WEEK 8 MANAGING THE ENVIRONMENT Özge Can –

Social Responsibility  Social Responsibility  The way a company’s managers and employees view their duty or obligation to make decisions that protect, enhance, and promote the welfare and well-being of the society as a whole  Corporate Social Responsibility (CSR): The idea that businesses have obligations to society beyond the pursuit of profits

I. The Classical View  Management’s only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).  Expending the firm’s resources on doing “social good” is not preferable

II. Socioeconomic View  Management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare.  Corporations are not independent entities responsible only to stockholders. Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.

Why Be Socially Responsible?  Building good image and reputation  Responsibility for bearing the costs of protecting stakeholders, providing health care and income, paying taxes and etc  Promoting a climate of caring in general  Better environment and better society  Superiority of prevention over cures

Open Systems  Open systems  Organizations are affected by, and affect, their environment.  They are systems open to external world.

 Set of forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources  Components of external environment:  Task Environment  General Environment What is External Environment?

Forces in the External Environment

What Should Managers Do to Deal with External Environment?  Environmental analysis  Environmental scanning => searching for and sorting through information about the environment  Forecasting and benchmarking  Adapting to environment: changing yourself or  Try to influence/ change the environment

Task (Competitive) Environment  Set of forces and conditions that originate with suppliers, distributors, customers, and competitors and affect an organization’s ability to obtain inputs and dispose of its outputs because they influence managers on a daily basis  Direct and immediate impact on organization  Suppliers  Distributors  Customers  Competitors & Potential Competitors

General (Macro) Environment  The wide-ranging global, economic, technological, socio- cultural, demographic, political, and legal forces that affect an organization and its task environment  Economic forces  Technological forces  Socio-cultural forces  Demographic forces  Political/ legal forces  Global forces

Task Environment: Suppliers  Suppliers: Individuals and organizations that provide an organization with the input resources that it needs to produce goods and services  Raw materials, component parts, labor (employees)  Material shortages and lack of substitutes  Managers can have stronger bargaining power by increasing the number of suppliers of an input

 Outsourcing  Purchase of inputs from foreign suppliers or the production of inputs abroad to lower production costs and improve product quality or design  Global outsourcing => outsourcing across countries Task Environment: Suppliers

Task Environment: Distributors  Distributors  Organizations that help other organizations sell their goods or services to customers  Examples: package delivery companies, super market retailers

Task Environment: Customers  Customers  Individuals and groups that buy the goods and services that an organization produces  Consumers or businesses  Identifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success.

Task Environment: Competitors  Competitors  Organizations that produce goods and services that are similar to a particular organization’s goods and services  Potential Competitors  Organizations that presently are not in the task environment but could enter if they choose so

Potential Competitors: Barriers to Entry  Barriers to Entry => Factors that make it difficult and costly for new companies to enter a particular task environment or industry  Economies of scale Cost advantages associated with large operations  Brand loyalty Customers’ preference for the products of organizations currently existing in the task environment.  Government regulations

Barriers to Entry

General (Macro) Environment  The wide-ranging global, economic, technological, socio- cultural, demographic, political, and legal forces that affect an organization and its task environment  Economic forces  Technological forces  Socio-cultural forces  Demographic forces  Political/ legal forces  Global forces

General Environment: Economic Forces  Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization

General Envrionment: Technological Forces  Technology: The combination of skills and equipment that managers use in the design, production, and distribution of goods and services  Technological Forces: Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services

General Environment: Socio-cultural Forces  Pressures emanating from the social structure of a country (or society) or from the national culture  Social Structure  The system of relationships established between individuals and groups in a society  National Culture  The set of values, attitudes, beliefs, and norms shared by a majority of the inhabitants of a country

General Environment: Demographic Forces  Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

General Environment: Political & Legal Forces  Outcomes of changes in laws and regulations  Such as: regulation of industries, the privatization of organizations, and increased emphasis on environmental protection

Globalization  Globalization:  The set of specific and general forces that work together to integrate and connect economic, political, and social systems across countries, cultures, or geographical regions so that nations become increasingly interdependent and similar  Need of new thinking and new managerial skills

Globalization  A shift toward a more open global environment in which capital flows more freely  Four principal forms of capital:  Human capital => flow of people  Financial capital => flow of money  Resources capital => flow of natural resources, parts, components  Political capital => flow of power and infleunce

Globalization  Companies search for new opportunities to create profit and wealth.  Declining barriers to international trade and investment  Free trade, new trade aggreements  Declining barriers of distance and culture

Management Skills for The Global Marketplace:  Effective global managers need:  Global strategic skills  Communication skills  Cultural intelligence and global mind set  Transfer of knowledge skills  Team building skills  Organization skills

Next Week: Mid-Term Exam  November 20, 2012 – Tuesday  Hours: 13:00-14:30  Classes: O O 002 – O 003 Good luck!

Exam Content:  Textbook Chapters:  Chapter-2 is not included  Powerpoint slides

Exam Content:  You are responsible for all topics that we have covered so far BUT please pay special attention to:  Four tasks of management (Chapter 1)  Levels and skills of management (Chapter 1)  Big five personality traits and others (Chapter 3)  Emotions, values, job attitudes and organizational culture (Chapter 3)

Exam Content:  Diversity of the workforce; sources of diversity; management of diversity (Chapter 5)  Stakeholders and managers’ responsibilities and ethical behavior to them (Chapter 4)  Rules and sources of ethical decision-making; social responsibility (Chapter 4)  External environment: Components of task and general environments; how each one can effect the company and managers (Chapter 6)

Exam Format:  Multiple choice questions (% 60-70)  Short-essay questions (1-2 Qs: % 30-40)  No definition will be asked; do not memorize anything  I will be seeking to receive your take; opinions comments on a managerial issue based on the concepts and ideas discussed in this course.