Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © 2003 Chapter 2 Organizational Environments and Cultures

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Would You Do? 4The “Southwest” of Europe 4Stiff competition from “go” & rising costs 4How do you react to the competition & political pressures? 4What would you do?

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © After discussing this section, you should be able to: Learning Objectives External Environments 1.discuss how changing environments affect organizations. 2.describe the four components of the general environment. 3.explain the five components of the specific environment. 4.describe the process that companies use to make sense of their changing environments.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Changing Environments 4Environmental Change 4Environmental Complexity 4Environmental Munificence 4Uncertainty

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Environmental Change 4The rate at which a company’s general and specific environments change Tstable environments Tdynamic environments 4Punctuated equilibrium theory Tcompanies cycle through stable and dynamic environments

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Punctuated Equilibrium: U.S. Airline Industry Punctuated Equilibrium: U.S. Airline Industry Adapted from Exhibit 2.1

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Environmental Complexity 4The number of external factors in the environment that affect organizations TSimple environments âhave few environmental factors TComplex environments âhave many environmental factors.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Environmental Munificence 4The degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Uncertainty 4How well managers can understand or predict the external changes and trends affecting their businesses

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Environmental Change, Complexity, & Munificence Environmental Characteristics ComplexityChangeResources High Medium Low Environmental Uncertainty Adapted from Exhibit 2.2

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © General & Specific Environments Business B Customers Competitors Suppliers Industry Regulation Advocacy Groups Business A Customers Competitors Suppliers Industry Regulation Advocacy Groups Sociocultural Component Economy Political/Legal Component Technological Component Adapted from Exhibit 2.3 Specific Environment General Environment

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © General Environment 4Economy 4Technological 4Sociocultural 4Political/Legal

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Economy 4Growing vs. shrinking economies 4Future economic activity is difficult to predict 4Business confidence indices Towners’/managers’ confidence in the growth of the economy

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Technological 4Technology is the knowledge, tools, and techniques used to transform inputs (raw materials, information, etc.) into outputs (products and services) 4Technological changes can benefit or threaten businesses

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Sociocultural 4Refers to the demographic characteristics and general behavior, attitudes, and beliefs of people in a particular society 4Two important components TDemographic changes TChanges in behavior, attitudes, and beliefs

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Political/Legal 4Includes the legislation, regulation, and court decisions that govern and regulate business behavior 4Managers must be aware of relevant laws and regulations Ttrack changes Tavoid lawsuits and penalties

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Specific Environment 4Customer 4Competitor 4Supplier 4Industry Regulation 4Advocacy Group

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Customer Component 4Customers are essential for business survival 4Managers must monitor customers’ wants and needs T reactive âresponding to complaints T proactive âanticipating problems

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Competitor Component 4Companies in the same industry that sell similar products or services to customers 4Competitive analysis Tdeciding who your competitors are T anticipating competitors’ moves Tdetermining competitors’ strengths and weaknesses

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Supplier Component 4Companies that provide material, human, financial, and informational resources to other companies 4Supplier & buyer dependence 4Opportunistic vs. relationship behavior

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Industry Regulation Component 4Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Federal Regulatory Agencies & Commissions Adapted from Exhibit 2.5

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Federal Regulatory Agencies & Commissions Adapted from Exhibit 2.5

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Advocacy Group Component 4Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions 4Influence techniques Tpublic communications Tmedia advocacy Tproduct boycotts

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Making Sense of Changing Environments 4Environmental Scanning 4Interpreting Environmental Factors 4Acting on Threats and Opportunities

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Environmental Scanning 4Searching the environment for important events or issues that might affect an organization 4Scanning: Treduces uncertainty Talters organizational strategies Tcontributes to organizational performance

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Interpreting Environmental Factors 4Managers determine what environmental events and issues mean to the organization 4Opportunities vs. threats

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Acting on Threats and Opportunities 4Managers have to decide how to respond to these environmental factors 4Cognitive maps Tsimplified models of external environments Tdepicts how managers believe environmental factors relate to possible organizational actions

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Cognitive Maps Good location Kmart Low rent & taxes Wal-Mart Large mall 20 minutes away Low-cost strategy Good value Good service Large selection of latest fashions Strength & Weaknesses Potential Actions Environmental Factors Success, Profits Too small to get volume discounts Low employee turnover Know customers well Reasonable selection prices Adapted from Exhibit

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © After discussing this section, you should be able to: Learning Objectives Internal Environments 5.explain how organizational cultures are created and how they can help companies be successful.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Organizational Cultures: Creation, Success, and Change 4Creation and Maintenance of Organizational Cultures 4Successful Organizational Cultures 4Changing Organizational Cultures

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Creation and Maintenance of Organizational Cultures 4Company founders help create culture 4Cultures are maintained through: TStories THeroes

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Blast From The Past 4Capturing corporate history 4Preserves culture and values

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Successful Organizational Cultures Adapted from Exhibit 2.7 D.R. Denison & A.K. Mishra, Organization Science 6(1995): Involvement Consistency Clear Mission Clear Mission Adaptability

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Been There, Done That 4The beliefs and values of Starbucks Coffee Tsharing success Ta culture of meaning and loyalty Tgrassroots decision making

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © Changing Organizational Cultures 4Behavioral addition Tis the process of having managers and employees perform a new behavior 4Behavioral substitution Tis having managers and employees perform a new behavior in place of another behavior 4Change visible artifacts Tsuch as the office design and layout, company dress codes, etc.

Management, 2e by Chuck Williams South-Western/Thompson Learning Copyright © What Really Happened? 4Challenges in the economic, supplier, competitor, and industry components 4Avoids travel agents by using the Web 4Directly confronts competitors and regulators