A Response Model to Market Adversity

The process by which organisations respond to changes in their environment is a particularly complex one, involving considerations of resource availability, strategy formulation, organisational structure and culture, power and information availability. In considering the interdependencies between these variables, it is suggested that interactions between environment, strategy and structure affect the distribution of power within the organisation, and that power is used to affect the distribution of resources. The advent of a market intelligence report which forecasts market adversity provides an occasion when the organisation can select from among a number of possible responses. A model of the selection process by which responses to market adversity are chosen is developed, in which it is suggested that the distribution of resources within the organisation plays a critical role. The model is a dynamic one, since the response selected is likely to re‐distribute resources within the organisation. If executives are viewed as competing against each other for access to resources, the possibility arises that an executive may deliberately bias the market signal to promote a response more favourable to his/her own relative position. Other sources of bias may also exist, all of which complicate the process of response selection. It is however argued that in the longer term a learning process may be expected to take place which effectively de‐biases the market signal. It is therefore suggested that it is the distribution of resources within the organisation which dominates the choice of response to forecast market adversity.