Chapter 3 Organizational Environments and Cultures MGMT

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Chapter 3Organizational Environments and
Cultures
Designed Prepared byB-books, Ltd.
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External Environments
After reading the next four sections, you should
be able to

• discuss how changing environments affect
  organizations.
• describe the four components of the general
  environment.
• explain the five components of the specific
  environment
• describe the process that companies use to make
  sense of their changing environments.

3
External Environments

• The forces and events outside a company that have
  the potential to influence or affect it.
• Types of external environment
• General
• Specific

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ORGANIZATIONAL ENVIORNMENTS AND SOCIAL
RESPONSIBILITY Organizations Operate within
Conditions set by the Environment

• General Environment
• Consists of cultural, economic, legal, political
  and educational conditions
• Economic
• Health of the economy in terms of inflation,
  income levels, gross domestic product,
  unemployment, and job outlook
• Sociocultural
• Norms, customs, and social values on such matters
  as human rights, trends in education and related
  social institutions, as well as demographic
  patterns in society
• Legal-political
• Prevailing philosophy and objectives of the
  political party or parties running the
  government, as well as laws and government
  regulations
• Technological
• Development and availability of technology,
  including scientific advancements
• Natural
• Nature and conditions of the natural environment,
  including levels of public concern expressed
  through environmentalism

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Changing Environments
1
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Nissan Responds to Changing Auto Industry
Beyond the Book

• The auto industry is rapidly changing as
  consumers become more concerned with the
  environment, traditional markets slow down, and
  new markets develop in countries like China and
  India.
• Nissan CEO Carlos Ghosn responds with focus on
  tech research for environmentally sustainable
  models and low-priced models for developing
  markets.
• Ghosn plans to develop a Nissan hybrid by 2010,
  release an all-electric car in Japan by 2011, and
  make a 3000 model to compete with Tata in India.

Source A. Taylor III, Nissans Radical Chic,
Fortune, 29 October 2007, 127-134.
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Environmental Change
1.1
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Environmental Complexity
Simple environments Complex environments
1.2
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Environmental Complexity and Resource Scarcity
Simple environments Complex environments
1.2
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Resource Scarcity
1.3
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Natural Resources
There is general concern over the scarcity of
natural resources. Companies like Weyerhauser
work extra hard to correct the misperception that
they are "using up" valuable resources. In fact,
through careful planning and good management,
Weyerhauser is able to both guarantee its lumber
resources and be a good environmental steward.
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Environmental Uncertainty

• Environmental change, environmental complexity
  and resource scarcity affect environmental
  uncertainty, which is how well managers can
  understand or predict the external environment.

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Uncertainty
1.4
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External Environment
2
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Components of the General Environment

• Economy
• Technological trends
• Sociocultural trends
• Political / Legal trends

2
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Economy

• Growing vs. shrinking economies
• Predicting future economic activity
• Business confidence indices

2.1
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Technological Component
2.2
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Impact of Technology

• Technology can be a great benefit or a daunting
  threat. MP3 players have created a tremendous
  new business

opportunity for some, like Apple, Creative, and
other manufacturers. But record labels have
suffered from the rapid acceptance of digital
music and persistent file swapping.
2.2
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Sociocultural Component

• Sociocultural Components
• Demographic changes
• Changes in behavior, attitudes, and beliefs

2.3
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Demographics Example
2.3
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Demographics

• Women are 47 of the U.S. workforce and hold
  50.3 of managerial jobs.
• African-Americans are 13.8 of the workforce and
  hold 6.5 of managerial jobs.
• Hispanics are 11.1 of the workforce and hold 5
  of managerial jobs.
• Women hold 14.7 of board seats at Fortune 500
  companies women of color hold 3.4.
• For each 1 earned by men, women earn 76 cents
  African-American women earn 64 cents Hispanic
  women earn 52 cents.

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Is There a Pending Labor Shortage in the United
States?

• 2010 U.S. Labor Shortage
• Fewer available workers
• Retiring baby boomers
• Immigration restrictions
• Implication for managers
• More sophisticated recruitment and retention
  strategies

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Political / Legal Component
Managers must be educated about the laws,
regulations, and potential lawsuits that could
affect business

• Legislation
• Regulations
• Court decisions

2.4
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Specific Environment
3
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Customer Component

• Reactive customer monitoring
• responding to problems, trends, and events
• Proactive customer monitoring
• anticipating problems, trends, and events

3.1
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Competitor Component

• Mistakes managers make in regard to competitive
  analysis
• They tend to focus on only two or three
  well-known competition with similar goals and
  resources.
• They underestimate potential competitors
  capabilities.

3.2
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Supplier Component
The degree to which a company relies on a
supplier because of the importance of the
suppliers product to the company and the
difficulty of finding other sources of that
product.
The degree to which a supplier relies on a buyer
because of the importance of that buyer to the
supplier and the difficulty of selling its
products to other buyers.
3.3
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Supplier Dependence on Boeing
Beyond the Book

• Companies like General Electric and Barnes Group,
  Inc. supply engine and other airplane parts to
  Boeing.
• A Fall 2008 machinists strike at Boeing meant the
  company produced 23 fewer planes.
• Fewer planes means need for fewer engine parts,
  and Boeing instructed suppliers to delay
  shipments.
• Suppliers like Spirit AeroSystems, Inc.
  instituted shorter work weeks to avoid layoffs.

Source F. Haflich, Boeing Strikes Impact
Spreading to Suppliers, American Metal Market ,
6 October 2008, 1-2.
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Impact of Economic Downturn on Supply Chain
Beyond the Book

• Steelmakers like ArcelorMittal face decreased
  demand in steel for products like cars and
  buildings.
• Price of iron ore on the spot market dropped from
  180 to 70 per metric ton.
• But steelmakers are locked into contracts with
  suppliers like BHP Billiton for 90 per metric
  ton, contracts made when the price was high.
• Buyers pressure suppliers to renegotiate
  contracts or default on them.
• Suppliers meet with U.S. Commerce Department to
  protect and enforce contracts.

Source R. G. Matthews, Steelmakers Squeeze
Suppliers, The Wall Street Journal, 18 November
2008.
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Industry Regulation Component
3.4
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Federal Regulation Agencies
3.4
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Cost of Compliance

• Researchers studied U.S. manufacturers and the
  cost they incur complying with the 25 major
  federal regulations. Researchers found
• There are about 300,000 manufacturing companies
  in the U.S.
• Each company spends roughly 2.2 million
• For every 1 the federal government spends
  creating regulations, businesses spend 45 to
  comply with them.

So, the aggregate cost of complying with federal
regulations is roughly 660 billion And thats
just for manufacturing.
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Advocacy Groups

• Advocacy Groups
• Groups of concerned citizens who band together to
  try to influence the business practices of
  specific industries, businesses, and professions
• Techniques to try to influence companies
• public communications
• media advocacy
• product boycotts

3.5
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Advocacy Groups
PETA is a well-known advocacy group that attempts
to influence consumers and companies to pursue
animal-friendly practices.
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PETA
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Making Sense of Changing Environments
Environmental Scanning
Evaluating External Environments
Interpreting Environmental Factors
Acting on Threats and Opportunities
4
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Environmental Scanning

• Environmental scanning
• searching the environment for events or issues
  that might affect an organization
• keeps companies current on industry factors
• reduces uncertainty
• alters organizational strategies
• contributes to organizational performance

4.1
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Interpreting Environmental Factors
4.2
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Acting on Threats and Opportunities

• Cognitive Maps
• simplified models of external environments
• depicts how managers believe environmental
  factors relate to possible organizational actions

4.3
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Cognitive Maps
4.3
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Internal Environments
After reading this section, you should be able
to

• explain how organizational cultures are created
  and how they can help companies be successful.

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Internal Environments

• Internal Environment
• Consists of the trends and events within an
  organization that affect the management,
  employees, and organizational culture
• important because it affects what people think,
  feel, and do at work
• organizational culture is the set of key values,
  beliefs, and attitudes shared by organizational
  members

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Biz Flix Brazil
Beyond the Book
Describe the culture at Sams new employer. How
easy would it be to change the culture at Sams
new company?
Take Two Video Click

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Creation and Maintenance of Organizational
Cultures
5.1
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Levels of Organizational Culture
5.3
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Changing Organizational Cultures

• Behavioral addition
• is the process of having managers and employees
  perform a new behavior
• Behavioral substitution
• is having managers and employees perform a new
  behavior in place of another behavior
• Change visible artifacts
• such as the office design and layout, company
  dress codes, etc.

5.4