Remember, syllabus and schedule highlightsare at

http://yourpeakescape.com/uscupstate

Chapter 2: Environment and Culture

Macro environment?Competitive environment?How do companies respond to uncertainty?What is culture?How does culture affect responses?

“The essence of a business is outside itself.” – Peter Drucker

Inputs, processes, outputs

“Open system”—company is affected by and affects its environment

2-3

Macroenvironment

External environment can influence strategic decisions and company’s success:

Laws and regulationsEconomyTechnologyDemographicsSocial valuesEcological factors/trends

Fighting Fat with Videogames

How does Nintendo use the public health issue of obesity to its competitive advantage in the marketplace?

What demographic trends might influence new Wii Fit products?

Threat of new entrants[into our market/industry]

Buyer power

[when bargainingwith us]

Rivalry amongexisting firms

[we’re here]

Threat of substitutes[for our product]

Supplier power

[when bargainingwith us]

Competitive Environment: Porter’s 5 Forces model

Let’s apply Porter’s 5 Forces model to Ben & Jerry’s

Who is the Competition?

Worldwide: small and large domestic firms?regional competitors?overseas firms?newer entrants?

New Entrants

Easier when entry barriers are low:

Government policy (e.g., patent laws)Capital requirements (start-up costs)Brand identification (consumer brand loyalty)Cost disadvantages (Established economies of scale)Distribution channels (e.g., supermarket shelf space)

Substitutes and Complements

SubstituteThreat posted by an alternativeTechnological change is typical source

Complement: Opportunity created when one product is used in conjunction with another

Resource Suppliers

People – e.g., schoolsRaw materials –producers, wholesalers, and distributorsInformation – e.g., news media, researchersMoney – investors and creditors

Supplier Issues

PriceQualityAlternativesSwitching costs

Buyers: customers

Final consumers –buy products in their finished form.

Intermediate consumers – buy raw materials or wholesale products to process and re-sell to final consumers.

May have great influence over price, quality, design, service.

Environment Uncertainty

Can be hard to understand environment, predict the future.

Complexity – How many issues? How interconnected?

Dynamism – How much discontinuous change in the industry?

Identifying Your Environment

Scenario Development

Cirque du Soleil and Ben & Jerry’s?

Scenarios – alternative possible futures

Best-case scenarioWorst-case scenario

Multiple scenarios lead to stronger plans

Responding to Uncertainty

Adapt to the environmentInfluence the environmentMove to a new environment

Can do independently or cooperate with others

Independent strategy examples

Compete—exploit a competence or improve internally

Help competitors in an effort to improve relations

Public relations—work to create a favorable image

Legal action—engage in legal battles

Political action—try to influence politicians

Cooperative strategy examples

Contracting—agreements with outsiders to exchange products, information, patents

Coopting—absorb new outsiders into your company or its planning/leadership work

Coalition—get others to act jointly on political initiatives

Change your environment’s boundaries

Move into new suitable market or industry.

Diversification – expand into new markets, industires, or locations to reduce dependence on a market or technology

Merge—combine companiesAcquire—buy businessesDivest—sell off businesses

Environmental trends that may foster change

Economic trendsSocial trendsTrends in demographic patternsPolitical/regulatory trendsTechnology trendsEcological trends

Trend analysis

Industry analysis: 5 IMPORTANT issues

Defining the industry

Choosing dimensions/criteria for analysis

Predicting behavior

Addressing firm-level differences

Dealing with dynamism and innovation

Now…Organization Culture

Culture – shared assumptions and values aboutThe companyIts goals and practicesWhat’s importantHow the world worksHow we interact and get things done

Strong culture

Influences how people think and behave

Common belief in the company’s goals, priorities and practices

Good if it encourages appropriate behavior

Weak culture

Few common values

Confusion about corporate goals

Unclear guiding principles

Fosters conflict and poor performance

Clues to culture

Mission statements, official goals

Business practices (how a company responds to problems, makes strategic decisions, and treats employees and customers)

Symbols, rites, and ceremonies

Stories (myths, legends, and true stories)

The Ritz Carlton Service Values“I Am Proud To Be Ritz-Carlton”

– I build strong relationships and create Ritz-Carlton guests for life. – I am always responsive to the expressed and unexpressed wishes and needs of our guests. – I am empowered to create unique, memorable and personal experiences for our guests. – I understand my role in achieving the Key Success Factors and creating The Ritz-Carlton

Mystique. – I continuously seek opportunities to innovate and improve The Ritz-Carlton experience. – I own and immediately resolve guest problems. – I create a work environment of teamwork and lateral service so that the needs of our guests

and each other are met. – I have the opportunity to continuously learn and grow. – I am involved in the planning of the work that affects me. – I am proud of my professional appearance, language and behavior. – I protect the privacy and security of our guests, my fellow employees and the company's

confidential information and assets. – I am responsible for uncompromising levels of cleanliness and creating a safe and accident-

free environment. Excerpt from www.corporate.ritzcarlton.com

So…here’s a question

The Ritz Carlton service values demonstrate which aspect of culture?

1. corporate mission statement2. business practices3. ceremony4. myth

What kind of culture do you want to work in?

For questions that will help you figure out the culture of a company, see:

http://career-advice.monster.com/job-interview/interview-preparation/assess-company-culture-best-fit/article.aspx

What we just didChapter 2: Environment and Culture

What is the macro environment?What is the competitive environment?How do companies respond to uncertainty?What is culture?How does culture affect responses?