Organizational Environments and Cultures

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Chapter 2

• Organizational Environments and Cultures

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What Would You Do?

• The Southwest of Europe
• Stiff competition from go rising costs
• How do you react to the competition political
  pressures?
• What would you do?

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Learning ObjectivesExternal Environments
After discussing this section, 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.

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Changing Environments

• Environmental Change
• Environmental Complexity
• Environmental Munificence
• Uncertainty

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Environmental Change

• The rate at which a companys general and
  specific environments change
• stable environments
• dynamic environments
• Punctuated equilibrium theory
• companies cycle through stable and dynamic
  environments

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Punctuated Equilibrium U.S. Airline Industry
Adapted from Exhibit 2.1
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Environmental Complexity

• The number of external factors in the environment
  that affect organizations
• Simple environments
• have few environmental factors
• Complex environments
• have many environmental factors.

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Environmental Munificence

• The degree to which an organizations external
  environment has an abundance or scarcity of
  critical organizational resources

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Uncertainty

• How well managers can understand or predict the
  external changes and trends affecting their
  businesses

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Environmental Change, Complexity, Munificence
Adapted from Exhibit 2.2
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General Specific Environments
Specific Environment
Sociocultural Component
Economy
General Environment
Customers
Competitors
Business A
Customers
Competitors
Advocacy Groups
Business B
Suppliers
Advocacy Groups
Industry Regulation
Suppliers
Industry Regulation
Political/Legal Component
Technological Component
Adapted from Exhibit 2.3
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General Environment

• Economy
• Technological
• Sociocultural
• Political/Legal

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Economy

• Growing vs. shrinking economies
• Future economic activity is difficult to predict
• Business confidence indices
• owners/managers confidence in the growth of the
  economy

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Technological

• Technology is the knowledge, tools, and
  techniques used to transform inputs (raw
  materials, information, etc.) into outputs
  (products and services)
• Technological changes can benefit or threaten
  businesses

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Sociocultural

• Refers to the demographic characteristics and
  general behavior, attitudes, and beliefs of
  people in a particular society
• Two important components
• Demographic changes
• Changes in behavior, attitudes, and beliefs

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Political/Legal

• Includes the legislation, regulation, and court
  decisions that govern and regulate business
  behavior
• Managers must be aware of relevant laws and
  regulations
• track changes
• avoid lawsuits and penalties

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Specific Environment

• Customer
• Competitor
• Supplier
• Industry Regulation
• Advocacy Group

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Customer Component

• Customers are essential for business survival
• Managers must monitor customers wants and needs
• reactive
• responding to complaints
• proactive
• anticipating problems

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Competitor Component

• Companies in the same industry that sell similar
  products or services to customers
• Competitive analysis
• deciding who your competitors are
• anticipating competitors moves
• determining competitors strengths and weaknesses

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Supplier Component

• Companies that provide material, human,
  financial, and informational resources to other
  companies
• Supplier buyer dependence
• Opportunistic vs. relationship behavior

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Industry Regulation Component

• Consists of regulations and rules that govern the
  business practices and procedures of specific
  industries, businesses, and professions

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Federal Regulatory Agencies Commissions
Adapted from Exhibit 2.5
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Federal Regulatory Agencies Commissions
Adapted from Exhibit 2.5
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Advocacy Group Component

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

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Making Sense of Changing Environments

• Environmental Scanning
• Interpreting Environmental Factors
• Acting on Threats and Opportunities

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Environmental Scanning

• Searching the environment for important events or
  issues that might affect an organization
• Scanning
• reduces uncertainty
• alters organizational strategies
• contributes to organizational performance

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Interpreting Environmental Factors

• Managers determine what environmental events and
  issues mean to the organization
• Opportunities vs. threats

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Acting on Threats and Opportunities

• Managers have to decide how to respond to these
  environmental factors
• Cognitive maps
• simplified models of external environments
• depicts how managers believe environmental
  factors relate to possible organizational actions

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Cognitive Maps
Success, Profits

Good location


-
-
Kmart
-
-
Good value Good service
Large selection of latest fashions
Low-cost strategy

-


-


-
Low rent taxes
Large mall 20 minutes away
Wal-Mart
Adapted from Exhibit 2.6
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Learning Objectives Internal Environments
After discussing 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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Organizational Cultures Creation, Success, and
Change

• Creation and Maintenance of Organizational
  Cultures
• Successful Organizational Cultures
• Changing Organizational Cultures

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Creation and Maintenance of Organizational
Cultures

• Company founders help create culture
• Cultures are maintained through
• Stories
• Heroes

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Blast From The Past

• Capturing corporate history
• Preserves culture and values

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Successful Organizational Cultures
Adaptability
Consistency
Involvement
Clear Mission
Adapted from Exhibit 2.7
D.R. Denison A.K. Mishra, Organization Science
6(1995) 204-223
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Been There, Done That

• The beliefs and values of Starbucks Coffee
• sharing success
• a culture of meaning and loyalty
• grassroots decision making

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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.

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What Really Happened?

• Challenges in the economic, supplier, competitor,
  and industry components
• Avoids travel agents by using the Web
• Directly confronts competitors and regulators