1. The Environment and Corporate Culture Chapter 3

2. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 2 Organizational Environment All elements existing outside the boundary of the organization that have the potential to affect the organization Manager’s Challenge: IBM, p. 77

3. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 3 External Environment ● General environment – affects indirectly ● Task environment - Affects directly - Influences operations and performances ● Internal environment – elements within the organization’s boundaries

4. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 4 Organizational Environments Management Employees Culture Internal Environment Suppliers Competitors Customers Labor Market Legal/Political Economic Technological Socio-Cultural International General Environment Task Environment Technological Suppliers

5. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 5 International Dimension ● Provides New Customers Competitors Suppliers ● Shapes: Social trends Technological trends Economic trends

6. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 6 Technological Dimension Scientific and technological advances – Specific industries – Society at large Impact – Competition – Relationship with Customers – Medical advances – Nanotechnology advances

7. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 7 Socio-Cultural Dimension Dimension of the general environment – Demographic characteristics – Norms – Customs – Values

8. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 8 Key Demographic Trends in U.S. ● By 2050 non-Hispanic whites will make up only about half of the population, down from 74% in 1995; and 69% in 2004 ● Baby boomer generation is aging and losing interest in high- cost goods. Generation Y, rival them in size, will soon rival them in buying power. ● The single father household is the fastest growing living arrangement, which rose 62% in 10 years. Two-parent and single-mother households are still much more numerous ● Unprecedented demographic shift = married couple households slipped from 80% in 1950s to just over 50% in 2003. Couples with kids= 25%, with projection 20% by 2010 and 30% of homes inhabited by someone who lives alone.

9. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 9 Economic Dimension ● General economic health ● Consumer purchasing power ● Unemployment rate ● Interest rates ● Recent Trends ● Frequency of mergers and acquisitions ● Small business sector vitality

10. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 10 Task Environment Sectors that have a direct working relationship with the organization ● Customers ● Competitors ● Suppliers ● Labor Market

11. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 11 Labor Market Forces Labor Market Forces Affecting Organizations today ● Growing need for computer literate information technology workers ● Necessity for ongoing investment in human resources – recruitment, education, training ● Effects of international trading blocks, automation, outsourcing, shifting facility locations upon labor dislocations

12. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 12 Adopting to the Environment Boundary-spanning Inter-organizational partnerships Mergers or joint ventures

13. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 13 External Environment and Uncertainty Number of Factors in Organization Environment Adapt to Environment High Uncertainty Low Uncertainty High Low High Rate of Change in Factors in Environment

14. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 14 Competitive Intelligence - CI What - Activities to get as much information as possible about one’s rivals Where - Web sites, commercial databases, financial reports, market activities, news clippings, trade publications, personal contacts Why – Spot potential threats or opportunities Ethical Dilemma: Competitive Intelligence Predicament, P. 105

15. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 15 Interorganizational Partnerships Shift in paradigm ● Trust, value added to both sides ● Equity, fair dealing, everyone profits ● E-business links to share information and conduct digital transactions ● Close coordination; virtual teams and people on site ● Involvement in partner’s product design and production ● Long-term contracts ● Business assistance goes beyond the contract

16. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 16 Levels of Corporate Culture Visible 1. Artifacts, such as dress, office layout, symbols, slogans, ceremonies 2. Expressed values, such as “The Penney Idea,” “The HP Way” 3. Underlying assumptions and deep beliefs, such as “people are lazy and can’t be trusted” Invisible Culture that can be seen at the surface level Deeper values and shared understandings held by organization members

17. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 17 Visible Manifestations Symbols Stories Heroes Slogans Ceremonies

18. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 18 Environment and Culture A big influence on internal corporate culture is the external environment Cultures can vary widely across organizations Organizations within same industry reveal similar cultural characteristics Experiential Exercise: Working in an Adaptive Culture, p. 104

19. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 19 Corporate Culture Adaptability Adaptive CultureUnadaptive Culture Visible Behavior Expressed Values Managers pay close attention to all their constituencies, especially customers, and initiate change when needed to serve their legitimate interests, even if it entails taking some risks. Managers tend to behave somewhat insularly, politically, and bureaucratically. As a result, they do not change their strategies quickly to adjust to or take advantage of changes in their business environments. Managers care deeply about customers, stockholders, and employees. They strongly value people and processes that can create useful change (e.g., leadership initiatives up and down the management hierarchy). Managers care mainly about themselves, their immediate work group, or some product (or technology) associated with that work group. They value the orderly and risk-reducing management process much more highly than leadership initiatives. Source: John P. Kotter and Jmaes L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.

20. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 20 Four Types of Corporate Cultures Adaptability Culture Achievement Culture Consistency Culture Involvement Culture External Internal FlexibilityStability Strategic Focus Needs of the Environment

21. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 21 Cultural Leadership ● Articulates a vision that employees can believe in ● Defines and communicates central values that employees believe in ● Values are tied to a clear and compelling mission, or core purpose ● Heeds the day-to-day activities that reinforce the cultural vision – work procedures and reward systems match and reinforce the values

22. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved. 22 High-Performance Culture Creating and maintaining a high-performance culture in today’s turbulent environment and changing workplace is not easy. – Managers widely communicate their cultural values through their words and particularly their actions – Value statements that are not reinforced by management behavior are meaningless or even harmful for employees and the organization – Cultural leaders uphold their commitment to values during difficult times or crises.