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7/29/2019 Chapter 03principles of management
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Designed & Prepared by
B-books, Ltd.
MGMT
Chuck Williams
Chapter 3Organizational Environments
and Cultures
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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
Characteristics of
Changing External Environments
1
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Beyond the BookNissan Responds to
Changing Auto Industry
The auto industry is rapidly changing as consumersbecome more concerned with the environment,traditional markets slow down, and new markets
develop in countries like China and India. Nissan CEO Carlos Ghosn responds with focus on
tech research for environmentally sustainable modelsand low-priced models for developing markets.
Ghosn plans to develop a Nissan hybrid by 2010,release an all-electric car in Japan by 2011, and makea $3000 model to compete with Tata in India.
Source: A. Taylor III, Nissans Radical Chic, Fortune, 29 October 2007, 127-134.
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Environmental Change
Environmental Change is the rate at whicha companys environments change
stable environments
dynamic environments
Punctuated equilibrium theory
Companies cycle through stable and dynamicenvironments.
1.1
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Environmental Complexity
Environmental Complexity: the number ofexternal factors in the environment thataffect organizations
Simple environments Complex environments
1.2
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Resource Scarcity
Resource Scarcity
The degree to which an organizations
external environment has an abundanceor scarcity of critical organizational resources
1.3
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NaturalResources
The scarcity of naturalresources is a general
concern. Companies like
Weyerhauser work extra
hard to correct the
misperception that they
are using up valuableresources. In fact,
through careful planning
and good management,
Weyerhauser is able to
both guarantee its
lumber resources and bea good environmental
steward.
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Uncertainty
1.4
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External Environment
2
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Components of theGeneral Environment
Economy
Technological trends
Sociocultural trends
Political / Legal trends
2
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Economy
Growing vs. shrinking
economies
Predicting future economicactivity
Business confidence indices
2.1
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Technological Component
Information
OutputInputTechnology
Knowledge
ToolsTechniques
RawMaterials
Services
Products
2.2
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Impact of TechnologyTechnology
can be a greatbenefit or adauntingthreat. MP3
players havecreated atremendousnew 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.
2.2
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Sociocultural Component
Demographic changes
Changes in behavior, attitudes, and beliefs
2.3
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Demographics Example
2.3
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Political / Legal Component
Legislation
Regulations
Court decisions
Managers must be educatedabout the laws, regulations,and potential lawsuits that
could affect business
http://www.eeoc.gov/abouteeo/overview_laws.htmlhttp://www.dol.gov/esa/whd/fmla/
Web Link2.4
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Specific Environment
Customer
Competitor
Supplier
Industry Regulation
Advocacy Group
3
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Customer Component
Reactive customer monitoring
responding to problems,
trends, and events
Proactive customer monitoring
anticipating problems,
trends, and events
Monitoring customerwants and needsis critical for
business success
3.1
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Competitor Component
Competitive Analysis
Deciding who your competitors are
Anticipating competitors moves
Determining competitors
strengths and weaknesses
3.2
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Supplier Component
Opportunistic Behavior
SuppliersBuyerDependence
SupplierDependence
Relationship Behavior
3.3
l d B d th B k
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Supplier Dependenceon Boeing
Companies like General Electric and Barnes Group,Inc. supply engine and other airplane parts to
Boeing.
A Fall 2008 machinists strike at Boeing meant the
company produced 23% fewer planes. Fewer planes means need for fewer engine parts,
and Boeing instructed suppliers to delay shipments.
Suppliers like Spirit AeroSystems, Inc. institutedshorter work weeks to avoid layoffs.
Source: F. Haflich, Boeing Strikes Impact Spreading to Suppliers, American Metal Market , 6 October 2008, 1-2.
Beyond the Book
f B d th B k
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Impact of EconomicDownturn on Supply Chain
Steelmakers like ArcelorMittal face decreaseddemand in steel for products like cars and buildings.
Price of iron ore on the spot market dropped from$180 to $70 per metric ton.
But steelmakers are locked into contracts withsuppliers like BHP Billiton for $90 per metric ton,contracts made when the price was high.
Buyers pressure suppliers to renegotiate contracts ordefault on them.
Suppliers meet with U.S. Commerce Department toprotect and enforce contracts.
Source: R. G. Matthews, Steelmakers Squeeze Suppliers,The Wall Street J ournal, 18 November 2008.
Beyond the Book
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Industry RegulationComponent
Industry Regulation
Regulations and rules that govern thebusiness practices and procedures of specific
industries, businesses, and professions
3.4
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Federal Regulation Agencies
Consumer ProductSafety Commission
http://www.cpsc.gov
Department of Labor http://www.dol.gov
Environmental Protection Agency http://www.epa.gov
Equal EmploymentOpportunity Commission
http://www.eeoc.gov
Federal CommunicationsCommission
http://www.fcc.gov
Federal Reserve System http://www.federalreserve.gov
Federal Trade Commission http://www.ftc.gov
Food and Drug Administration http://www.fda.gov
National Labor Relations Board http://www. nlrb.gov
Occupational Safety andHealth Administration
http://www.osha.gov
Securities and ExchangeCommission http://www.sec.gov
3.4
http://www.cpsc.gov/http://www.dol.gov/http://www.epa.gov/http://www.eeoc.gov/http://www.fcc.gov/http://www.federalreserve.gov/http://www.ftc.gov/http://www.fda.gov/http://www.cpsc.gov/http://www.osha.gov/http://www.sec.gov/http://www.sec.gov/http://www.osha.gov/http://www.cpsc.gov/http://www.fda.gov/http://www.ftc.gov/http://www.federalreserve.gov/http://www.fcc.gov/http://www.eeoc.gov/http://www.epa.gov/http://www.dol.gov/http://www.cpsc.gov/7/29/2019 Chapter 03principles of management
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Cost of Compliance
Researchers studied U.S. manufacturers and the
costs they incur complying with the 25 major
federal regulations. They 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 thats just for manufacturing.
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Advocacy Groups
Advocacy Groups
Groups of concerned citizens who band together totry to influence the business practices of specific
industries, businesses, and professions
Techniques to try to influence companies
public communications
media advocacy product boycotts
3.5
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Advocacy Groups
PETA is a well-known advocacy
group that attempts to influenceconsumers and companies to
pursue animal-friendly practices.
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Making Sense ofChanging Environments
Acting onThreats and Opportunities
InterpretingEnvironmental Factors
EnvironmentalScanning
Evaluating
ExternalEnvironments
4
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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 performance4.1
Interpreting Environmental
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Interpreting EnvironmentalFactors
EnvironmentalScan
Opportunities? Threats?
4.2
Acting on Threats
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Acting on Threatsand Opportunities
Cognitive Maps
simplified models of external environments
depicts how managers believe
environmental factors relate to possible
organizational actions
4.3
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Cognitive Maps
4.3
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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
Internal Environment
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
5
Creation and Maintenance of
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Creation and Maintenance ofOrganizational Cultures
Organizational HeroesOrganizational Stories
Company Founder
5.1
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Successful Organizational Cultures
EmployeeSatisfaction
Quality
Consistency
Adaptability
Involvement
Clear Vision
SalesGrowth
Return onAssets
Profits
Source: D.R. Denison and A.K. Mishra,Organization Science 6 (1995): 204-223
5.2
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Levels of Organizational Culture
Behaviors Symbolic artifacts
1. SurfaceLevel
SEEN
What people say How decisions
are made2. Expressed Values
and BeliefsHEARD
Beliefs andassumptions
Rarely discussed
3. UnconsciouslyHeld Assumptions
and Beliefs BELIEVED
5.3
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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.
5.3