather than compete with them
o Forming a strategic alliance is a response where two or more firms maintain their separate identifies; however, jointly work together on a particular enterprise or endeavor
o A good alliance is one where the weaknesses of one organization are the areas of strength of the other
• Creating your charts
o One general environment stimulus may trigger 2 or 3 task stimuli; organize your charts to reflect this
o Keep in mind that one stimulus may product multiple responses and also one response may have been prompted by multiple stimuli
• Scoring of cases
o Cases are evaluated on both columns and rows
o Columns must include all salient aspects of the case and rows must demonstrate and understanding for the S-O-R logic, how the environment both general and task, served as stimuli to the organization and how the characteristics of the internal environment influenced how the firm chose to respond
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