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Chapter 3: Organizational Chapter 3: Organizational culture and environment: the culture and environment: the

constraintsconstraintsA.A. INTRODUCTIONINTRODUCTIONManagers must be aware that organizational culture and Managers must be aware that organizational culture and

organizational environments will influence both the way organizational environments will influence both the way an organization is managed as well as its effectiveness. an organization is managed as well as its effectiveness. In this chapter, both organizational culture and In this chapter, both organizational culture and organizational environment are explored in order to organizational environment are explored in order to understand the complexities involved with each.understand the complexities involved with each.

B. THE MANAGER: OMNIPOTENT OR SYMBOLIC?B. THE MANAGER: OMNIPOTENT OR SYMBOLIC?Two positions on the role of the manager have been Two positions on the role of the manager have been

proposed. proposed. (1) The omnipotent view that managers are directly (1) The omnipotent view that managers are directly

responsible for the success or failure of an organization. responsible for the success or failure of an organization. This view is consistent with the stereotypical picture of This view is consistent with the stereotypical picture of the take charge executive who can overcome any the take charge executive who can overcome any obstacle to achieve company objectives. When obstacle to achieve company objectives. When organization perform poorly management must be held organization perform poorly management must be held accountableaccountable

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Chapter 3Chapter 3((2) The symbolic view management that management has only a 2) The symbolic view management that management has only a

limited effect on substantive organizational outcomes limited effect on substantive organizational outcomes because of the large number of factors outside of because of the large number of factors outside of management control. Thus what management does affect management control. Thus what management does affect greatly is symbolic outcomes. Management’s role is seen as greatly is symbolic outcomes. Management’s role is seen as creating meaning out of randomness, confusion and creating meaning out of randomness, confusion and ambiguity. The management play a minimal part in success or ambiguity. The management play a minimal part in success or failure of organization.failure of organization.

In reality managers are neither impotent nor all powerful and In reality managers are neither impotent nor all powerful and operates within constraints.operates within constraints.

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Chapter 3Chapter 3C. THE ORGANIZATION’S CULTUREC. THE ORGANIZATION’S CULTUREAn organization has a personality just like individuals do. An organization has a personality just like individuals do.

Organizational culture is a system of shared meaning within an Organizational culture is a system of shared meaning within an organization that determines in large degree, how employee act. organization that determines in large degree, how employee act. This definition implies several things i.e. (1) Culture is a This definition implies several things i.e. (1) Culture is a perception that exists in the organization, not in the individual (2) perception that exists in the organization, not in the individual (2) Organizational culture is a descriptive term. It describes rather Organizational culture is a descriptive term. It describes rather than evaluates (3) Ten characteristics of an organization’s than evaluates (3) Ten characteristics of an organization’s culture have been proposed thru research: member identity, culture have been proposed thru research: member identity, group emphasis, people focus, unit integration, control, risk group emphasis, people focus, unit integration, control, risk tolerance, reward criteria, conflict tolerance, means-ends tolerance, reward criteria, conflict tolerance, means-ends orientation, open systems focus.orientation, open systems focus.

The source of culture is usually a reflection of the vision or mission The source of culture is usually a reflection of the vision or mission of the organization’s founders. It results from the interaction of the organization’s founders. It results from the interaction between the founders’ biases and assumptions and what the first between the founders’ biases and assumptions and what the first employees subsequently learned from their own experiences.employees subsequently learned from their own experiences.

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Chapter 3Chapter 3Strong cultures are characterized by organization in which the Strong cultures are characterized by organization in which the

key values are intensely held and widely shared. Whether an key values are intensely held and widely shared. Whether an organization’s culture is strong, weak or somewhere in organization’s culture is strong, weak or somewhere in between will depend upon organizational factors such as size, between will depend upon organizational factors such as size, age, turnover rate and intensity of original culture. A culture age, turnover rate and intensity of original culture. A culture will have increasing impact on what managers do as it will have increasing impact on what managers do as it becomes stronger. Because culture establishes constraints becomes stronger. Because culture establishes constraints upon what managers can and cannot do it is particularly upon what managers can and cannot do it is particularly relevant to managers. The link between corporate values and relevant to managers. The link between corporate values and management behavior is fairly straight forward. The culture management behavior is fairly straight forward. The culture conveys to managers what is appropriate behavior. An conveys to managers what is appropriate behavior. An organizations’ culture, especially strong one constrains a organizations’ culture, especially strong one constrains a manager’s decision making options concerning management manager’s decision making options concerning management functions.functions.

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Chapter 3Chapter 3C. THE ENVIRONMENTC. THE ENVIRONMENTThere two types of environment; i.e. general and specific; There two types of environment; i.e. general and specific;

affecting manager’s actions and behaviors. The environment is affecting manager’s actions and behaviors. The environment is defined as forces that potentially affect an organization’s defined as forces that potentially affect an organization’s performance. An organization is a system that interacts with performance. An organization is a system that interacts with and depends upon its specific environment and remains and depends upon its specific environment and remains vigilant about the potential influences of its general vigilant about the potential influences of its general environment. environment.

The general environment includes everything outside the The general environment includes everything outside the organization includes economic, political, social and organization includes economic, political, social and technological conditions. Economic conditions include interest technological conditions. Economic conditions include interest rates, changes in disposable income, stock market indexes and rates, changes in disposable income, stock market indexes and the general business cycle and etc. Political conditions include the general business cycle and etc. Political conditions include the general stability of the countries in which an organization the general stability of the countries in which an organization operates and the specific attitudes that elected officials have operates and the specific attitudes that elected officials have toward the role of business in society. Social conditions include toward the role of business in society. Social conditions include the changing expectations of the society in which an the changing expectations of the society in which an organization operates. Values, customs and tastes can change organization operates. Values, customs and tastes can change and management must change also. Technological conditions and management must change also. Technological conditions include the changes that are occurring in technology.include the changes that are occurring in technology.

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Chapter 3Chapter 3The specific environment is the part of the environment that is directly The specific environment is the part of the environment that is directly

relevant to the achievement of an organization’s goals and varies relevant to the achievement of an organization’s goals and varies depending on the niche that it has made for itself with respect to the depending on the niche that it has made for itself with respect to the range of products or services it offers and the markets it serves. range of products or services it offers and the markets it serves. Specific environment includes supplier, customers, competitors, Specific environment includes supplier, customers, competitors, government agencies and special interest groups. Suppliers include government agencies and special interest groups. Suppliers include firms that provide materials and equipment as well as providers of firms that provide materials and equipment as well as providers of financial and labor inputs. Management seeks to ensure a steady financial and labor inputs. Management seeks to ensure a steady flow of these needed materials, equipment, financial and labor inputs flow of these needed materials, equipment, financial and labor inputs at the lowest possible price. Customers are the reasons that at the lowest possible price. Customers are the reasons that organizations exist. Customers absorb the organization’s outputs. organizations exist. Customers absorb the organization’s outputs. They obviously represent potential uncertainty particularly if their They obviously represent potential uncertainty particularly if their tastes and desires change. Competitors cannot be ignored by tastes and desires change. Competitors cannot be ignored by management. They are an important environmental force to monitor management. They are an important environmental force to monitor and respond to organizations by virtue of what they do are more and respond to organizations by virtue of what they do are more closely scrutinized by governmental agencies. The effects of closely scrutinized by governmental agencies. The effects of governmental regulations limit the choices available to managers. governmental regulations limit the choices available to managers. Pressure groups and special interest groups, e.g. NGOs such as Pressure groups and special interest groups, e.g. NGOs such as FOMCA, cannot be ignored by managers.FOMCA, cannot be ignored by managers.

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Chapter 3Chapter 3D. ENVIRONMENT UNCERTAINTYD. ENVIRONMENT UNCERTAINTYOrganization interact with and are influenced by their Organization interact with and are influenced by their

environment. Many environmental forces are dynamic and environment. Many environmental forces are dynamic and create considerable uncertainty for managers. The greater the create considerable uncertainty for managers. The greater the environmental uncertainty an organization faces, the more the environmental uncertainty an organization faces, the more the environment limits the manager’s options and freedom to environment limits the manager’s options and freedom to determine destiny. Environmental uncertainty is defined as the determine destiny. Environmental uncertainty is defined as the degree of change and complexity in an organization’s degree of change and complexity in an organization’s environment. If the components in an organization’s change environment. If the components in an organization’s change frequently, it is a dynamic environment. If change is minimal frequently, it is a dynamic environment. If change is minimal the environment is called stable environment. Another the environment is called stable environment. Another dimension of uncertainty is the degree of environmental dimension of uncertainty is the degree of environmental complexity. This is defined as the number of components in an complexity. This is defined as the number of components in an organization’s environment and the extent of an organization’s organization’s environment and the extent of an organization’s knowledge about its environmental components. Since knowledge about its environmental components. Since uncertainty is a threat to an organization’s effectiveness, uncertainty is a threat to an organization’s effectiveness, managers try to minimize it.managers try to minimize it.

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Chapter 4: International Chapter 4: International managementmanagement

A large number of well-known companies derive half or more of A large number of well-known companies derive half or more of their income from global operations. Successful global their income from global operations. Successful global management requires enlightened sensitivity to difference in management requires enlightened sensitivity to difference in national customs and practices. One problem faced is national customs and practices. One problem faced is parochialism; defined as a selfish, narrow view of the world parochialism; defined as a selfish, narrow view of the world and inability to recognize differences between people.and inability to recognize differences between people.

THE CHANGING GLOBAL ENVIRONMENTTHE CHANGING GLOBAL ENVIRONMENT(1) International organizations can be classified as multinational, (1) International organizations can be classified as multinational,

transnational and borderless organizations. Although transnational and borderless organizations. Although international businesses have been around a long time, the international businesses have been around a long time, the popularity of multinational corporations really didn’t occur until popularity of multinational corporations really didn’t occur until the mid 1960s.the mid 1960s.

A multinational corporation (MNC) is a company that maintain A multinational corporation (MNC) is a company that maintain significant operations in more than one country simultaneously significant operations in more than one country simultaneously but manages them all from one base in a home country.but manages them all from one base in a home country.

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Chapter 4Chapter 4A transnational corporation (TNC) is a company that A transnational corporation (TNC) is a company that

maintains significant operations in more than one country maintains significant operations in more than one country simultaneously and decentralizes decision making in each simultaneously and decentralizes decision making in each operation to the local country.operation to the local country.

Many large well known companies are attempting to more Many large well known companies are attempting to more effectively globalize their management structure by effectively globalize their management structure by breaking down internal arrangements that impose artificial breaking down internal arrangements that impose artificial geographic barriers. These moves to borderless geographic barriers. These moves to borderless management are attempts to increase efficiency and management are attempts to increase efficiency and effectiveness in an increasingly competitive global effectiveness in an increasingly competitive global marketplace. marketplace.

A company’s national origin is no longer a good measure of A company’s national origin is no longer a good measure of where it does business or of the national origin of the where it does business or of the national origin of the employees.employees.

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Chapter 4Chapter 4(2) Regional trading alliances are reshaping global competition. (2) Regional trading alliances are reshaping global competition. The twelve nation (originally) European Union which was formed in The twelve nation (originally) European Union which was formed in

late 1992 resulted in a single market with no national barriers to late 1992 resulted in a single market with no national barriers to travel, employment, investment and trade. Three other countries travel, employment, investment and trade. Three other countries have now joined making the EU the largest economic market in have now joined making the EU the largest economic market in the world.the world.

The North American Free Trade Agreement (NAFTA) went into effect The North American Free Trade Agreement (NAFTA) went into effect in January 1994 and covers trade between the US, Mexico and in January 1994 and covers trade between the US, Mexico and Canada.Canada.

ASEAN established in 1967 was originally aim to accelerate ASEAN established in 1967 was originally aim to accelerate economic progress and increase stability in the region. Later the economic progress and increase stability in the region. Later the group moved towards establishing an economic free trade area. group moved towards establishing an economic free trade area. Participating countries have agreed to reduce tariffs between Participating countries have agreed to reduce tariffs between themselves to a ceiling of 5% by 2000. However due to financial themselves to a ceiling of 5% by 2000. However due to financial turmoil in 1998 affected some of the countries, protectionist turmoil in 1998 affected some of the countries, protectionist attitudes still exist.attitudes still exist.

Asian Pacific Economic Cooperation (APEC) was established in 1989 Asian Pacific Economic Cooperation (APEC) was established in 1989 as a forum for discussion on regional trade in the Asia Pacific as a forum for discussion on regional trade in the Asia Pacific region and Australia played a significant role in its inception. The region and Australia played a significant role in its inception. The form and functions of the grouping is still being developed and form and functions of the grouping is still being developed and free trade agreements are yet formalized.free trade agreements are yet formalized.

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Chapter 4Chapter 4HOW ORGANIZATIONS GO INTERNATIONALHOW ORGANIZATIONS GO INTERNATIONAL

An organization evolves into a global one by typically thru 3 stages:An organization evolves into a global one by typically thru 3 stages:Stage 1: exporting products to other countriesStage 1: exporting products to other countriesStage 2: initial entry by hiring foreign representation or contracting Stage 2: initial entry by hiring foreign representation or contracting

with foreign manufacturers. However there is still no physical with foreign manufacturers. However there is still no physical presence of company personnel outside the company’s home presence of company personnel outside the company’s home countrycountry

Stage 3: establishing international operations either thru licensing/ Stage 3: establishing international operations either thru licensing/ franchising, joint ventures or strategic alliancesfranchising, joint ventures or strategic alliances

MANAGING IN A FOREIGN ENVIRONMENTMANAGING IN A FOREIGN ENVIRONMENT

The challenges when managing in a foreign environment are:The challenges when managing in a foreign environment are:(1)The legal political environment does not have to be unstable or (1)The legal political environment does not have to be unstable or

revolutionary to be a challenge; a country’s different political revolutionary to be a challenge; a country’s different political system must be fully awaresystem must be fully aware

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Chapter 4Chapter 4(2) The economic environment also presents many challenges to (2) The economic environment also presents many challenges to

foreign based managers. Obviously fluctuation of currency foreign based managers. Obviously fluctuation of currency rates and diverse tax policies are two of these.rates and diverse tax policies are two of these.

(3) The cultural environment involves the cultural differences (3) The cultural environment involves the cultural differences between nations. A national culture is the attitudes and between nations. A national culture is the attitudes and perspectives shared by individuals from a specific country that perspectives shared by individuals from a specific country that shape their behavior and the way they see the world. A shape their behavior and the way they see the world. A framework of cultural dimensions developed by Hofstede has framework of cultural dimensions developed by Hofstede has been a big help in understanding differences between national been a big help in understanding differences between national cultures:cultures:

1.1. Individualism vs. collectivism – describes ways that people’s Individualism vs. collectivism – describes ways that people’s interests are looked after. In individualism people are supposed to interests are looked after. In individualism people are supposed to look after their own interests and those of their family. In look after their own interests and those of their family. In collectivism people expect others in their group to look after collectivism people expect others in their group to look after them and protect them.them and protect them.

2.2. Power distant – a cultural measure of the extent to which a society Power distant – a cultural measure of the extent to which a society accepts the unequal distribution of power in institutions and accepts the unequal distribution of power in institutions and organizations. Malaysia has high power distance ranking.organizations. Malaysia has high power distance ranking.

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Chapter 4Chapter 43. Uncertainty avoidance - a cultural measure of the degree to 3. Uncertainty avoidance - a cultural measure of the degree to

which people tolerate risk and unconventional behavior. which people tolerate risk and unconventional behavior. Malaysia has low uncertainty avoidance ranking. Malaysia has low uncertainty avoidance ranking.

4. Quantity versus quality of life – Quantity of life refers to a 4. Quantity versus quality of life – Quantity of life refers to a national culture attribute describing the extent to which national culture attribute describing the extent to which societal values are characterized by assertiveness and societal values are characterized by assertiveness and materialism. Quality of life refers to a national culture materialism. Quality of life refers to a national culture attribute that reflects the emphasis placed upon attribute that reflects the emphasis placed upon relationships and concern for others.relationships and concern for others.

Countries have different rankings on Hofstede’s four cultural Countries have different rankings on Hofstede’s four cultural dimensions and managers should be aware of the dimensions and managers should be aware of the cultural differences present in countries to which they are cultural differences present in countries to which they are assigned.assigned.

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Chapter 4Chapter 4OVERSEAS ASSIGNMENT SELECTION CRITERIAOVERSEAS ASSIGNMENT SELECTION CRITERIA

How do organizations decide which individuals will be sent on How do organizations decide which individuals will be sent on overseas assignments?overseas assignments?

Typically the decision is based on selection criteria such as ability Typically the decision is based on selection criteria such as ability to adapt, technical competence, spouse and family to adapt, technical competence, spouse and family adaptability, human relations skill, desire to serve overseas, adaptability, human relations skill, desire to serve overseas, previous overseas experience, understanding of host country previous overseas experience, understanding of host country culture, academic qualifications, knowledge of language of culture, academic qualifications, knowledge of language of country and etc. country and etc.

A person makes two major types of adjustments when being A person makes two major types of adjustments when being transferred to another country:transferred to another country:

1. The anticipatory adjustment period is affected by a number of 1. The anticipatory adjustment period is affected by a number of personal factors such as realistic expectations, pre departure personal factors such as realistic expectations, pre departure training and prior experience with the cultural characteristics training and prior experience with the cultural characteristics of the country going to.of the country going to.

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Chapter 4Chapter 42. Once transferred there’s also a period of in-country adjustment. 2. Once transferred there’s also a period of in-country adjustment.

An individual’s work adjustment, interaction adjustment and An individual’s work adjustment, interaction adjustment and general adjustment are affected by individual and general adjustment are affected by individual and organizational factors, as well as non-work factors:organizational factors, as well as non-work factors:

• Individual factors include a positive outlook, relationship skills Individual factors include a positive outlook, relationship skills and perceptual skillsand perceptual skills

• Organizational factors revolve around the job, the Organizational factors revolve around the job, the organizational culture and organizational socializationorganizational culture and organizational socialization

• Non work factors include the novelty of the culture and family Non work factors include the novelty of the culture and family spouse adjustmentspouse adjustment

• Culture shock refers to the feelings of confusion, disorientation, Culture shock refers to the feelings of confusion, disorientation, and emotional upheaval caused by being immersed in a new and emotional upheaval caused by being immersed in a new culture.culture.