1. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–13–1 CHAPTER 3 UNDERSTANDING INTERNAL AND EXTERNAL ENVIRONMENTS

2. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–23–2 LECTURE OUTLINE Types of external environment Analysing environmental conditions Managing environmental elements The internal environment: Organisational Culture (Nature, manifestations, types, culture and innovation, cultural change)

3. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–33–3 EXTERNAL ENVIRONMENT Major forces outside the organisation with potential to influence significantly the likely success of a product or service.

4. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–43–4 EXTERNAL ENVIRONMENT External environment is made up of: The mega-environment The broad conditions and trends in societies in which an organisation operates. The task environment Specific outside elements with which an organisation interfaces in the course of conducting its business.

5. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–53–5 THE MEGA-ENVIRONMENT The organisation Sociocultural element Legal-political element International element Technological element Economic element

6. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–63–6 THE MEGA-ENVIRONMENT Five major elements: Technological element Current state of knowledge regarding production of products & services Economic element Systems of producing, distributing and consuming wealth Legal-political element Legal and governmental systems within which an organisation must function

7. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–73–7 THE MEGA-ENVIRONMENT Sociocultural element Attitudes, values, norms, beliefs, behaviours and associated demographic trends characteristic of a given geographic area International element Developments in countries outside of an organisation’s home country with potential to influence the organisation

8. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–83–8 THE TASK ENVIRONMENT Five elements: Customers and clients Individuals and organisations purchasing products/services Competitors Other organisations offering (or with a high potential to offer) rival products/services Suppliers Organisations and individuals supplying resources an organisation needs to conduct its operations

9. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–93–9 THE TASK ENVIRONMENT Labour supply Individuals potentially employable by an organisation (diversity and characteristics of the labour market) Government agencies Agencies providing services and monitoring compliance with laws and regulations at local, state or regional and national levels

10. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–10 THE TASK ENVIRONMENT KEEPING TABS ON COMPETITORS Commercial databases Specialty trade publications Local newspaper clippings Advertised vacancies Published market research Trade shows and product literature Personal contacts

11. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–11 ANALYSING ENVIRONMENTAL CONDITIONS Views on the organisation- environment interface: Population ecology model Argues that environmental factors cause organisations to survive or fail Resource dependence model Highlights the dependence of organisations on environment but argues they attempt to manipulate the environment to reduce this dependence

12. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–12 CHARACTERISTICS OF THE ENVIRONMENT Uncertainty Condition in which future environmental circumstances affecting an organisation cannot be accurately assessed and predicted Complexity Number of elements in an organisation’s environment and their degree of similarity Dynamism Rate and predictability of change in the elements of an organisation’s environment Bounty Extent to which the environment can support sustained growth and stability

13. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–13 MANAGING ENVIRONMENTAL ELEMENTS Three approaches to managing the environment: Adaptation Involves changing internal operations and activities to make the organisation and its environment more compatible Favourability influence Involves trying to alter environmental elements to make them more compatible with the organisation’s needs Domain shifting Changing product/service mix to create favourable interface

14. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–14 ADAPTATION Buffering Stockpiling either inputs into, or outputs from, a production or service process to cope with environmental fluctuations Smoothing Taking actions aimed at reducing the impact of fluctuations, given the market Forecasting Predicting changing conditions and future events that significantly affect an organisation’s business Rationing Providing limited access to a product or service in high demand

15. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–15 FAVOURABILITY INFLUENCE Advertising and public relations Boundary spanning Recruiting Negotiating contracts Co-opting Strategic alliances Trade associations Political activity

16. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–16 DOMAIN SHIFTS Move out of a current product, service or geographic area into a more favourable domain Expand current domains through diversification or expansion of products/services offered

17. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–17 INTERNAL ENVIRONMENT: ORGANSATIONAL CULTURE Nature of organisational culture: ‘A system of shared values, assumptions, beliefs and norms uniting organisational members’ (Smircich 1983; Kilmann 1985). ‘The way we do things around here.’ The ‘glue’ binding the disparate parts (or the oil that keeps them moving). The interpretive part of organisational behaviour: it explains, gives direction, sustains energy, commitment, and cohesion.

18. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–18 MANIFESTATIONS OF CULTURE Symbols Objects, acts, events or qualities serving as a vehicle for conveying meaning (logos, office decoration and layout) Stories Narratives based on true events, which may be embellished to highlight intended value Rites Relatively elaborate, dramatic, planned sets of activities intended to convey cultural values to participants and, usually, an audience Rituals Standard behaviours, like staff meetings, company awards, weekly after-works drinks or socialising Ceremonials Systems of rites performed in conjunction with a single occasion or event

19. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–19 CULTURAL TYPES Strong: clear, explicit principles, widely shared Often spring from beliefs of a founder or strong leader Genuine concern for customers, employees and shareholders Weak: lack widely shared values Little top management commitment Lead to development of sub-cultures Hard to implement management strategy Unhealthy cultures: internal politics, hostile to change, arrogant

20. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–20 OPERATOR, ENGINEERING AND EXECUTIVE CULTURE (SCHEIN 1996) Operator culture: assumes organisation’s actions are actions of people - focus on knowledge, skills, commitment Engineering culture: prefers linear thinking, quantitative methods, “people-free” solutions Executive culture: focus on need to maintain organisation’s financial health - preoccupied with markets, boards, investors

21. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–21 CHARACTERISTICS OF ENTREPRENEURIAL CULTURE Strategic Focused on identifying opportunities Committed to seizing opportunities Willing to make major, fast changes Commitment of resources Many stages with risk assessed for each stage Control of resources Rental or outsourcing of resources for flexibility Management structure Few levels, with informal communication

22. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–22 CHANGING ORGANISATIONAL CULTURE Because they involve fairly stable values, beliefs and assumptions, organisations can be difficult to change. An approach to changing culture: Surfacing actual norms Articulating new directions Establishing new norms Identifying culture gaps Closing culture gaps

23. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–23 HOW LEADERS INFLUENCE CULTURAL CHANGE Crisis identification Communication of a new vision Motivation of key staff ( to lead cultural change by implementing the new vision and its corresponding strategy)

24. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–24 LECTURE SUMMARY External environment: Types of external environment Mega-environment, task environment (Each with five elements) Analysing the environment Models: ecology and resource dependence Environmental uncertainty and bounty Complexity and dynamism Managing the environment Adaptation, favourability influence and domain shifts

25. Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 3–25 LECTURE SUMMARY Internal environment (culture): System of shared values, assumption, beliefs and norms uniting organisational members Manifestations of culture Symbols, stories, rites, rituals and ceremonies Promoting innovation Entrepreneurial cultures encourage innovation Changing culture can be hard A multi-step process