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Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*

CHAPTER 3

UNDERSTANDING INTERNAL & EXTERNAL ENVIRONMENTS

Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin

Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*LECTURE OUTLINEExternal environment

Types of external environmentAnalysing the environmentManaging the environment


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*LECTURE OUTLINEInternal environment (culture)

Nature of organisational cultureManifestations of culturePromoting innovationChanging organisational cultureLeadership & cultural change


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*EXTERNAL ENVIRONMENT Major forces outside the organisation with potential to influence significantly the likely success of a product or service.


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*EXTERNAL ENVIRONMENTExternal environment is made up of:The mega-environmentThe broad conditions and trends in societies in which an organisation operates.

The task environmentSpecific outside elements with which an organisation interfaces in the course of conducting its business.


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE MEGA-ENVIRONMENTThe organisationSociocultural element Legal-political element International element Technological elementEconomic element


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE MEGA-ENVIRONMENTFive major elements:Technological elementCurrent state of knowledge regarding production of products & servicesEconomic elementSystems of producing, distributing & consuming wealthLegal-political elementLegal & governmental systems within which an organisation must function


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE MEGA-ENVIRONMENTSociocultural elementAttitudes, values, norms, beliefs, behaviours & associated demographic trends characteristic of a given geographic areaInternational elementDevelopments in countries outside of an organisations home country with potential to influence the organisation


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*EXTERNAL ENVIRONMENT WARREN FEATHERBONE COMPANY Over a century the company built a thriving business around a patented product, the featherbone used to stiffen corsets and collars. Though the company survived the Great Depression, technological changes such as plastic were emerging. By 1938 the company started making plastic baby pants to cover nappies, just as featherbone demand fell. As the companys history shows, an organisations environment is crucial and organisations must be ready to change and innovate.


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE TASK ENVIRONMENTSuppliersCompetitorsGovernment & regulatorsThe employment marketPublic pressure groupsTHE ORGANISATIONCustomers/ clients


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE TASK ENVIRONMENTFive elements:Customers and clientsIndividuals and organisations purchasing products/servicesCompetitorsOther organisations offering (or with a high potential to offer) rival products/servicesSuppliersOrganisations and individuals supplying resources an organisation needs to conduct its operations


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE TASK ENVIRONMENTLabour supplyIndividuals potentially employable by an organisation

Government agenciesAgencies providing services and monitoring compliance with laws and regulations at local, state or regional and national levels


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*THE TASK ENVIRONMENTKEEPING TABS ON COMPETITORSCommercial databasesSpecialty trade publicationsLocal newspaper clippingsAdvertised vacanciesPublished market researchTrade shows & product literaturePersonal contacts


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*ANALYSING THE ENVIRONMENTPerspectives on environment:Population ecology modelArgues that environmental factors cause organisations to survive or fail

Resource dependence modelHighlights the dependence of organisations on environment but attempts to manipulate the environment to reduce this dependence


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*ANALYSING THE ENVIRONMENTRECONCILING THE TWO MODELSManagers find both models useful:The population ecology model shows that organisations have little control over environmental factors and that success may be based on luck.The resource dependence model shows that managers can influence environmental aspects, therefore they must monitor, understand and influence. They must realise that major organisational impacts can come from unexpected elements.


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*ANALYSING THE ENVIRONMENTEnvironment characteristics:UncertaintyCondition in which future environmental circumstances affecting an organisation cannot be accurately assessed and predicted

ComplexityNumber of elements in an organisations environment and their degree of similarity


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*ANALYSING THE ENVIRONMENTDynamismRate and predictability of change in the elements of an organisations environment

BountyExtent to which the environment can support sustained growth and stability


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*MANAGING THE ENVIRONMENT Three approaches to managing the environment:AdaptationInvolves changing internal operations & activities to make the organisation and its environment more compatibleFavourability influenceInvolves trying to alter environmental elements to make them more compatible with the organisations needsDomain shiftingChanging product/service mix to create favourable interface


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*ADAPTATIONBufferingStockpiling either inputs into, or outputs from, a production or service process to cope with environmental fluctuationsSmoothingTaking actions aimed at reducing the impact of fluctuations, given the marketForecastingPredicting changing conditions & future events that significantly affect an organisations businessRationingProviding limited access to a product or service in high demand


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*FAVOURABILITY INFLUENCEAdvertising & public relationsBoundary spanningRecruitingNegotiating contractsCo-optingStrategic alliancesTrade associationsPolitical activity


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*DOMAIN SHIFTSMove out of a current product, service or geographic area into a more favourable domain

Expand current domains through diversification or expansion of products/services offered


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*INTERNAL ENVIRONMENTNature of organisational culture:A system of shared values, assumptions, beliefs and norms uniting organisational members (Smircich 1983; Kilman et al. 1986).The way we do things around here.The glue binding the disparate parts (or the oil that keeps them moving).The interpretive part of organisational behaviour: it explains, gives direction, sustains energy, commitment, and cohesion.


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*MANIFESTATIONS OF CULTURESymbolsObjects, acts, events or qualities serving as a vehicle for conveying meaningStoriesNarratives based on true events, which may be embellished to highlight intended valueRitesRelatively elaborate, dramatic, planned sets of activities intended to convey cultural values to participants and, usually, an audienceCeremonialsSystems of rites performed in conjunction with a single occasion or event


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*PROMOTING INNOVATIONStrategicFocused on identifying opportunitiesCommitted to seizing opportunitiesWilling to make major, fast changesCommitment of resourcesMany stages with risk assessed for each stageControl of resourcesRental or outsourcing of resources for flexibilityManagement structureFew levels, with informal communication


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*CHANGING ORGANISATIONAL CULTUREBecause they involve fairly stable values, beliefs and assumptions, organisations can be difficult to change.An approach to changing culture:Surfacing actual normsArticulating new directionsEstablishing new normsIdentifying culture gapsClosing culture gaps


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*LEADERSHIP &CULTURAL CHANGECrisis identification

Communication of a new vision

Motivation of key staff to lead cultural change by implementing the new vision and its corresponding strategy


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*LECTURE SUMMARYExternal environment:Types of external environmentMega-environment; task environmentAnalysing the environmentModels: ecology & resource dependenceManaging the environmentAdaptation, favourability influence & domain shifts


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*LECTURE SUMMARYInternal environment (culture):Nature of organisational cultureSystem of shared values, assumption, beliefs and norms uniting organisational membersManifestations of cultureSymbols, stories, rites and ceremonialsPromoting innovationRequires strategically oriented organisations with ability to change quickly


Copyright 2005 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 4e by Bartol, Tein, Matthews, Martin3*LECTURE SUMMARYInternal environment (culture):Changing organisational cultureDifficult because of need to change values & behaviourLeadership & cultural changeLeaders convey need for change, provide new vision & motivate key staff


*An organisations effectiveness is influenced by its external environmentthe major forces outside the organisation able to impact on the success of its products or services. In addition organisations which could be successful are unable to be unless their internal environment is compatible with external conditions. Further discussion can be found on page 64.

*Pages 62, 64*Pages 62, 64**Pages 65, 69*Page 65*Although specific technical knowledge can give an organisation a competitive edge, it should be recognised that in time technological progress may erode this edge.Because the mix of state and private ownership of the means of production varies between countries, international corporations face different systems of economic ground rules. A countrys legal system is often influenced by its political processes, i.e. government regulation may emanate from political issues.Further discussion can be found on pages 65-67.

*Because sociocultural aspects change, managers must monitor new opportunities or threats. Such changes can mean demand shifts across products and/or service types.International elements affect how an organisation conducts business overseas. For example, currency fluctuations influence a firms global competitiveness.Further discussion can be found on pages 67-68.

*The example of the Warren Featherbone Company demonstrates that an organisations external environment is crucial to its success and continued existence. Organisations must be ready to change and innovate in response to its demands.Further discussion of the Warren Featherbone example can be found on page 64.*This environment depends on the products, services and locales where an organisation operates. Each organisation must assess its own situation to determine its specific task environment. Any organisation has difficulty influencing the mega-environment, but may affect its task environment.The example of the Warren Featherbone Company demonstrates that an organisations external environment is crucial to its success and continued existence. Organisations must be ready to change and innovate in response to its demands.Further discussion can be found on page 69.

*Many organisations work to be close to the customer, particularly attending to service and quality and listening to customers.Organisations must be aware of competitors activities (see Management skills for a globalised economy: Keeping tabs on competitors, page 70).Global competition has meant that firms can lower costs by having fewer contracted suppliers.Further discussion can be found on pages 69-70.

*Being able to attract, motivate and retain human resources is crucial to an organisation and now employers can expect to recruit from a more diverse population.Usually the task environment requires interactions with representatives of different government agencies e.g. tax, police, health, consumer affairs.Further discussion can be found on pages 70-73.

*Page 70*Page 73*Accurately assessing the environment is hard. Managers act on their perceptions of the environment and so must verify their perceptions through other information sources. In this analysis of the environment two key concepts are used: environmental uncertainty and environmental complexity.Further discussion can be found on page 74.

*Pages 74-75*In seeking to manage the environment, managers have three options: adapting to the environmental elements, trying to influence the environment and thus make it more favourable and/or shifting the domain in which they operate to a more favourable one.The choice made may depend upon feasibility.Further discussion can be found on page 77. *The adaptation strategy accepts the existing environment as given and seeks to develop a rational process for dealing with it.Further discussion can be found on pages 77-78.

*Rather than accept environmental aspects as givens, this approach holds that organisations can change some environmental aspects.Further discussion can be found on pages 78-79.

*Page 79*Culture is important as members act on shared values and other cultural aspects, so their behaviours can impact organisational effectiveness. Environmental changes such as new competitors may force firms to revisit norms in areas such as quality. Three aspects of culture are important: direction, pervasiveness and strength.Further discussion can be found on page 81.

*An interesting feature of organisational culture is that the values, assumptions, beliefs and norms making up a particular culture are largely unseen. Also, culture can negatively impact when it is widely shared and well internalised but influences behaviour to interfere with organisational goals.Further discussion can be found on pages 81-82.

*Successful organisations foster adaptive, entrepreneurial cultures. The organisation opportunity matrix (see Figure 3.5 in text, page 82) classifies firms by how much their culture supports a desire for change and a belief in its capacity to influence the competitive environment.Further discussion can be found on page 82.

*Page 83*Page 84*Page 87*Page 87*Page 87

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