© Copyright 2004 McGraw-Hill. All rights reserved.4–14–1 What Is the Organizational Environment Organizational EnvironmentOrganizational Environment  The set of forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources.  Forces and conditions change over time creating: Opportunities for managers to enhance revenues, enter new markets, and strengthen the firm’s competitive position.Opportunities for managers to enhance revenues, enter new markets, and strengthen the firm’s competitive position. Threats to the firm from new competitors, economic downturns, and diminished access to critical resources.Threats to the firm from new competitors, economic downturns, and diminished access to critical resources.

© Copyright 2004 McGraw-Hill. All rights reserved.4–24–2 The Task Environment SuppliersSuppliers  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)Raw materials, component parts, labor (employees)  Relationships with suppliers can be difficult due to materials shortages, unions, and lack of substitutes. Suppliers that are the sole source of a critical item are in a strong bargaining position to raise their prices.Suppliers that are the sole source of a critical item are in a strong bargaining position to raise their prices. Managers can reduce supplier effects by increasing the number of suppliers of an input.Managers can reduce supplier effects by increasing the number of suppliers of an input.

© Copyright 2004 McGraw-Hill. All rights reserved.4–34–3 The Task Environment (cont’d) Global OutsourcingGlobal Outsourcing  The purchase of inputs from foreign suppliers, or the production of inputs abroad, to lower production costs and improve product quality.

© Copyright 2004 McGraw-Hill. All rights reserved.4–44–4 The Task Environment (cont’d) DistributorsDistributors  Organizations that help other organizations sell their goods or services to customers. Powerful distributors can limit access to markets through its control of customers in those markets.Powerful distributors can limit access to markets through its control of customers in those markets. Managers can counter the effects of distributors by seeking alternative distribution channels.Managers can counter the effects of distributors by seeking alternative distribution channels.

© Copyright 2004 McGraw-Hill. All rights reserved.4–54–5 The Task Environment (cont’d) CustomersCustomers  Individuals and groups that buy goods and services that an organization produces. Identifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success.Identifying an organization’s main customers and producing the goods and services they want is crucial to organizational and managerial success.

© Copyright 2004 McGraw-Hill. All rights reserved.4–64–6 The Task Environment (cont’d) CompetitorsCompetitors  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 so chose.Organizations that presently are not in the task environment but could enter if they so chose.  Strong competitive rivalry results in price competition, and falling prices reduce access to resources and lower profits.

© Copyright 2004 McGraw-Hill. All rights reserved.4–74–7 The Task Environment (cont’d) Barriers to EntryBarriers to Entry  Factors that make it difficult and costly for the organization to enter a particular task environment or industry.  Economies of scale Cost advantages associated with large operations.Cost advantages associated with large operations.  Brand loyalty Customers’ preference for the products of organizations currently existing in the task environment.Customers’ preference for the products of organizations currently existing in the task environment.

© Copyright 2004 McGraw-Hill. All rights reserved.4–84–8 The General Environment Economic ForcesEconomic 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.  Managers usually cannot impact or control these.  Forces have profound impact on the firm.

© Copyright 2004 McGraw-Hill. All rights reserved.4–94–9 The General Environment Technological ForcesTechnological Forces  Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services. Results in new opportunities or threats to managersResults in new opportunities or threats to managers Often makes products obsolete very quickly.Often makes products obsolete very quickly. Can change how managers manage.Can change how managers manage.

© Copyright 2004 McGraw-Hill. All rights reserved.4–10 The General Environment (cont’d) Sociocultural ForcesSociocultural Forces  Pressures emanating from the social structure of a country or society or from the national culture. Social structure: the arrangement of relationships between individuals and groups in society.Social structure: the arrangement of relationships between individuals and groups in society. National culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society.National culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society.  Cultures and their associated social structures, values, and norms differ widely throughout the world.

© Copyright 2004 McGraw-Hill. All rights reserved.4–11 The General Environment (cont’d) Demographic ForcesDemographic 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. During the past two decades, women have entered the workforce in increasing numbers and most industrial countries’ populations are aging.During the past two decades, women have entered the workforce in increasing numbers and most industrial countries’ populations are aging. This will change the opportunities for firms competing in these areas as demands for child care and health care are forecast to increase dramatically.This will change the opportunities for firms competing in these areas as demands for child care and health care are forecast to increase dramatically.

© Copyright 2004 McGraw-Hill. All rights reserved.4–12 The General Environment (cont’d) Political ForcesPolitical Forces  Outcomes of changes in laws and regulations, such as the deregulation of industries, the privatization of organizations, and increased emphasis on environmental protection. Increases in laws and regulations increase the costs of resources and limit the uses of resources that managers are responsible for acquiring and using effectively and efficiently.Increases in laws and regulations increase the costs of resources and limit the uses of resources that managers are responsible for acquiring and using effectively and efficiently.

© Copyright 2004 McGraw-Hill. All rights reserved.4–13 The General Environment (cont’d) Global ForcesGlobal Forces  Outcomes of changes in international relationships; changes in nations’ economic, political, and legal systems; and changes in technology, such as falling trade barriers, the growth of representative democracies, and reliable and instantaneous communication.  Important opportunities and threats to managers: The economic integration of countries through free- trade agreements (GATT, NAFTA, EU) that decrease the barriers to trade.The economic integration of countries through free- trade agreements (GATT, NAFTA, EU) that decrease the barriers to trade.

© Copyright 2004 McGraw-Hill. All rights reserved.4–14 The Changing Global Environment Global OrganizationGlobal Organization  An organization that operates and competes in more than one country. The Challenges of Global CompetitionThe Challenges of Global Competition  Establishing operations in a foreign country.  Obtaining inputs from foreign suppliers.  Managing in a foreign culture. The Global Environment Is OpenThe Global Environment Is Open  Managers need to learn to compete globally.

© Copyright 2004 McGraw-Hill. All rights reserved.4–15 Declining Barriers to Trade and Investment TariffTariff  A tax that government imposes on imported or, occasionally, exported goods. Intended to protect domestic industry and jobs from foreign competition.Intended to protect domestic industry and jobs from foreign competition. Other countries usually retaliate with their own tariffs, actions that eventually reduce the overall amount of trade and impede economic growth.Other countries usually retaliate with their own tariffs, actions that eventually reduce the overall amount of trade and impede economic growth.

© Copyright 2004 McGraw-Hill. All rights reserved.4–16 GATT and the Rise of Free Trade Free-Trade DoctrineFree-Trade Doctrine  The idea that if each country specializes in the production of the goods and services that it can produce most efficiently, this will make the best use of global resources. If India is more efficient in making textiles, and the United States is more efficient in making computer software, then each country should focus on their respective strengths and trade for the other’s goods.If India is more efficient in making textiles, and the United States is more efficient in making computer software, then each country should focus on their respective strengths and trade for the other’s goods.

© Copyright 2004 McGraw-Hill. All rights reserved.4–17 National Culture and Global Management Management practices that are effective in one culture often will not work as well in another culture.Management practices that are effective in one culture often will not work as well in another culture.  Expatriate managers (managers who go abroad to work for a global organization) need advance training to understand the cultural context of their host country.  Managers who do not understand the values, folkways, and mores that guide behavior in a culture will encounter difficulties in managing within that culture.