1. Organizational Environment Chapter #5

2. Chapter #5 Learning Objectives By the conclusion of this section you will understand: The complex environment organizations are required to operate in. How the changes in the environment effect management. Ways to manage the environment effectively.

3. Organizational Environment Organizational Environment: external forces that impact an organization. Opportunities Threats Managers must seek opportunities and avoid threats.

4. Forces in the Organizational Environment Figure 3.1 Distributors Firm Task Environment Supplier s Competitors Customers General Environment Economic Forces Global Forces Sociocultural Forces Demographic Forces Technological Forces Political & Legal Forces

5. Task Environment Suppliers: provide organization with inputs Managers need to secure reliable input sources. Suppliers provide raw materials, components, and even labor. Managers often prefer to have many, similar suppliers of each item.

6. Task Environment Distributors: organizations that help others to sell goods. Customers: people who buy the goods. Usually, there are several groups of customers.

7. Task Environment Competitors: other organizations that produce similar goods. most serious force high levels means lower prices Barriers to entry keep new competitors out: Economies of scale: Brand loyalty

8. The Industry Life Cycle Figure 3.3 BirthGrowthShakeoutMaturityDecline Time Demand

9. Forces in the Organizational Environment Figure 3.1 Distributors Firm Task Environment Supplier s Competitors Customers General Environment Economic Forces Global Forces Sociocultural Forces Demographic Forces Technological Forces Political & Legal Forces

10. General Environment Managers usually cannot impact or control these. Forces have profound impact on the firm. Economic forces: affect the national economy and the organization. Includes interest rate changes, unemployment rates, economic growth.

11. General Environment Technological forces: skills & equipment used in design, production and distribution. new opportunities or threats products obsolete very quickly Socialcultural forces: result from changes in the social or national culture of society. Social structure refers to the relationships between people and groups. National culture includes the values that characterize a society.

12. General Environment Demographic forces: result from changes in the nature, composition and diversity of a population. These include gender, age, ethnic origin, etc. Currently, most industrial countries are aging.

13. General Environment Political-legal forces: result from changes in the political arena. laws of a society increasing deregulation of many state-run firms Global forces: result from changes in international relationships between countries. increase in economic integration of countries Free-trade agreements (GATT, NAFTA, EU) decreases former barriers to trade.

14. Managing the Organization Environment Managers must: measure the complexity of the environment rate of environmental change The more forces, the more complex the manager’s job becomes.

15. Reducing Environmental Impact Reduce the number of forces (I.e. reduce number of suppliers). All levels of managers should work to minimize the potential impact of environmental forces.

16. Organizational Structure Managers can create new organizational structures to deal with change. specific departments to respond to each force Centralized vs. decentralized

17. Boundary Spanning Managers must gain access to information needed to forecast future issues. Boundary spanning is the practice of relating to people outside the organization. More management levels involved in spanning, yields better overall decision making.

18. Boundary Spanning Roles Figure 3.5 Managers in boundary spanning roles feedback information to other managers

19. Agent of Change EnvironmentOrganization Change in Environment affects Managerial actions impact Figure 3.6

20. Conclusion Organizations are open, dynamic systems that are heavily effected by the external environment. Sustained success is based on an organizations ability to be proactive and innovative with it’s environment.