Chapter 03principles of management

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

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


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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/


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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

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Chapter 03principles of management