Management by chuch williams chapter 03

Chapter 3
Organizational Environments
and Cultures

MGMT
Chuck Williams

Designed & Prepared by
B-books, Ltd.
1


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.
2


Changing Environments
Characteristics of
Changing External Environments

Environmental

EnvironmentalChange
Change
Environmental
EnvironmentalComplexity
Complexity
Resource
Resource Scarcity
Scarcity
Uncertainty
Uncertainty
1
3


Environmental Change
Environmental Change is the rate at which
a company’s environments change
 stable environments
 dynamic environments
Punctuated equilibrium theory
Companies cycle through stable and dynamic
environments.
1.1
4


Environmental Complexity
Environmental Complexity: the number of
external factors in the environment that
affect organizations

Simple environments

Complex environments

1.2
5


Resource Scarcity
Resource Scarcity
The degree to which an organization’s
external environment has an abundance
or scarcity of critical organizational resources

1.3
6


Natural
Resources
The scarcity of natural
resources is a general
concern. Companies like
Weyerhauser work extra
hard to correct the
misperception that they
are using up valuable
resources. In fact,
through careful planning

and good management,
Weyerhauser is able to
both guarantee its
lumber resources and be
a good environmental
steward.

7


Uncertainty

1.4
8


External Environment

Specific Environment

2
9


Components of the
General Environment
•
•
•
•

Economy
Technological trends
Sociocultural trends
Political / Legal trends

2
10


Economy
• Growing vs. shrinking
economies
• Predicting future economic
activity
• Business confidence indices

2.1
11


Technological Component

Input
Input
Raw
Raw
Materials
Materials

Information
Information

Technology
Technology
Knowledge
Knowledge
Tools
Tools
Techniques
Techniques

Output
Output
Products
Products

Services
Services

2.2
12


Impact of Technology

2.2

Technology
can be a great

benefit or a
daunting
threat. MP3
players have
created a
tremendous
new 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.

13


Sociocultural Component
– Demographic changes
– Changes in behavior, attitudes, and beliefs

2.3
14


Demographics Example

2.3
15

Political / Legal Component
•
•
•

2.4

Legislation
Regulations
Court decisions

Web Link

Managers must be educated
about the laws, regulations,
and potential lawsuits that
could affect business

/> />16


Specific Environment
Customer
Customer
Competitor
Competitor
Supplier
Supplier
Industry
Industry Regulation

Regulation
Advocacy
Advocacy Group
Group
3
17


Customer Component
Monitoring customer
wants and needs
is critical for
business success
Reactive customer monitoring
– responding to problems,
trends, and events

3.1

Proactive customer monitoring
– anticipating problems,
trends, and events
18


Competitor Component
Competitive
CompetitiveAnalysis
Analysis
Deciding

Deciding who
who your
your competitors
competitors are
are
Anticipating
Anticipating competitors’
competitors’moves
moves
Determining
Determining competitors’
competitors’
strengths
strengths and
and weaknesses
weaknesses

3.2
19


Supplier Component
Buyer
Buyer
Dependence
Dependence

Suppliers
Suppliers

Opportunistic
Opportunistic Behavior
Behavior

Supplier
Supplier
Dependence
Dependence

Relationship
Relationship Behavior
Behavior

3.3
20


Industry Regulation
Component
Industry Regulation
Regulations and rules that govern the
business practices and procedures of specific
industries, businesses, and professions

3.4
21


Federal Regulation Agencies
Consumer

ConsumerProduct
Product
Safety
Commission
Safety Commission




Department
Departmentof
ofLabor
Labor




Environmental
EnvironmentalProtection
ProtectionAgency
Agency




Equal
EqualEmployment
Employment
Opportunity
OpportunityCommission

Commission
Federal
FederalCommunications
Communications
Commission
Commission

3.4






Federal
FederalReserve
ReserveSystem
System




Federal
FederalTrade
TradeCommission
Commission

Food
Foodand
andDrug
DrugAdministration
Administration




National
NationalLabor
LaborRelations
RelationsBoard
Board

http://www.

nlrb.gov

Occupational
OccupationalSafety
Safetyand
and
Health
Administration
Health Administration
Securities
Securitiesand
andExchange
Exchange

Commission
Commission






22


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 billion
And that’s just for manufacturing.
23


Advocacy Groups
Advocacy Groups

 Groups of concerned citizens who band together to

try 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
24


Advocacy Groups

PETA is a well-known advocacy
group that attempts to influence
consumers and companies to
pursue animal-friendly practices.

25