2- Organizational Environments And Cultures
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Chapter 2 Organizational Environments and Cultures
©2004 by Nelson, a division of Thomson Canada Limited
1
What Would You Do?
The “Southwest” of Europe Stiff competition from “go” & rising costs How do you react to the competition & political pressures? What would you do?
©2004 by Nelson, a division of Thomson Canada Limited
2
Learning Objectives: 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 of that companies use to make sense of their changing environments ©2004 by Nelson, a division of Thomson Canada Limited
3
Changing Environments
Environmental complexity and munificence Environmental change Uncertainty
©2004 by Nelson, a division of Thomson Canada Limited
4
Environmental Change The rate at which a company’s general and specific environments change
stable environments dynamic environments
Punctuated equilibrium theory
Companies cycle through stable and dynamic environments 5
©2004 by Nelson, a division of Thomson Canada Limited
Environmental Complexity and Munificence Environmental complexity The number of external factors in the environment that affect organizations
Simple environments
have few environmental factors
Complex environments
have many environmental factors
©2004 by Nelson, a division of Thomson Canada Limited
6
Environmental Munificence
The degree to which an organization’s environment has an abundance or scarcity of critical organizational resources
©2004 by Nelson, a division of Thomson Canada Limited
7
Environmental Change, Complexity, and Munificence
Exhibit 2.1 ©2004 by Nelson, a division of Thomson Canada Limited
8
Uncertainty
How well managers can understand or predict the external changes and trends affecting their businesses
©2004 by Nelson, a division of Thomson Canada Limited
9
General and Specific Environments
Exhibit 2.2 ©2004 by Nelson, a division of Thomson Canada Limited
10
General Environment
Economy Technological Component Sociocultural Component Political/Legal Component
©2004 by Nelson, a division of Thomson Canada Limited
11
Economy
Growing versus shrinking economies Future economic activity is difficult to predict Business confidence indices
managers’ confidence in the growth of the economy
©2004 by Nelson, a division of Thomson Canada Limited
12
Technological Component
Technology is the knowledge, tools, and techniques used to transform inputs (raw materials, information, etc.) into outputs (products and services) Technological changes can benefit or threaten businesses
©2004 by Nelson, a division of Thomson Canada Limited
13
Sociocultural Component
Refers to the demographic characteristics and general behaviour, attitudes and beliefs of people in a particular society Two important components
Demographic changes Changes in behaviour, attitudes, and beliefs
©2004 by Nelson, a division of Thomson Canada Limited
14
Political/Legal Component
Includes the legislation, regulation, and court decisions that govern and regulate business behaviour Managers must be aware of relevant laws and regulations
Education is a key component
©2004 by Nelson, a division of Thomson Canada Limited
15
Specific Environment
Customer Component Competitor Component Supplier Component Industry Regulation Component Advocacy Groups
©2004 by Nelson, a division of Thomson Canada Limited
16
Customer Component
Companies cannot exist without customers Managers must monitor customer wants and needs
reactive
responding after the fact
proactive
anticipating problems
©2004 by Nelson, a division of Thomson Canada Limited
17
Competitor Component
Companies in the same industry that sell similar products or services to customers Competitive analysis
deciding who your competitors are anticipating competitors’ moves determining competitors’ strengths and weaknesses
©2004 by Nelson, a division of Thomson Canada Limited
18
Supplier Component
Companies that provide material, human, financial, and informational resources to other companies Supplier & buyer dependence Opportunistic vs. relationship behaviour
©2004 by Nelson, a division of Thomson Canada Limited
19
Industry Regulation Component
Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions
©2004 by Nelson, a division of Thomson Canada Limited
20
Advocacy Groups Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions. Influence techniques:
public communications media advocacy product boycott
©2004 by Nelson, a division of Thomson Canada Limited
21
Making Sense of Changing Environments
Environmental scanning Interpreting environmental factors Acting on threats and opportunities
©2004 by Nelson, a division of Thomson Canada Limited
22
Environmental Scanning Searching the environment for important events or issues that might affect an organization. Scanning:
reduces uncertainty alters organizational strategies contributes to organizational performance
©2004 by Nelson, a division of Thomson Canada Limited
23
Interpreting Environmental Factors
Managers determine what environmental events and issues mean to the organization Opportunities versus threats
©2004 by Nelson, a division of Thomson Canada Limited
24
Acting on Threats and Opportunities
Managers have to decide how to respond to these environmental factors Cognitive maps
simplified models of external environments depicts how managers believe environmental factors relate to possible organizational actions
©2004 by Nelson, a division of Thomson Canada Limited
25
Cognitive Maps
Exhibit 2.4 ©2004 by Nelson, a division of Thomson Canada Limited
26
Learning Objectives: Internal Environments After reading the next section, you should be able to: 5. explain how organizational cultures are created and how they can help companies be successful ©2004 by Nelson, a division of Thomson Canada Limited
27
Organizational Cultures: Creation, Success, and Change
Creation and maintenance of organizational cultures Successful organizational cultures Changing organizational cultures
©2004 by Nelson, a division of Thomson Canada Limited
28
Creation and Maintenance of Organizational Cultures
Visible artifacts Company founders help create culture Cultures are maintained through:
stories organizational heroes rituals, ceremonies, and symbols
©2004 by Nelson, a division of Thomson Canada Limited
29
Successful Organizational Cultures
Exhibit 2.5 ©2004 by Nelson, a division of Thomson Canada Limited
30
Changing Organizational Cultures
Behavioural addition
Behavioural substitution
is the process of having managers and employees perform a new behaviour is having managers and employees perform a new behaviour in place of another behaviour
Change visible artifacts
Such as the office design and layout, company dress codes, etc.
©2004 by Nelson, a division of Thomson Canada Limited
31
What Really Happened?
Challenges in the economic, supplier, competitor, and industry components Avoids travel agents by using the Web Directly confronts competitors and regulators Experiences new opportunities
©2004 by Nelson, a division of Thomson Canada Limited
32
©2004 by Nelson, a division of Thomson Canada Limited
1
What Would You Do?
The “Southwest” of Europe Stiff competition from “go” & rising costs How do you react to the competition & political pressures? What would you do?
©2004 by Nelson, a division of Thomson Canada Limited
2
Learning Objectives: 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 of that companies use to make sense of their changing environments ©2004 by Nelson, a division of Thomson Canada Limited
3
Changing Environments
Environmental complexity and munificence Environmental change Uncertainty
©2004 by Nelson, a division of Thomson Canada Limited
4
Environmental Change The rate at which a company’s general and specific environments change
stable environments dynamic environments
Punctuated equilibrium theory
Companies cycle through stable and dynamic environments 5
©2004 by Nelson, a division of Thomson Canada Limited
Environmental Complexity and Munificence Environmental complexity The number of external factors in the environment that affect organizations
Simple environments
have few environmental factors
Complex environments
have many environmental factors
©2004 by Nelson, a division of Thomson Canada Limited
6
Environmental Munificence
The degree to which an organization’s environment has an abundance or scarcity of critical organizational resources
©2004 by Nelson, a division of Thomson Canada Limited
7
Environmental Change, Complexity, and Munificence
Exhibit 2.1 ©2004 by Nelson, a division of Thomson Canada Limited
8
Uncertainty
How well managers can understand or predict the external changes and trends affecting their businesses
©2004 by Nelson, a division of Thomson Canada Limited
9
General and Specific Environments
Exhibit 2.2 ©2004 by Nelson, a division of Thomson Canada Limited
10
General Environment
Economy Technological Component Sociocultural Component Political/Legal Component
©2004 by Nelson, a division of Thomson Canada Limited
11
Economy
Growing versus shrinking economies Future economic activity is difficult to predict Business confidence indices
managers’ confidence in the growth of the economy
©2004 by Nelson, a division of Thomson Canada Limited
12
Technological Component
Technology is the knowledge, tools, and techniques used to transform inputs (raw materials, information, etc.) into outputs (products and services) Technological changes can benefit or threaten businesses
©2004 by Nelson, a division of Thomson Canada Limited
13
Sociocultural Component
Refers to the demographic characteristics and general behaviour, attitudes and beliefs of people in a particular society Two important components
Demographic changes Changes in behaviour, attitudes, and beliefs
©2004 by Nelson, a division of Thomson Canada Limited
14
Political/Legal Component
Includes the legislation, regulation, and court decisions that govern and regulate business behaviour Managers must be aware of relevant laws and regulations
Education is a key component
©2004 by Nelson, a division of Thomson Canada Limited
15
Specific Environment
Customer Component Competitor Component Supplier Component Industry Regulation Component Advocacy Groups
©2004 by Nelson, a division of Thomson Canada Limited
16
Customer Component
Companies cannot exist without customers Managers must monitor customer wants and needs
reactive
responding after the fact
proactive
anticipating problems
©2004 by Nelson, a division of Thomson Canada Limited
17
Competitor Component
Companies in the same industry that sell similar products or services to customers Competitive analysis
deciding who your competitors are anticipating competitors’ moves determining competitors’ strengths and weaknesses
©2004 by Nelson, a division of Thomson Canada Limited
18
Supplier Component
Companies that provide material, human, financial, and informational resources to other companies Supplier & buyer dependence Opportunistic vs. relationship behaviour
©2004 by Nelson, a division of Thomson Canada Limited
19
Industry Regulation Component
Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions
©2004 by Nelson, a division of Thomson Canada Limited
20
Advocacy Groups Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions. Influence techniques:
public communications media advocacy product boycott
©2004 by Nelson, a division of Thomson Canada Limited
21
Making Sense of Changing Environments
Environmental scanning Interpreting environmental factors Acting on threats and opportunities
©2004 by Nelson, a division of Thomson Canada Limited
22
Environmental Scanning Searching the environment for important events or issues that might affect an organization. Scanning:
reduces uncertainty alters organizational strategies contributes to organizational performance
©2004 by Nelson, a division of Thomson Canada Limited
23
Interpreting Environmental Factors
Managers determine what environmental events and issues mean to the organization Opportunities versus threats
©2004 by Nelson, a division of Thomson Canada Limited
24
Acting on Threats and Opportunities
Managers have to decide how to respond to these environmental factors Cognitive maps
simplified models of external environments depicts how managers believe environmental factors relate to possible organizational actions
©2004 by Nelson, a division of Thomson Canada Limited
25
Cognitive Maps
Exhibit 2.4 ©2004 by Nelson, a division of Thomson Canada Limited
26
Learning Objectives: Internal Environments After reading the next section, you should be able to: 5. explain how organizational cultures are created and how they can help companies be successful ©2004 by Nelson, a division of Thomson Canada Limited
27
Organizational Cultures: Creation, Success, and Change
Creation and maintenance of organizational cultures Successful organizational cultures Changing organizational cultures
©2004 by Nelson, a division of Thomson Canada Limited
28
Creation and Maintenance of Organizational Cultures
Visible artifacts Company founders help create culture Cultures are maintained through:
stories organizational heroes rituals, ceremonies, and symbols
©2004 by Nelson, a division of Thomson Canada Limited
29
Successful Organizational Cultures
Exhibit 2.5 ©2004 by Nelson, a division of Thomson Canada Limited
30
Changing Organizational Cultures
Behavioural addition
Behavioural substitution
is the process of having managers and employees perform a new behaviour is having managers and employees perform a new behaviour in place of another behaviour
Change visible artifacts
Such as the office design and layout, company dress codes, etc.
©2004 by Nelson, a division of Thomson Canada Limited
31
What Really Happened?
Challenges in the economic, supplier, competitor, and industry components Avoids travel agents by using the Web Directly confronts competitors and regulators Experiences new opportunities
©2004 by Nelson, a division of Thomson Canada Limited
32
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