1. Remember, syllabus and schedule highlights are at

2. Chapter 2: Environment and Culture
Macro environment? Competitive environment? How do companies respond to uncertainty? What is culture? How does culture affect responses?

3. “The essence of a business is outside itself
“The essence of a business is outside itself.” – Peter Drucker Inputs, processes, outputs “Open system”—company is affected by and affects its environment
2-3

4. Macroenvironment
External environment can influence strategic decisions and company’s success:
Laws and regulations
Economy
Technology
Demographics
Social values
Ecological factors/trends

6. Fighting Fat with Videogames
How does Nintendo use the public health issue of obesity to its competitive advantage in the marketplace? What demographic trends might influence new Wii Fit products?

7. Competitive Environment: Porter’s 5 Forces model
Threat of new entrants
[into our market/industry]
Supplier
power
[when bargaining
with us]
Rivalry among
existing firms
[we’re here]
Buyer
power
[when bargaining
with us]
Threat of substitutes
[for our product]

8. Let’s apply Porter’s 5 Forces model to Ben & Jerry’s Who is the Competition?
Worldwide:
small and large domestic firms?
regional competitors?
overseas firms?
newer entrants?

9. New Entrants
Easier when entry barriers are low: Government policy (e.g., patent laws) Capital requirements (start-up costs) Brand identification (consumer brand loyalty) Cost disadvantages (Established economies of scale) Distribution channels (e.g., supermarket shelf space)

10. Substitutes and Complements
Substitute Threat posted by an alternative Technological change is typical source Complement: Opportunity created when one product is used in conjunction with another

11. Resource Suppliers
People – e.g., schools Raw materials –producers, wholesalers, and distributors Information – e.g., news media, researchers Money – investors and creditors

12. Supplier Issues
Price Quality Alternatives Switching costs

13. Buyers: customers
Final consumers –buy products in their finished form. Intermediate consumers – buy raw materials or wholesale products to process and re-sell to final consumers. May have great influence over price, quality, design, service.

14. Environment Uncertainty
Can be hard to understand environment, predict the future. Complexity – How many issues? How interconnected? Dynamism – How much discontinuous change in the industry?

15. Identifying Your Environment

16. Scenario Development Cirque du Soleil and Ben & Jerry’s?
Scenarios – alternative possible futures Best-case scenario Worst-case scenario Multiple scenarios lead to stronger plans

17. Responding to Uncertainty
Adapt to the environment Influence the environment Move to a new environment Can do independently or cooperate with others

18. Independent strategy examples
Compete—exploit a competence or improve internally Help competitors in an effort to improve relations Public relations—work to create a favorable image Legal action—engage in legal battles Political action—try to influence politicians

19. Cooperative strategy examples
Contracting—agreements with outsiders to exchange products, information, patents Coopting—absorb new outsiders into your company or its planning/leadership work Coalition—get others to act jointly on political initiatives

20. Change your environment’s boundaries
Move into new suitable market or industry. Diversification – expand into new markets, industires, or locations to reduce dependence on a market or technology Merge—combine companies Acquire—buy businesses Divest—sell off businesses

21. Trend analysis Environmental trends that may foster change
Economic trends
Social trends
Trends in demographic patterns
Political/regulatory trends
Technology trends
Ecological trends

22. Industry analysis: 5 IMPORTANT issues Defining the industry
Choosing dimensions/criteria for analysis
Predicting behavior
Addressing firm-level differences
Dealing with dynamism and innovation

23. Now…Organization Culture
Culture – shared assumptions and values about The company Its goals and practices What’s important How the world works How we interact and get things done

24. Strong culture
Influences how people think and behave Common belief in the company’s goals, priorities and practices Good if it encourages appropriate behavior

25. Weak culture
Few common values Confusion about corporate goals Unclear guiding principles Fosters conflict and poor performance

26. Clues to culture
Mission statements, official goals Business practices (how a company responds to problems, makes strategic decisions, and treats employees and customers) Symbols, rites, and ceremonies Stories (myths, legends, and true stories)

27. The Ritz Carlton Service Values
“I Am Proud To Be Ritz-Carlton”
I build strong relationships and create Ritz-Carlton guests for life.
I am always responsive to the expressed and unexpressed wishes and needs of our guests.
I am empowered to create unique, memorable and personal experiences for our guests.
I understand my role in achieving the Key Success Factors and creating The Ritz-Carlton Mystique.
I continuously seek opportunities to innovate and improve The Ritz-Carlton experience.
I own and immediately resolve guest problems.
I create a work environment of teamwork and lateral service so that the needs of our guests and each other are met.
I have the opportunity to continuously learn and grow.
I am involved in the planning of the work that affects me.
I am proud of my professional appearance, language and behavior.
I protect the privacy and security of our guests, my fellow employees and the company's confidential information and assets.
I am responsible for uncompromising levels of cleanliness and creating a safe and accident-free environment.
Excerpt from

28. So…here’s a question
The Ritz Carlton service values demonstrate which aspect of culture? 1. corporate mission statement 2. business practices 3. ceremony 4. myth

29. What kind of culture do you want to work in?
For questions that will help you figure out the culture of a company, see:

30. What we just did Chapter 2: Environment and Culture
What is the macro environment? What is the competitive environment? How do companies respond to uncertainty? What is culture? How does culture affect responses?