ii.  Organizational Challenges 
Organizational challenges refer to concerns that are internal to the firm.  However, they are often a byproduct of
environmental forces because no firm operates in a vacuum.  These issues include:  competitive position (cost,
quality, and distinctive capability), decentralization, downsizing, organizational restructuring, self-managed work
teams, small businesses, organizational culture, technology, and outsourcing.
Organizational challenges are concerns or problems internal to a firm. They are often a byproduct of
environmental forces because no firm operates in a vacuum. Still, managers can usually exert much more control
over organizational challenges than over environmental challenges. Effective managers spot organizational issues
and deal with them before they become major problems. One of the themes of this text is proactively: the need for firms to take action before problems get out of hand. Only managers who are well informed about important
HR issues and organizational challenges can do this. These challenges include the need for a competitive
position and flexibility, the problems of downsizing and organizational restructuring, the use of self-managed
work teams, the rise of small businesses, the need to create a strong organizational culture, the role of tech-
nology, and the rise of outsourcing. 

An organization will outperform its competitors if it effectively utilizes its work force's unique combination of
skills and abilities to exploit environmental opportunities and neutralize threats. HR policies can influence an
organization's competitive position by 
a)  Controlling costs, 
b)  Improving quality, and 
c)  Creating distinctive capabilities
d)  Restructuring