The munificence of an organization's environment refers to the level of resources available to an organization. The degree of munificence may range from rich to lean. Rich environments usually exist where resources are plentiful. However, a rich resource environment attracts other organizations and, over time, environments will move from rich to lean. As such, rich resource environments usually exist in the early stages of industry development or under conditions of monopoly market structure.
When environments become lean, organizations are required to engage in several tactics to survive. Stockpiling through inventory, cutthroat competitive practices, and more efficiency in the use of resources are all tactics that will increase the chances of survival. Organizations unable to adapt to lean environments are faced with two prospectsâ€”failure, or movement to a richer resource environment by changing their product, their market, or both.
For instance, a lumber mill in the Pacific Northwest at the turn of the century would have found resources (trees) in plentiful supply. Over time, however, the number of trees would diminish, changing the resource environment of the lumber mill from rich to lean. In addition, the establishment of other lumber mills in the region would make the supply of trees even more scarce.
How did lumber mills respond to this situation? Many discovered ways to be more efficient in the location and cutting of timber. As more competitors moved into the region, competitive pricing of timber became more intense. Many lumber mills created large warehouses for the storage of lumber to ensure that they would have adequate supplies. Some lumber mills moved to other regions where timber supplies were richer. Others simply failed. And, of course, firms in the lumber industry recognize the importance of reseeding the forests to generate richer supplies for the future.