The Environment and Corporate Culture Chapter 2 The Environment and Corporate Culture 1

General Environment The layer of the external environment that affects the organization indirectly. 3

General Environment Technological Task Environment International The layer of the external environment that directly influences the organization’s operations and performance. Sociocultural Legal/Political Economic 9

Organization’s Internal Environment General Environment Technological Task Environment International Customers Sociocultural Organization’s Internal Environment Labor Market Competition Employees Culture Management Suppliers Legal/Political Economic 14

The Organization-Environment Relationship

Three Strategies for Coping with High Uncertainty 1. Adapt the organization to the changes in the environment 2. Influence the environment to make it more compatible with organizational needs. 3. Moving from one environment to another (“Domain Shift”) 16

Adapting to the Environment Boundary-spanning roles link and coordinate the organization with key elements in the external environment Forecasting = spotting trends that enable managers to predict future events Flexible structure--- Organic (non-bureaucratic) structure Has few rules and regulations Decentralized Decision Making 17

Mergers and Joint Ventures Also Reduce Uncertainty Merger occurs when two or more organizations combine to become one Joint venture is a strategic alliance by two or more organizations. 20

Influencing the Environment Advertising Public relations Political activity Trade associations 21

Domain Shifts Acquisitions Divestures New Product Creation Old Product Discontinuance Geographical Moves

Corporate Culture Key values, beliefs, understandings, and norms shared by members of an organization. 22

Culture that can be seen at the surface level Visible Artifacts such as dress, office layout, symbols, slogans, ceremonies Invisible Expressed values such as “The Penney Idea,” “The H-P Way” Underlying assumptions and deep beliefs such as “people are lazy and can’t be trusted” Deeper values and shared understandings held by organization members. 27

Types of Cultures There are many classification systems, including those based on: Risk Tolerance Communication Patterns Types of Control Coordination Techniques Reward Systems Open-Systems Focus 33

Four Types of Corporate Cultures

Four Types of Corporate Cultures Fast-Changing External Environment Adaptability Culture Puts customers first, stressing innovation, risk taking, Little stress on people, teamwork Involvement Culture Emphasizes employee participation in determining changes in response to the environment Much stress on employee well-being, teamwork

Four Types of Corporate Cultures Stable External Environment Achievement Culture Puts customers first, stressing competition, hard work Consistency Culture Emphasizes following rules, being careful

High-Performance Culture Based on solid mission / clear agreed upon purpose Fast changing environment provides opportunities Has shared adaptive values Employee involvement encouraged (i.e., Balances needs of Customers and needs of Employees

Sources of Culture Founder Change Agents Experience National, Regional Culture

Why Change a Culture? To keep up with the competition To meet customer needs Your company is doing poorly Your company is growing rapidly

Maintaining/Changing Culture Cultural Leadership Communicate Reward Set Examples