Don Hellriegel John W. Slocum, Jr. Susan E. Jackson MANAGING: A COMPETENCY BASED APPROACH 11 th Edition Chapter 4—Assessing the Environment Prepared by Argie Butler Texas A&M University

Chapter 4: PowerPoint 4.1 Learning Goals 1.Explain how economic, demographic, and cultural factors affect organizations 2.State the five competitive forces in an industry 3.Describe the political and legal strategies managers use to cope with changes in the environment 4.Explain how technology changes the structure of industries

Chapter 4: PowerPoint 4.2 General Environment—sometimes called the macroenvironment, includes the external factors that usually affect all or most organizations

Chapter 4: PowerPoint 4.3 (Adapted from Figure 4.1) Demographics Technology Economy Country Cultural Values Competitors Macroenvironment Organization Politics

Chapter 4: PowerPoint 4.4  Economics is the discipline that focuses on understanding how people or nations produce, distribute, and consume various goods and services

Chapter 4: PowerPoint 4.5 (Adapted from Table 4.1) The New Age of Competition Source: Adapted from Friedman, T.L. The World is Flat. New York: Farrar, Straus & Giroux, 2005, OldNew Low-cost manufacturingValue-added services Self-relianceOutsourcing Made in U.S.A.Borderless competition The Economy (cont’d) Local knowledgeCustomer convenience Physical labor Human capital, software, knowledge management Smoke-stack industriesEnvironmental stewardship

Chapter 4: PowerPoint 4.6 Snapshot “Our assets leave on the elevator every night. Organizations do not own human capital; they can only rent them. In today’s world, human capital will have greater power than other resources because it is the people who create knowledge.” Andy Grove, Founder and CEO Intel Corporation

Chapter 4: PowerPoint 4.7 Impact of Changing Demographics on Organizations  Increasing diversity  Women participation rate increasing  Hispanic men rate increasing  People of color rate increasing  Managerial challenges  Multicultural awareness programs  Language offerings  Career challenges  Lifestyle issues  Illegal immigration

Chapter 4: PowerPoint 4.8  Culture: the dominant pattern of living, thinking, and believing that is developed and transmitted by people, consciously or unconsciously, to subsequent generations Value: a basic belief about a condition that has considerable importance and meaning to individuals and is relatively stable over time Value system: comprises multiple beliefs that are compatible and supportive of one another

Chapter 4: PowerPoint 4.9 Values can effect how a manager Why is Culture Important to Managers? (cont’d) Views other people and groups Perceives situations and problems Goes about solving problems Determines what is and is not ethical behavior Leads and controls employees

Chapter 4: PowerPoint 4.10 (Adapted from Figure 4.2) Why is Culture Important to Management: Overview of Cultural Factors Long-Term Orientation Power Distance Uncertainty Avoidance Gender Role Orientation Individualism Culture

Chapter 4: PowerPoint 4.11 Why is Culture Important to Management: Hofstede’s Framework  Power Distance—the degree to which less powerful members of society accept that influence is unequally divided  Uncertainty Avoidance—the extent to which members of a culture feel threatened by risky or unknown situations  Individualism—a combination of the degree to which society expects to take care of themselves and their immediate family and the degree to which people believe they are masters of their own destinies

Chapter 4: PowerPoint 4.12 Why is Culture Important to Management: Hofstede’s Framework (cont’d)  Gender Role Orientation—refers to the extent to which a society reinforces traditional norms of masculinity versus femininity  Long-Term Orientation—reflects the extent to which a culture stresses that its members accept delayed gratification of material, social, and emotional needs  The opposite of individualism is collectivism—a tight social framework in which group (family, clan, organization, and nation) members focus on the common welfare and feel strongly toward one another

Chapter 4: PowerPoint 4.13

Chapter 4: PowerPoint 4.14 (Adapted from Figure 4.4) Suppliers Substitute goods and services New Entrants Customers Competitors Rivalry among existing firms in industry

Chapter 4: PowerPoint 4.15 Bruce D. Henderson, founder and chairman of the Boston Consulting Group “For virtually all organizations, the critical environment constraint is their actions in relation to competitors. Therefore, any change in the environment that affects any competitor will have consequences that require some degree of adaptation. This requires continual change and adaptation by all competitors merely to maintain relative position.” Competitors

Chapter 4: PowerPoint 4.16 HH igh versus low barriers to entry  Economies of scale: achieved when increased volume lowers the unit cost of a good or service produced by a firm  Government regulation: barrier to entry if it bars or severely restricts potential new entrants to an industry  Product differentiation: the uniqueness in quality, price, design, brand image, or customer service that gives one firm’s product an edge over another firm’s  Capital requirements: the dollars needed to finance equipment, purchase supplies, purchase or lease land, hire staff, and the like

Chapter 4: PowerPoint 4.17  In a general sense, all competitors produce substitute goods or services, or goods or services that can easily replace another’s goods or services  Movie rental versus movie theatres  Books versus TV versus newspapers  Purchase versus rental  Cell phone versus hard lines

Chapter 4: PowerPoint 4.18  Customer bargaining power may be relatively great when:  Customer purchases a large volume relative to the supplier’s total sales  Product or service represents a significant expenditure by the customer  Large customers pose a threat of backward integration  Customers have readily available alternatives for the same services or products

Chapter 4: PowerPoint 4.19 BB argaining power of suppliers often controls: 1.how much they can raise prices above their costs or 2.reduce the quality of goods and services they provide before losing customers

Chapter 4: PowerPoint 4.20 (Adapted from Figure 4.5) Political-Legal Forces: Managerial Political Strategies Political-Legal Forces  Negotiation  Lobbying  Alliance  Representation  Socialization  Political action committees (PACs)  Laws  Government  Labor unions  Others

Chapter 4: PowerPoint 4.21 (Adapted from Figure 4.6) Technology WorkplaceStrategyManufacturingDistribution

Chapter 4: PowerPoint 4.22 Snapshot Meg Whitman, CEO, eBay “With 135 million users selling goods in more than 45,000 categories in 27 international markets, eBay has left all competitors in the dust. Technology has really changed people’s lives for the better.”

Chapter 4: PowerPoint 4.23  Workers need greater problem- solving skills  Outsourcing routine tasks  Virtual organizations

Chapter 4: PowerPoint 4.24  Faster new product introductions to market  Entrance of “electronic” competitors  Formation of “electronic shopping malls”  Wider choice of suppliers for company  More substitute goods and services available to company  Product differentiation based on technological sophistication

Chapter 4: PowerPoint 4.25 Mass Customization Reduction in Manufacturing time Outsourcing of routine jobs

Chapter 4: PowerPoint 4.26 Internet access for shopping Telecommunication devices Information superhighway for global competition