chapter 3 organizational environments and cultures
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Chapter 3Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
OrganizationalEnvironments and Cultures
Prepared byDeborah Baker
Texas Christian University
Management4th Edition
Chuck Williams
Chapter 3
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Chapter 3Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
What Would You Do?
Obesity is at epic proportions, with 66 percent of Americans overweight
Fast food restaurants are faced with lawsuits, regulation, and complaints
Healthier cooking techniques costs more with less tasty results
Wendy’s International Headquarters
Should Wendy’s pay attention to activists—or give customers what they want?
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Chapter 3Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
External Environments
After reading the next four sections, you should be able to:
1. discuss how changing environments affect organizations.
2. describe the four components of the general environment.
3. explain the five components of the specific environment
4. describe the process that companies use to make sense of their changing environments.
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Changing Environments
Environmental Change
Environmental Complexity
Resource Scarcity
Uncertainty
Environmental Change
Environmental Complexity
Resource Scarcity
Uncertainty
Characteristics ofChanging External Environments
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Environmental Change
1.11.1
Environmental Change is the rate at which a company’s 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
1.11.1
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Environmental Complexity
1.21.2
Environmental Complexity: the number of external factors in the environment that affect organizations
Simple environments Complex environments
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Resource Scarcity
1.31.3
Resource Scarcity
The degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources
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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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Uncertainty
1.41.4
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External Environment
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Components of the General Environment
Economy Technological trends Sociocultural trends Political / Legal trends
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Economy
Growing vs. shrinking economies
Predicting future economic activity
Business confidence indices
2.12.1
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Technological Component
InformationInformation
OutputOutputInputInputTechnology--
KnowledgeTools
Techniques
Technology--Knowledge
ToolsTechniques
Raw Materials
Raw Materials
ServicesServices
ProductsProducts
2.22.2
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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.
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Sociocultural Component
Sociocultural Components
Demographic changes
Changes in behavior, attitudes, and beliefs
2.32.3
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Demographics Example
2.32.3
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Political / Legal Component
Legislation Regulations Court decisions
Managers must be educated about the laws, regulations, and
potential lawsuits that could affect business
http://www.eeoc.gov/laws/cra91.htmlhttp://www.dol.gov/esa/whd/fmla/
Web Link 2.32.3
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Specific Environment
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CustomerCustomer
CompetitorCompetitor
SupplierSupplier
Industry RegulationIndustry Regulation
Advocacy GroupAdvocacy Group
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Customer Component
Reactive customer monitoring responding to problems,
trends, and events
Proactive customer monitoring anticipating problems,
trends, and events
Monitoring customer wants and needs
is critical for business success
3.13.1
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Competitor Component
Competitive AnalysisCompetitive Analysis
Deciding who your competitors areDeciding who your competitors are
Anticipating competitors’ movesAnticipating competitors’ moves
Determining competitors’ strengths and weaknesses
Determining competitors’ strengths and weaknesses
3.23.2
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Supplier Component
Opportunistic BehaviorOpportunistic Behavior
SuppliersSuppliersBuyer Dependence
Buyer Dependence
Supplier Dependence
Supplier Dependence
Relationship BehaviorRelationship Behavior
3.33.3
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Supplier Dependence
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Industry Regulation Component
3.43.4
Industry Regulation
Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions
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Federal Regulation Agencies
Consumer Product Safety Commission
Consumer Product Safety Commission http://www.cpsc.govhttp://www.cpsc.gov
Department of LaborDepartment of Labor http://www.dol.govhttp://www.dol.gov
Environmental Protection AgencyEnvironmental Protection Agency http://www.epa.govhttp://www.epa.gov
Equal EmploymentOpportunity Commission
Equal EmploymentOpportunity Commission http://www.eeoc.govhttp://www.eeoc.gov
Federal Communications Commission
Federal Communications Commission http://www.fcc.govhttp://www.fcc.gov
Federal Reserve SystemFederal Reserve System http://www.federalreserve.govhttp://www.federalreserve.gov
Federal Trade CommissionFederal Trade Commission http://www.ftc.govhttp://www.ftc.gov
Food and Drug AdministrationFood and Drug Administration http://www.fda.govhttp://www.fda.gov
National Labor Relations BoardNational Labor Relations Board http://www. nlrb.govhttp://www. nlrb.gov
Occupational Safety andHealth Administration
Occupational Safety andHealth Administration http://www.osha.govhttp://www.osha.gov
Securities and ExchangeCommission
Securities and ExchangeCommission http://www.sec.govhttp://www.sec.gov
3.43.4
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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
So, the aggregate cost of complying with federal regulations is roughly
$660 billionAnd that’s just for manufacturing.
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Dealing with Gifts and Suppliers
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Guidelines to Avoid Conflicts of Interest
There’s no such thing as a free lunch
Meals and entertaining are valid business
No gifts worth more than $25 in value
No cash or cash equivalents
No discount on goods and services
No stock in suppliers’ companies
Don’t allow personal friendship to influence decisions
Guidelines to Avoid Conflicts of Interest
There’s no such thing as a free lunch
Meals and entertaining are valid business
No gifts worth more than $25 in value
No cash or cash equivalents
No discount on goods and services
No stock in suppliers’ companies
Don’t allow personal friendship to influence decisions
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Advocacy Groups
3.53.5
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
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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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Making Sense of Changing Environments
Acting on Threats and Opportunities
Acting on Threats and Opportunities
Interpreting Environmental Factors
Interpreting Environmental Factors
Environmental Scanning
Environmental Scanning
EvaluatingEvaluatingExternalExternal
EnvironmentsEnvironments
EvaluatingEvaluatingExternalExternal
EnvironmentsEnvironments
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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
4.14.1
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Interpreting Environmental Factors
4.24.2
EnvironmentalEnvironmentalScanScan
EnvironmentalEnvironmentalScanScan
Opportunities?Opportunities? Threats?Threats?
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Acting on Threats and Opportunities
4.34.3
Cognitive Maps
simplified models of external environments
depicts how managers believe environmental factors relate to possible organizational actions
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Cognitive Maps
4.34.3
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Chapter 3Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved
Internal Environments
After reading this section, you should be able to:
5. explain how organizational cultures are created and how they can help companies be successful.
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Internal Environments
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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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Creation and Maintenance of Organizational Cultures
Organizational HeroesOrganizational HeroesOrganizational StoriesOrganizational Stories
Company FounderCompany Founder
5.15.1
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Successful Organizational Cultures
Adapted from Exhibit 3.7
EmployeeSatisfactionEmployee
Satisfaction
QualityQuality
ConsistencyConsistency
AdaptabilityAdaptability
InvolvementInvolvement
Clear VisionClear Vision
SalesGrowthSales
Growth
Return onAssets
Return onAssets
ProfitsProfits
D.R. Denison & A.K. Mishra, Organization Science 6 (1995): 204-223
5.25.2
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Levels of Organizational Culture
Symbolic artifacts Behaviors
Symbolic artifacts Behaviors
1. SurfaceLevel
1. SurfaceLevel SEENSEEN
What people say How decisions
are made
What people say How decisions
are made2. Expressed Values
and Beliefs2. Expressed Values
and Beliefs HEARDHEARD
Beliefs andassumptions
Rarely discussed
Beliefs andassumptions
Rarely discussed
3. Unconsciously Held Assumptionsand Beliefs
3. Unconsciously Held Assumptionsand Beliefs BELIEVEDBELIEVED
Adapted from Exhibit 3.8
5.35.3
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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.
5.35.3
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