External Environment and Organizational Culture Chapter 4 External Environment and Organizational Culture

Planning Ahead—Chapter 4 Study Questions What is in the general or macro environment of organizations? What are key elements and issues in the specific or task environment of organizations? How do organizations accomplish innovation? What are the emerging issues of sustainability and the environment?

Chapter 4 Learning Dashboard The General or Macro Environment Economic conditions Legal-political conditions Sociocultural conditions Technological conditions Natural environment conditions The Specific or Task Environment Stakeholders and value creation Competitive advantage Uncertainty, complexity, and change

Chapter 4 Learning Dashboard Environmental and Innovation Types of innovations The innovation process Disruptive innovation and technology Environment and Sustainability Sustainable development Sustainable business Human sustainability

Takeaway 1: The General or Macro Environment The general or macroenvironment — all of the background conditions in the external environment of the organization including: Economic health of the economy Legal-political philosophy/objectives of political party running the government Socio-cultural norms, customs, social values Technological development and availability of technology Natural environment nature and conditions of environment

Figure 4.1 Sample elements in the general environments of organizations

Takeaway 1: The General or Macro Environment Economic conditions Things like the overall health of the economy in terms of financial markets, inflation, income levels, and job outlook are always important. All such economic conditions affect the prospects for individual companies, the spending patterns and lifestyles of consumers, and even a nation’s priorities. They must be assessed, forecasted, and considered when executives make decisions about the strategies and operations of their organizations.

Takeaway 1: The General or Macro Environment Economic conditions Offshoring – outsourcing of jobs to foreign locations Reshoring – return of jobs from foreign locations

Takeaway 1: The General or Macro Environment Legal-political conditions laws and regulations, government policies, and the objectives of political parties vary from one country to the next Ex.Not all countries stand up for international copyright and intellectual property protection. Internet censorship - deliberate blockage of public access to information posted on the Internet

Takeaway 1: The General or Macro Environment Sociocultural conditions diversity issues relating to educational opportunity, access to technology, housing/job options norms, customs, demographics, and societal values Generational cohorts -- people born within a few years of one another and who experience somewhat similar life events during their formative years Cohorts: افواج، جماعه

Takeaway 1: The General or Macro Environment Technological conditions social media, features and “apps” on smart phones brings both opportunities “ new product development and advertising to employee networking and data sharing to virtual meetings and always-available chats. Between new applications and fast- developing mobile and smart device technologies” and problems”many employees spend a lot of time doing personal things online. Some employers call this loss of productive time “social notworking.” work-life balance ““never free from the job””

Takeaway 1: The General or Macro Environment Natural environment conditions nuclear plant failure, oil spill, hurricane “carbon neutral,” “green”, “sustainability” Sustainable business – meets both the needs of customers and protects the natural environment

Takeaway 2: The Specific or Task Environment The specific (task) environment - actual organizations, groups, and persons with whom an organization interacts and conducts business Includes important stakeholders such as: Customers Suppliers Competitors Regulators Owners

Stakeholders are the persons, groups, and institutions directly affected by an organization. The important stakeholders for most organizations include customers, suppliers, competitors, regulators, advocacy groups, investors or owners, and employees. “Society at large” and “future generations” are also part of the stakeholder map; they introduce, in particular, concerns for sustainability and the natural environment. Organizations should create value for and satisfy the needs of their multiple stakeholders. Advocacy:”تأييد” public support for or recommendation of particular cause or policy

Takeaway 2: The Specific or Task Environment Multiple stakeholders in the environment of an organization

Takeaway 2: The Specific or Task Environment? Competitive advantage a core competency that clearly sets an organization apart from competitors and gives it an advantage over them in the marketplace Companies may achieve competitive advantage in many ways, including: Costs, quality, delivery, flexibility

costs—finding ways and using technology to operate with lower costs than one’s competitors and thus earn profits with prices that one’s competitors have difficulty matching. quality— finding ways and using technology to create products and services that are of consistently higher quality for customers than what is offered by one’s competitors. delivery— finding ways and using technology to outperform competitors by delivering products and services to customers faster and on time, and by developing timely new products. flexibility— finding ways and using technology to adjust and tailor products and services to fit customer needs in ways that are difficult for one’s competitor to match.

Takeaway 2: The Specific or Task Environment Environmental uncertainty a lack of complete information regarding what exists and what developments may occur in the external environment The more uncertain the environment, the harder it is to analyze environmental conditions and predict future states of affairs. Two dimensions of environmental uncertainty: Degree of complexity Rate of change

Takeaway 2: The Specific or Task Environment Environmental uncertainty a lack of complete information regarding what exists and what developments may occur in the external environment The more uncertain the environment, the harder it is to analyze environmental conditions and predict future states of affairs. Two dimensions of environmental uncertainty: Degree of complexity: or the number of different factors in the environment. An environment is typically classified as relatively simple or complex Rate of change: An environment is typically classified as stable or dynamic

Figure 4.2 Dimensions of uncertainty

Takeaway 3: Environment and Innovation Innovation - process of putting new ideas into practice Innovation is often a high priority when executives and leaders try to steer organizations through complex and uncertain environments Business innovations Product innovation: result in the creation of new or improved goods and services Process innovation: result in better ways of doing things Business model innovation: result in new ways of making money for the firm.

Takeaway 3 : Environment and Innovation Social business innovations – find ways to use business models to address important social problems Ex. “microcredit”

Takeaway 3: Environment and Innovation The innovation process: Step 1: Imagining Step 2: Designing Step 3: Experimenting Step 4: Assessing Step 5: Scaling Reverse innovation – innovation can come from any level in the organization or location

Takeaway 3: Environment and Innovation The innovation process: Step 1: Imagining Step 2: Designing Step 3: Experimenting Step 4: Assessing Step 5: Scaling Reverse innovation – innovation can come from any level in the organization or location

Takeaway 3: Environment and Innovation Disruptive innovation – creates products/services that become so widely used that they largely replace prior practices and competitors

Takeaway 4: Environment and Sustainability Sustainability – commitment to protect the rights of present and future generations as co-stakeholders of present-day natural resources

Takeaway 4: Environment and Sustainability Sustainable development makes use of environmental resources to support societal needs today while also preserving and protecting them for future generations

Takeaway 4: Environment and Sustainability Environmental capital – natural resources used to sustain life and produce goods and services for society Land atmosphere Water Minerals

Takeaway 4: Environment and Sustainability Triple Bottom Line: Three P’s of organizational performance Profit People Planet

Takeaway 4: Environment and Sustainability Sustainable business – operates in ways that meets the needs of consumers while protecting the environment Sustainable/green innovations – help reduce an organization’s negative impact; enhance positive impact

Takeaway 4: Environment and Sustainability Human sustainability – concern for the effect of management practices on employee physical and psychological well-being Health and wellness programs Stress management Minimizing work-family conflict Control over work Fair wages and opportunities