Organizational Environments
Internal and External
General and Specific
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MGMT8 | CH3
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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
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MGMT8 | CH3
2
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
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MGMT8 | CH3
3
Exhibit 3.1
Environmental Change, Environmental
Complexity, and Resource Scarcity
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MGMT8 | CH3
4
Exhibit 3.2
General and Specific Environments
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MGMT8 | CH3
5
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
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part.
MGMT8 | CH3
6
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
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part.
MGMT8 | CH3
7
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.
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part.
MGMT8 | CH3
8
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
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MGMT8 | CH3
9
Components of the Specific Environment
Customers
• Purchase products and services
Competitors
• Companies in the same industry that sell similar products or services to
customers
Suppliers
• Companies that provide material, human, financial, and informational
resources to other companies
Industry regulation
• Regulations and rules that govern the business practices and procedures
Advocacy group
• Concerned citizens that band together to try to influence business
practices
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MGMT8 | CH3
10
Components of the Internal Environment
• Organizational Culture
• Organizational Communication (between
and among departments and individuals).
• Leadership/Management Style
• Quality of Management and Workforce
a)Knowledge
b)Level of Motivation
c)Commitment to Organizational Mission
and Values
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MGMT8 | CH3
11
Component of Internal Environment
(all related to previous slide)
•
•
•
•
Product Quality
Level of Effectiveness
Level of Efficiency
Ability to Innovate
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MGMT8 | CH3
12
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
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MGMT8 | CH3
13
SUMMARY
• 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
Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part.
MGMT8 | CH3
14
SUMMARY
• 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
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MGMT8 | CH3
15
Organizational Culture
• Collective beliefs, attitudes,
values and principles of an
organization which shape and
guide behavior.
Key component of an
organization's internal
environment
•
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
Characteristics of Successful Organizational
Cultures
•
•
•
•
•
Adaptability
Employee Involvement
Clear mission
Transparency
Consistency…
•
•
•
•
•
Higher sales growth
Return on assets
Profits
Quality
Employee satisfaction
…which can help organizations achieve:
Competing Values Within Cultures
(Cameron, K. S., & Quinn, R. E. (1999). Diagnosing and changing organizational culture. Reading:
Addison-Wesley)
Clan Culture:
▪ has an internal focus and values flexibility rather than
stability and control.
▪ resemble family-type organizations in which
effectiveness is achieved by encouraging collaboration
between employees.
▪ very “employee-focused” and strive to instill cohesion
through consensus and job satisfaction and commitment
through employee involvement.
▪ devote considerable resources to hiring and developing
their employees, and they view customers as partners.
Kinicki and Fugate Organizational Behavior: Key Concepts, Skills & Best
Practices 5th Edition
Adhocracy Culture:
▪ has an external focus and values flexibility.
▪ fosters the creation of innovative products and services
by being adaptable, creative, and fast to respond to
changes in the marketplace.
▪ does not rely on centralized power and authority
relationships and they encourage employees to take
risks, think outside the box, and experiment with new
ways of getting things done.
Kinicki and Fugate Organizational Behavior: Key Concepts, Skills & Best
Practices 5th Edition
Market Culture:
▪ has a strong external focus and values stability and
control.
▪ is driven by competition and a strong desire to deliver
results and accomplish goals.
▪ Customers and profits take precedence over employee
development and satisfaction and people who deliver
results are rewarded.
Kinicki and Fugate Organizational Behavior: Key Concepts, Skills & Best
Practices 5th Edition
Hierarchy Culture:
▪ has an internal focus and values stability and control over
flexibility.
▪ has an internal focus, which produces a more formalized
and structured work environment, and values stability
and control over flexibility.
▪ is characterized by reliable internal processes, extensive
measurement, and the implementation of a variety of
control mechanisms.
Kinicki and Fugate Organizational Behavior: Key Concepts, Skills & Best
Practices 5th Edition
Positive Influence of a Strong
Organizational Culture:
• Majority of people in the organization share the
same values and beliefs.
• Mission of the organization is very clear to
everyone, from top management down to front
line employees, and everyone is invested in that
mission.
• Less need for written rules, regulations and
procedures…strong culture provides the
direction.
• Teamwork and cooperation is often more
prevalent in strong cultures.
• Strong cultures often foster greater loyalty and
commitment.
Potential Negative Influence
of a Strong Culture:
• Less ability to change and innovate, which can
be detrimental to an organization’s growth.
• Tendency to turn inward in order to preserve
the culture, rather than to look outward to see
new opportunities in a changing environment.
• Can tend toward arrogance, which (with
everything else listed above) can weaken an
organization’s ability to compete.
• Individual differences are not always valued
and innovation and creativity can be stifled.
Strong Cultures in the Extreme:
• Can lead to “group-think,” and become almost
like a cult
• A strong culture might tend toward intolerance
of individual differences (both internally or
externally), and influence members of the
organization to accept such intolerance.
• Strong culture can be detrimental if the values,
vision, and mission of the organization are
negative and/or destructive.
(Kotter, J. P., & Heskett, J. L. (1992). Corporate culture and performance. New York:
The Free Press).
Adaptive Culture
• Deals effectively with a changing environment
(external) by being able to institute useful and
meaningful organizational change (internal).
• Change occurs in a manner that takes into
account the needs of all stakeholders, i.e.
customers, employees, and shareholders
• Leadership development and professionalism
is encouraged and fostered at all levels of the
organization, which encourages all
participants to hold themselves accountable to
all key constituents.
Adaptive Culture (Cont.)
• The organization always has to begin with
recognition and reaffirmation of its Core
Values. These are foundational and should not
change over time.
• Business practices and systems can change
over time in order to adapt to an everchanging external environment.
(Kotter, J. P., & Heskett, J. L. (1992). Corporate culture and performance. New York:
The Free Press).
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