Artifact project
MANAGEMENT
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Ricky W. Griffin
TWELFTH EDITION
Part Two: Understanding the Environmental Context of Management
Chapter Three: Understanding the Organization’s Environment
3 - ‹#›
Learning Outcomes
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Discuss the nature of the organizational environment and identify the environments of interest to most organizations.
Describe the components of the general and task environments and discuss their impact on organizations.
Identify the components of the internal environment and discuss their impact on organizations.
3 - ‹#›
Learning Outcomes
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Discuss the importance and determinants of an organization’s culture and how the culture can be managed.
Describe the multicultural environment of business and identify major trends and dimensions of diversity and multiculturalism.
Identify and describe how the environment affects organizations and how organizations adapt to their environment.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Organization’s Environments
3 - ‹#›
Miscommunication can occur in ay setting, but it seems to be especially common when mangers and decision makers are dealing with people who are different from themselves in one or more important ways.
Managers must have a deep understanding and appreciation of the environments in which they and their organizations functions.
Managers must develop and maintain a deep understanding and appreciation of the environment in which they and their organization function.
4
External environment
Everything outside an organization’s boundaries that might affect it.
Internal environment
The conditions and forces within an organization.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.1
The Organization and Its Environments
There are actually two separate external environments: the general environment and the task environment.
3 - ‹#›
The general environment of a business has five dimensions: economic, technological, sociocultural, political-legal, and international.
5
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Managers Check List
Managers need to remember that organizations have multiple environments.
While managers tend to think of the environment as being “outside” their organizations also have internal environments.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
External Environment
3 - ‹#›
General environment
The set of broad dimensions and forces in an organization’s surroundings that create its overall context.
Task environment
Specific organizations or groups that influence an organization.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.2
McDonald’s General Environment
The general environment of an organization consists of economic, technological, sociocultural, political-legal, and international dimensions.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The General Environment
3 - ‹#›
Economic dimension
The overall health and vitality of the economic system in which the organization operates.
Technological dimension
The methods available for converting resources into products or services.
Sociocultural dimension
The customs, mores, values, and demographic characteristics of society.
Political-legal dimension
The government regulation of business and the relationship between business and government.
International dimension
The extent to which an organization is involved in or affected by business in other countries.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.3
McDonald’s Task Environment
The task environment includes competitors, customers, suppliers, strategic partners, and regulators.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The Task Environment
3 - ‹#›
Competitors
An organization that competes with other organizations for resources.
Customers
Whoever pays money to acquire an organization’s products/services.
Suppliers
An organization that provides resources for other organizations.
Strategic partners (strategic allies)
An organization working together with one or more other organizations in a joint venture or similar arrangement.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The Task Environment
3 - ‹#›
Regulators
A unit that has the potential to control, legislate, or otherwise influence the organization’s policies and practices.
Regulatory agencies
An agency created by the government to regulate business activities.
Interest group
A group organized by its members to attempt to influence business.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.1
The Organization and Its Environment
An organization’s internal environments consist of their owners, boards of directors, employees, physical work environments, and cultures.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Managers Check List
Managers need to understand the general environment in which their business operates and how elements of that environment affect their business
Managers also need to know the core elements of their task environment and be able to assess the impact
If managers can not only understand their general and task environments but also be able to anticipate changes, they can use their insights for competitive advantage.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The Internal Environment
3 - ‹#›
Owners
Whoever can claim property rights to an organization.
Board of directors
Governing body elected by a corporation’s stockholders and charged with overseeing the general management of the firm to ensure that it is being run in a way that best serves the stockholders’ interests.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The Internal Environment
Employee issues include
A workforce becoming increasingly diverse in
gender, ethnicity, age, and other dimensions.
Increased reliance on “temp” workers.
Labor unions add a complex layer.
Physical work environment issues include
location, design, and layout.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Managers Check List
Managers need to understand the main parts of their organization’s internal environment, as well as how it affects the organization’s success
Regardless of their level, managers should have a clear knowledge of their organization’s governance structure
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Culture defies objective measurement or observation yet is the foundation of the internal environment.
The Organization’s Culture
3 - ‹#›
Because culture is the foundation of the organization’s internal environment, it plays a major role in shaping managerial behavior
18
Organization culture
The set of values, beliefs, behaviors, customs, and attitudes that helps the members of the organization understand what it stands for, how it does things, and what it considers important.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The Organization’s Culture
Importance of organizational culture
It can shape the firm’s effectiveness and long-term success, and increase productivity.
Determinants of organizational culture
Develops over a long period of time.
Often starts with the founder.
Includes such things as corporate success and shared experiences.
3 - ‹#›
Stereotypical images
Microsoft – dress casual, work long hours
Bank of America – formal setting with rigid rules and conservative business attire
Texas instrument – “shirtsleeve” culture – ties are avoided and few managers wear jackets
Southwest Airlines – stress fun and excitement
Strong Cultures – Apple, Starbucks, Proctor & Gamble
Weak culture – K-Mart
19
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Managing Organization Culture
Managers must understand current culture.
If it is in the best interests of the firm,
managers should reward behavior consistent with the culture.
If current culture needs changing,
mangers must identify the culture they prefer,
bring in outsiders, adopt new slogans, and tell new stories to support the new culture.
3 - ‹#›
New CEO – clear signal change is happening
Adopting new slogans
Telling new stories
Staging new ceremonies
Breaking with tradition
20
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Management Checklist
All members of an organization should understand its culture.
Managers need to help create, communicate, and sustain a strong organization culture
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Organization culture, multiculturalism, and diversity are closely related concepts.
The Multicultural Environment
3 - ‹#›
Beyond their strict definitions, of course, diversity and multiculturalism essential relate to differences among people.
Therefore, because organizations today are becoming more diverse and multicultural, it is important that all managers understand the major trends and dimensions of diversity and multiculturalism.
22
Multiculturalism
The broad issues associated with differences in values, beliefs, behaviors, customs, and attitudes held by people in different cultures.
Diversity
Exists in a group or organization when its members differ from one another along one or more important dimensions, such as age, gender, or ethnicity.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.4
Reasons For Increasing Diversity and Multiculturalism
The most fundamental trend is that all organizations are becoming more diverse and multicultural.
3 - ‹#›
Organizations are becoming more diverse and multicultural
One factor – changing demographics in the labor force (more woman and minorities enter workforce)
Talent pool to hire from has changed in size and composition
1955 = 26.6 % of woman worked outside the home
2013 = 57.2%
Organizations can improve the overall quality of their workforce by hiring and promoting the most talented people available
Legislation and judicial decisions have forced organization to hire more broadly.
Organizations that have opened offices and related facilities in other countries have had to learn to deal with different customs, social norms, and mores
Strategic alliances and foreign ownership also contribute, as managers today are more likely to have job assignments in other countries or to work with foreign manages within their own countries.
23
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Dimensions of Diversity and Multiculturalism
Average age is increasing.
Increasing numbers of females in workforce.
Glass ceiling is a perceived barrier that keeps women from advancing to top management.
Ethnicity
the ethnic composition of a group or organization, continues increasing.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
“[Many younger workers] believe workers in the older generations have been too slow to adopt social media and other tools, and place too much value on tenure rather than knowledge and performance”
Adrienne Fox, HR Consultant
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.5
Ethnicity Distribution Trends in the U.S.
The greatest increase in expected growth is within the Hispanic population.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Trends in Diversity and Multiculturalism
Other Diversity Dimensions
Physical mobility.
Religion.
Single parents.
Dual-career marriages.
Alternative lifestyles.
Vegetarianism.
Political ideologies.
Multicultural Differences
Some organizations
actively enhance their multiculturalism.
Soon, all companies may become multicultural,
due to changes in the external labor market.
U.S. immigration is at its highest rate since 1910.
“…we are determined to build a community and a culture that is inclusive.” Drew Hudson, Dropbox CEO
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Managers Checklist
Managers need a clear understanding of multiculturalism and diversity
Managers should be able to identify core dimensions od diversity that are most relevant to organizations and be knowledgeable about their trends
It is also important to remember that these dimensions might be related to one another.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Organization-Environment Relationships
Organizations are open systems and interact with various dimensions in many different ways.
First:
how environments affect organizations.
Second:
how organizations adapt to their environments.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
How Environments Affect Organizations
Three basic perspectives:
environmental change and complexity,
competitive forces, and
environmental turbulence.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.6
Environmental Change, Complexity, and Uncertainty
Degrees of homogeneity and change combine to create uncertainty.
3 - ‹#›
Least uncertainty (simple & stable) – Subway and Taco Bell – focuses on a certain segment of the consumer market, produces a limited product line, stable network of suppliers, consistent competition
Moderate (simple but dynamic) – clothing manufacturers (certain clothing buyer but sensitive to fashion induced changes); Music Producers (catering to certain kinds of music buyers but alert to changing tastes in music)
Moderate Uncertainty (stable & complex) – Ford, Nissan, BMW – a lot of suppliers, regulators, consumer groups and competitors, change occurs slowly
Most undertainty (Dynamic and complex) – Intel, Apple, Samsung, Sony, Ebay, Amazon
31
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Michael Porter defined the Five Competitive Forces.
Competitive Forces
3 - ‹#›
A way to assess environments
32
Threat of new entrants
Ease of entering the market.
Competitive rivalry
Rivalry between firms in the same industry.
Threat of substitute products
Can other products work just as well?
Power of buyers
Power of suppliers
Extent buyer’s influence suppliers.
Extent suppliers influence buyers.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Environmental Turbulence
Consists of changes in the environment which may or may not be expected.
Crisis is the most common form of turbulence.
Some organizations have developed a crisis team and/or plan.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Figure 3.7
How Organizations Adapt to Their Environments
These are the six basic mechanisms through which organizations adapt to their environments.
3 - ‹#›
34
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
How Organizations Adapt to Their Environment
Information management
Boundary spanner – someone who spends much of their time with others outside the organization to learn what other organizations are doing
Environmental scanning – monitoring the environment through observation and reading.
Information systems – electronic systems which gather, organize and summarize information.
Strategic response
Realizing something has changed and determining what action, if any, is needed.
3 - ‹#›
35
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
How Organizations Adapt to Their Environment
Mergers, acquisitions, and alliances
A merger occurs when two or more firms combine to form a new firm.
An acquisition occurs when one firm buys another. Most are friendly.
A hostile takeover occurs when one firm buys another against its will.
In an alliance (partnership), the firm undertakes a new venture with another firm.
3 - ‹#›
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
How Organizations Adapt to Their Environment
Organization design and flexibility
involves how an organization designs its structure.
Directly influence the environment by:
Signing long-term contracts.
Vertically integrating.
Lowering price, affecting competitors.
Creating new products.
Lobbying and bargaining.
3 - ‹#›
Influence suppliers by Signing long-term contracts with fixed prices
Vertically integrating – become its own supplier – Sears owns firms that produce its goods , Campbell Soup makes its own soup cans
Lowering price, affecting competitors. – Mitsubishi lowers prices of DVD player, Sony must follow
Creating new products. – finding entirely new customers, taking customers from competitors, convincing customers that they need something new (new car every 3 years)
Lobbying and bargaining. – sending a representative to Washington to influence
37
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Manager’s Checklist
The environment clearly influences organizations, so it is important to understand the nature and impact of these influences.
Managers should also remember that they can affect their environment.
Remember, though, there are limits to how much managers can influence their environment, and they should guard against crossing legal or ethical boundaries.
3 - ‹#›
Summary
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Chapter three defined the environments organizations face including:
external, both general and task, and
internal, including organization culture.
Multiculturalism and diversity followed.
The chapter closed with how organizations affect and adapt to their environments.
Includes the five competitive forces.
3 - ‹#›