Successful Organizational Cultures

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Organizational Environments and Cultures

LEARNING OUTCOMES

MGMT8 | CH3

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

Explain how organizational cultures are created and how they can help companies be successful

MGMT8 | CH3

Changing Environments

Environmental change: Rate at which a company’s general and specific environments change

Stable environment: Rate of change is slow

Dynamic environment: Rate of change is fast

Punctuated equilibrium theory

Companies go through long periods of stability, followed by short periods of dynamic, fundamental change, and then a new equilibrium

MGMT8 | CH3

Changing Environments

Environmental complexity: Number and intensity of external factors in the environment that affect organizations

Simple environment: Includes few factors

Complex environment: Includes many factors

Resource scarcity: Abundance or shortage of critical organizational resources in an external environment

Uncertainty: Extent to which managers can predict which external changes and trends will affect their businesses

MGMT8 | CH3

Exhibit

3.1 Environmental Change, Environmental Complexity, and Resource Scarcity

MGMT8 | CH3

Exhibit

3.2 General and Specific Environments

MGMT8 | CH3

Components of the General Environment

Economy

Consumers in:

Growing economy have more money to spend

Shrinking economy have less money to spend

Business confidence indices: Show managers’ level of confidence about future business growth

MGMT8 | CH3

Components of the General Environment

Technology: Knowledge, tools, and techniques used to transform inputs into outputs

Changes in technology help companies provide better products

Companies should use new technology effectively to improve their products and services

MGMT8 | CH3

Components of the General Environment

Sociocultural

Includes demographic characteristics, general behavior, attitudes, and beliefs of people in a particular society

Changes in demographic characteristics affect how companies staff their businesses

Changes in behavior, attitudes, and beliefs affect the demand for a business’s products and services

MGMT8 | CH3

Components of the General Environment

Political/legal

Legislation, regulations, and court decisions that govern and regulate business behavior

Managers must be aware of the laws, regulations, and potential lawsuits that could affect their business

MGMT8 | CH3

Components of the Specific Environment

MGMT8 | CH3

Making Sense of Changing Environments

Three-step process employed by managers

Environmental scanning: Searching the environment for important events or issues that might affect an organization

Interpreting environmental factors

Acting on threats and opportunities

MGMT8 | CH3

Creation and Maintenance of Organizational Cultures

Company founders create organizations in their images

Imprint companies with their beliefs, attitudes, and values

Organizational stories

Make sense of organizational events

Emphasize culturally consistent assumptions, decisions, and actions

MGMT8 | CH3

Creation and Maintenance of Organizational Cultures

Organizational culture is sustained by recognizing and celebrating heroes

Organizational heroes: People admired for their qualities and achievements within an organization

MGMT8 | CH3

Successful Organizational Cultures

Factors that influence successful cultures

Adaptability, involvement

Clear mission, and consistency

Cultures based on the above factors help companies achieve:

Higher sales growth

Return on assets

Profits

Quality

Employee satisfaction

SUMMARY

MGMT8 | CH3

Changing environments affect environmental uncertainty

General environment consists of the economy, technological, sociocultural, and political/legal trends that indirectly affect all organizations

Components of specific environment are customer, competitor, supplier, industry regulation, and advocacy groups

SUMMARY

MGMT8 | CH3

Steps to understand changes in their external environments

Environmental scanning, interpreting environmental factors, and acting on threats and opportunities

Factors that influence successful cultures

Adaptability involvement, clear mission, and consistency

KEY TERMS

MGMT8 | CH3

External environments

Environmental change

Stable environment

Dynamic environment

Punctuated equilibrium theory

Environmental complexity

Simple environment

Complex environment

Resource scarcity

Uncertainty

General environment

Specific environment

Business confidence indices

Technology

Competitors

Competitive analysis

Suppliers

Supplier dependence

Buyer dependence

KEY TERMS

MGMT8 | CH3

Opportunistic behavior

Relationship behavior

Industry regulation

Advocacy groups

Public communications

Media advocacy

Product boycott

Environmental scanning

Cognitive maps

Internal environment

Organizational culture

Organizational stories

Organizational heroes

Company mission

Consistent organizational culture

Behavioral addition

Behavioral substitution

Visible artifacts

MGMT8 | CH3