Lec-2_04.02.2008

The Environmental Context of Management

The Organization’s Environment 

External Environment  

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General Environment Task Environment

Internal Environment

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External Environment 

The General Environment: The set of broad dimensions and forces in an organization’s surroundings that create its overall context. 

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Economic dimension is the overall health and vitality of the economic system in which the organization operates.-inflation, interest rates, unemployment Technological dimension refers to the methods available for converting resources into products or services.-Firming method

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Continued… 

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Socio-cultural dimension includes the customs, mores, values, and demographic characteristics of the society in which the organization functions.-Designer clothes, tastes, bribers, age. Political-legal dimension is the extent of government regulation of business and the general relationship between business and government.-regulations, pro vs. anti business sentiment, political stability.

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International dimension is the extent to which the organization is affected by business in other countries.-global competition. S. M. Towhidur Rahman

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Continued… 

The Task Environment: Specific groups affecting the organization  Competitors  Customers  Suppliers  Regulators  Strategic partners (allies)

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Internal Environment 

Conditions and stakeholder forces within an organization 

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Owners: with legal property rights to a business.-individual, partners, public and private Ltd. Board of directors: elected by the stockholders to oversee the general management of the firm to best serve the stockholders’ interest. Employees: who work for the firm and have a vested interest in its continued operation and existence. S. M. Towhidur Rahman

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The Organization and Its Environments

International dimension

Technological dimension Competitors

Regulators

Politicallegal dimension

Owners Employees Physical environment Board of directors Culture

Strategic partners

Customers

Suppliers

Economic dimension

Internal environment Task environment General environment 04/15/09

External environment

Sociocultural dimension

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Organization-Environment Relationship 

Questions to be faced 

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How does environment affect organizations? How do organizations adapt to environment?

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How environments affect organizations 

Three perspectives are   

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Environmental change and complexity Competitive force Environmental turbulence

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Continued… 

Environmental change and complexity  Proponent: James D. Thompson  Envt. Can be analyzed along two dimensions  Degree of change (stable vs. dynamic)  Degree of homogeneity (simple vs. complex)  Level of uncertainty, a driving force that influence organization’s decision, is determined from the interaction of these two dimensions

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Figure: Environmental change, complexity and uncertainty

Degree of homogeneity

Simple

Least uncertainty Moderate uncertainty

Moderate uncertainty Most uncertainty

Complex

Stable

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Degree of change

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Dynamic

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Continued… 

Competitive force 

Five factor model (Proponent: Michael E porter) 

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Threat of new entrants Competitive rivalryThreat of substitute products Power of buyers Power of suppliers

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Continued… 

Environmental turbulence  Unexpected changes and upheavals

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How organizations adapt to their environments 

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Information management  Boundary spanner  Environmental scanning  Information systems Strategic response Mergers, takeovers, acquisitions, and alliances Organization design and flexibility Direct influence of the environment

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How Organizations and Environments Interact

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Organizational Effectiveness 

Models of organizational effectiveness    

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Systems resource approach Internal process approach Goal approach Strategic constituencies approach

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Organizational Culture 

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Organization Culture: The collection of values, beliefs, behaviors, customs, and attitudes that characterize a community of people. The Importance of Organization Culture  Culture determines the overall “feel” of the organization, although it may vary across different segments of the organization.  Culture is a powerful force that can shape the firm’s overall effectiveness and longterm success.

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Determinants of culture 

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Organization’s founder (personal values and beliefs). Symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization. Corporate success that strengthens the culture. Shared experiences that bond organizational members together.

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Managing Organizational Culture 

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Understand the current culture to understand whether to maintain or change it. Articulate the culture through slogans, ceremonies, and shared experiences. Reward and promote people whose behaviors are consistent with desired cultural values.

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Changing Organizational Culture 

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Develop a clear idea of what kind of culture you want to create. Bring in outsiders to important managerial positions. Adopt new slogans, stories, ceremonies, and purposely break with tradition.

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The Ethical and Social Context of Management

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Individual Ethics in Org. 

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Ethics: An individual’s personal beliefs regarding what is right and wrong or good and bad. Three implications  In the context of individual-people have ethic and org do not.  Ethical behavior varies from one person to another.  Conforms to generally accepted social norms.

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The Formation of Individual Ethics

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Managerial Ethics 

Standards of behavior that guide individual managers in their work.

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Areas of concerns for managers  How an org. treats its employees  How employees treat the org.  How the org. treats other economic agent.

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Managing Ethical Behavior 

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Begins with top management which establishes the organization’s culture and defines what will and will not be acceptable behavior. Includes training on how to handle different ethical dilemmas. Developing a code of ethics.  Written statement of the values and ethical standards that guide the firm’s actions.

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Social Responsibility and Org. 

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The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions. It is the awareness that business activities have an impact on society, and the consideration of that impact by firms in decision making.

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Areas of Social Responsibility 

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Stakeholders: customers, employees, and investors. The natural environment: environmentally sensitive products, recycling, and public safety. The general social welfare: charitable contributions, and support for social issues such as child labor and human rights.

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Arguments For and Against SR Arguments For Social Responsibility

Arguments Against Social Responsibility

1. Business creates problems and should therefore help solve them.

1. Business lacks the expertise to manage social programs.

2. Corporations are citizens in our society.

2. Involvement in social programs gives business too much power.

Social Responsibility

3. Business often has the resources necessary to solve problems.

3. There is potential for conflicts of interest.

4. Business is a partner in our society, along with the government and the general population.

4. The purpose of business in U.S. society is to generate profit for owners.

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Organizational Approaches to SR 

Social obstruction: An approach to social responsibility in which firms do as little as possible to solve social or environment problems. (higher price charge)

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Social Obligation: A social responsibility stance in which an organization does everything that is required of it legally but nothing more. (install pollution control equipment but inferior quality)

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Continued… 

Social Response: A social responsibility stance in which an organization meets its basic legal and ethical obligations and also goes beyond social obligation in selected cases. (donation school, college, university )

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Social Contribution: A social responsibility stance in which an organization views itself as a citizen in a society and proactively seeks opportunities to contribute to that society. Medical center, scholarship etc.

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The Govt. and SR The govt. influences business through •Envt. protection legislation

The Government

•Consumer protection legislation •Employee protection legislation •Securities legislation •The tax codes

Business influences the Govt. through •Personal contacts and networks •Lobbying

Business

•Favor and other influence tactics

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Managing Social Responsibility 

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Formal organizational decision  Legal compliance  Ethical compliance  Philanthropic giving Informal organizational decision  Organizational leadership and culture  Whistle blowing  Social audit

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