chapter 3 copyright ©2007 by south-western, a division of thomson learning. all rights reserved...

Chapter 3Copyright ©2007 by South-Western, a division of Thomson Learning. All rights reserved

Changing Environments

1

Environmental Change

Environmental Complexity

Resource Scarcity

Uncertainty



Resource Scarcity

Uncertainty

Characteristics ofChanging External Environments

11



2

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 long, stable periods and shorter, dynamic environments.


Punctuated Equilibrium: U.S. Airline Industry

3

1.11.1



4

1.21.2

Environmental Complexity: the number of external factors in the environment that affect organizations

Simple environments Complex environments


Resource Scarcity

5

1.31.3

Resource Scarcity

The degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources


Uncertainty

6

1.41.4


External Environment

7

22


Components of the General Environment

8

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

trends

22


Economy

• Growing vs. shrinking economies

• Predicting future economic activity

• Business confidence indices

9

2.12.1


Technological Component

10

InformationInformation

OutputOutputInputInputTechnology--

KnowledgeTools

Techniques

Technology--Knowledge

ToolsTechniques

Raw Materials

Raw Materials

ServicesServices

ProductsProducts

2.22.2


Impact of Technology• Technology can be

a great benefit or a daunting threat. MP3 players have created a tremendous new

business

11

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.


Sociocultural Component

• Sociocultural Components

– Demographic changes– Changes in behavior, attitudes, and beliefs

12

2.32.3


Demographics Example

13

2.32.3


Political / Legal Component

14

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

http://www.eeoc.gov/laws/cra91.html

http://www.dol.gov/esa/whd/fmla/


Specific Environment

15

33

CustomerCustomer

CompetitorCompetitor

SupplierSupplier

Industry RegulationIndustry Regulation

Advocacy GroupAdvocacy Group


Customer Component

16

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


Competitor Component

17

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


Supplier Component

18

Opportunistic BehaviorOpportunistic Behavior

SuppliersSuppliersBuyer Dependence

Buyer Dependence

Supplier Dependence

Supplier Dependence

Relationship BehaviorRelationship Behavior

3.33.3


Industry Regulation Component

19

3.43.4

Industry Regulation

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


Federal Regulation Agencies

20

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

http://www.cpsc.gov/


http://www.dol.gov/

http://www.dol.gov/

http://www.epa.gov/

http://www.epa.gov/

http://www.eeoc.gov/

http://www.eeoc.gov/

http://www.fcc.gov/

http://www.fcc.gov/

http://www.federalreserve.gov/

http://www.federalreserve.gov/

http://www.ftc.gov/

http://www.ftc.gov/

http://www.fda.gov/

http://www.fda.gov/



http://www.osha.gov/

http://www.osha.gov/

http://www.sec.gov/

http://www.sec.gov/


Cost of ComplianceResearchers 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

21

So, the aggregate cost of complying with federal regulations is roughly

$660 billionAnd that’s just for manufacturing.


Dealing with Gifts and Suppliers

22

33

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


Advocacy Groups

23

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


Advocacy Groups

24

PETA is a well-known advocacy group that attempts to influence consumers and companies to pursue animal-friendly practices.


Making Sense of Changing Environments

25

Acting on Threats and Opportunities


Interpreting Environmental Factors


Environmental Scanning


EvaluatingExternal

Environments

EvaluatingExternal

Environments

44



26

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



27

4.24.2

EnvironmentalScan

EnvironmentalScan

Opportunities?Opportunities? Threats?Threats?



28

4.34.3

Cognitive Maps

simplified models of external environments

depicts how managers believe environmental factors relate to possible organizational actions


Internal Environments

29

55

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


The Organization’s Culture• Organizational Culture

– A system of shared meanings and common beliefs held by organizational members that determines, in a large degree, how they act towards each other.

– “The way we do things around here.”• Values, symbols, rituals, myths, and practices

– Implications:• Culture is a perception.• Culture is shared.• Culture is descriptive.

30


Strong versus Weak Cultures• Strong Cultures

– Are cultures in which key values are deeply held and widely held.

– Have a strong influence on organizational members.• Factors Influencing the Strength of Culture

– Size of the organization– Age of the organization– Rate of employee turnover– Strength of the original culture– Clarity of cultural values and beliefs

31


Benefits of a Strong Culture

• Creates a stronger employee commitment to the organization.

• Aids in the recruitment and socialization of new employees.

• Fosters higher organizational performance by instilling and promoting employee initiative.

32


Creation and Maintenance of Organizational Cultures

33

Organizational HeroesOrganizational HeroesOrganizational StoriesOrganizational Stories

Company FounderCompany Founder

5.15.1


Successful Organizational Cultures

34

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


Levels of Organizational Culture

35

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


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.

36

5.35.3

chapter 3 copyright ©2007 by south-western, a division of thomson learning. all rights reserved...

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