1. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 1 Chapter 4 Assessing the Environment

2. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 2 Learning Objectives Describe how economic and cultural factors influence organizations. Identify the five competitive forces that affect organizations in an industry. Describe the principle political and legal strategies used by managers to cope with changes in the environment. Explain how technological forces influence changes in industries.

3. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 3 The Environment General Environment - sometimes called the macroenvironment, includes the external factors that usually affect all or most organizations.

4. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 4 Forces Impacting Organizations (adapted from Figure 3.1) Economy Country Cultural Values Technology Demographics Politics Organization Macroenvironment Competitors

5. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 5 The Economy Economics is the discipline that focuses on understanding how people or people or nations produce, distribute, and consume various goods and services.

6. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 6 Trends in the New Versus the Old Economy (adapted from Table 3.1) New Value matters – information is key New markets – distance vanished Customers buy activities not products – a click away Human capital – rise of knowledge worker Old Size of organization matters – manufacturing is key Defined market segments – demographics Customers for a lifetime – loyalty, repeat business Physical and capital assets – tangible assets

7. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 7 Demographics Demographics are the characteristics of a work group, an organization, a specific market, or various populations. Some current demographic changes include: –Increasing Diversity –Education and Skills –Managerial Challenges

8. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 8 Cultural Forces Culture refers to the unique pattern of shared characteristics, such as values, that distinguish the members of one group of people from those of another. –A value is a basic belief about a condition that has considerable importance and meaning to individuals and is relatively stable over time. –A value system comprises multiple beliefs that are compatible and supportive of on another.

9. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 9 Cultural Forces Values can effect how a manager –Views other people and groups –Perceives situations and problems –Goes about solving problems –Determines what is and is not ethical behavior –Leads and controls employees

10. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 10 Hofstede’s Framework Power Distance – the degree to which less powerful members of society accept that influence is unequally divided. Uncertainty Avoidance – the extent to which members of a culture feel threatened by risky or unknown situations. Individualism – is a combination of the degree to which society expects to take care of themselves and their immediate family and the degree to which people believe they are masters of their own destinies. Masculinity – the degree to which assertiveness and the acquisition of money and material things are valued. Long-Term/Short-Term Orientation – reflects the extent to which a culture stresses that its members accept delayed gratification of material, social, and emotional needs.

11. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 11 Hofstede’s Ranking (adapted from Figure 3.2)

12. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 12 Competitive Forces in the Task Environment (adapted from Figure 3.3) Threat of substitute goods or services Threat of substitute goods or services Supplier bargaining power Supplier bargaining power Rivalry among existing firms in industry Rivalry among existing firms in industry Customer bargaining power Customer bargaining power Threat of new competitors Threat of new competitors

13. Copyright © 2005 by South-Western, a division of Thomson Learning All rights reserved 13 Managerial Political Strategies (adapted from Figure 3.4) Negotiation Lobbying Alliance Representation Socialization Political action committees (PACs) Laws Government Labor unions Others Political StrategiesPolitical-Legal Forces