1. PowerPoint Presentation by Charlie Cook Copyright © 2005 South-Western. All rights reserved. Chapter 2 The Management Environment

2. Copyright © 2005 South-Western. All rights reserved.2–2 The Internal Environment Internal environment  Factors within an enterprise that influence how work is done and how goals are accomplished. Culture  The system of behavior, rituals, and shared meanings that distinguish a group or an organization from other similar units.  Gives employees an organizational identity and establishes the rules that they follow.

3. Copyright © 2005 South-Western. All rights reserved.2–3 The Internal Environment (cont’d) Culture’s relationship to innovation 1.A stated and working strategy of innovation. 2.The use of workplace teams. 3.Rewards/recognition for creativity and innovation. 4.Environment in which managers allow people to make mistakes and take risks. 5.Setting in which training in creativity is provided to employees. 6.Carefully managed organizational culture. 7.Atmosphere in which new opportunities are actively created.

4. Copyright © 2005 South-Western. All rights reserved.2–4 The Internal Environment (cont’d) Organizations have dominant culture and subcultures  Dominant culture  Refers to the core values shared by most of the employees in an organization.  May be strong or weak.  Subcultures  Are most likely to develop in a unit, group, or section where employees routinely face common situations or problems.

5. Copyright © 2005 South-Western. All rights reserved.2–5 The Internal Environment (cont’d) Building culture  Organizational socialization process  Managers and co-workers help newcomers develop skills and evolve into accepted team members committed to the firm’s culture.  Values  Values are convictions that a specific mode of conduct is personally or socially preferable to another mode of conduct.  Knowing values held by individuals helps managers to interpret workers’ attitudes and motivations.

6. Copyright © 2005 South-Western. All rights reserved.2–6 Sources: David Jamieson and Julie O’Mara, Managing Workforce 2000 (San Francisco: Jossey-Bass, 1991), 28–29; Daniel Yankelovich and Associates,Work and Human Values (New York: Public Agenda Foundation, 1983), 23; and Edward E. Lowler III, High-Involvement Management (San Francisco: Jossey-Bass, 1991), 88. The Internal Environment (cont’d)

7. Copyright © 2005 South-Western. All rights reserved.2–7 The External Environment Exhibit 2. 1 Forces in the External Environment

8. Copyright © 2005 South-Western. All rights reserved.2–8 The External Environment (cont’d) Direct forces  Competitors  Employees  Customers  Suppliers Indirect forces  Social-cultural  Economic  Global  Technology  Political/legal  Social responsibility and ethics

9. Copyright © 2005 South-Western. All rights reserved.2–9 The External Environment (cont’d)

10. Copyright © 2005 South-Western. All rights reserved.2–10 Monitoring the Management Environment Environmental scanning  Collecting information concerning forces in the management environment through observation; reviewing business, trade, and government publications; and engaging in research efforts. Environmental analysis  Assessing and interpreting the information gathered through scanning to discern changes in the environment, predict trends and changes, and determine possible threats and opportunities.

11. Copyright © 2005 South-Western. All rights reserved.2–11 The External Environment (cont’d) Responding to environmental forces  Traditional (reactive) approach  Managers view the forces of the environment as uncontrollable.  Organization can monitor the environment closely, adjust strategy to counter effects of inflation, and stay abreast of product improvements by competitors.  Proactive approach  Organizations choose to strategically manage elements of the environment to the benefit of the organization.

12. Copyright © 2005 South-Western. All rights reserved.2–12 Strategic Management of the Environment The process of identifying environmental uncertainties and developing strategies to manage or reduce those uncertainties.  James D. Thompson: “Uncertainty is the fundamental administrative problem.”

13. Copyright © 2005 South-Western. All rights reserved.2–13 Strategic Management (cont’d) Internal strategies  Change domain  Recruitment  Buffering  Smoothing  Rationing External strategies  Advertising  Contracting  Co-opting  Coalescing  Lobbying

14. Copyright © 2005 South-Western. All rights reserved.2–14 Strategic Management (cont’d) Internal strategies  Change domain—deciding where to do business and what will be produced and marketed.  Recruitment—deciding who to hire.  Buffering  Input buffering—managing process fluctuations by stockpiling materials and the purchase of suppliers.  Output buffering—warehousing finished goods until they can be absorbed by the environment.

15. Copyright © 2005 South-Western. All rights reserved.2–15 Strategic Management (cont’d) Internal strategies (cont’d)  Smoothing—maintaining continuous demand for a product or service.  Rationing—a way of ensuring that all employee time is productive.

16. Copyright © 2005 South-Western. All rights reserved.2–16 Strategic Management (cont’d) External strategies  Advertising  Signaling price changes, new product features, or new locations; providing information, creating brand recognition, and encouraging consumer demand:  Contracting  A mutually beneficial arrangement whose purpose is to reduce uncertainty on both sides of the buyer-seller relationship; the buyer is assured a set price for the contract, and the seller has a guaranteed buyer.

17. Copyright © 2005 South-Western. All rights reserved.2–17 Strategic Management (cont’d) External strategies (cont’d)  Co-opting  Attempting to influence an external party by allowing that party to become part of the organization.  Coalescing  Forming an alliance of several organizations, bound by common purpose, to take action.  Lobbying  An attempt to influence a decision maker (e.g., a public official) to be more informed and understanding of an issue that is of mutual concern to the firm.