Organizational Environmental Stability

Dynamism refers to the degree of turnover in environmental factors. A low degree of turnover of factors creates a stable environment. A high degree in turnover of factors creates an unstable environment. A stable environment allows organizational members to follow routine procedures for getting resources and distributing goods or services to the market. It also rewards organizations which have been operating the longest amount of time. The longer an organization operates under stable environmental conditions, the more managers learn and the more able they are to reduce the number of mistakes. Under conditions of environmental instability, managers must constantly adjust their activities to adapt to new conditions. As a result, efficiency is problematic because the techniques learned and applied last year may no longer be appropriate.

Many manufacturers of children's toys find themselves in unstable environments. Each year, the type of toys children demand will change. One year, it may be Cabbage Patch dolls; the next year, it may be Masters of the Universe dolls. Because most toys are sold during the holiday season, manufacturers of toys must begin speculating in early spring on what toys will be in demand (to give adequate lead time for their design and production). Managers who fail to predict correctly in March what toys children want in December can make the difference between a profitable and an unprofitable year for the company.
While many firms operating in so-called fad industries (e.g., toys, fashion clothing, records) are considered to be operating in an unstable environment, firms in other industries must also deal with instability. Airlines (price of fuel, deregulation), banks (prime rates, inflation), and farming (weather conditions, government policies) are just a few examples. On the other hand, manufacturers of box containers who have a steady demand for their products as well as a steady supply of resources are an example of a stable industry.