Management Presentation Chapter 2

Management Presentation Chapter 2 Management Presentation Chapter 2 Management Presentation Chapter 2 Management Presentation Chapter 2 Management Presentation Chapter 2 Management Presentation Chapter 2

The Organization’s Environments

• External Environment: Everything that is outside an organization

– General environment is a set of broad dimensions and forces in an organization’s

surroundings that determine its overall context

– Task environment is composed of specific groups and organizations that affect the firm.

• Internal Environment: Conditions and forces within an organization.

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password-Owners Employees

Physical environment

Board of directors

Culture Competitors

legal dimension

Political-Technological dimension

Economic dimension

Strategic partners

Suppliers

Internal environment

Task environment

External environment General environment

The Organization and Its Environments

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password-The general environment consists of broad dimensions and forces in

an organization's context

The task environment is the specific organizations or groups that have

a direct impact on a firm

The internal environment consists of conditions and forces within the

organization.

The External Environment

• The General Environment

The External Environment (cont’d)

• Dimensions of the Task Environment

– Specific groups affecting the organization

• Competitors: The other organizations that compete for the same resources

• Customers: Pay money to acquire an organization’s products or services

• Suppliers: Provide resources for other organizations

The External Environment (cont’d)

• Dimensions of the Task Environment

– Regulators: Have the potential to control, regulate or influence an organization's policies and practices

• Regulatory agencies are created by the government to protect the public from certain

business practices or to protect organizations from one another

• Interest groups: are groups organized by members to attempt to influence organizations – Specific groups affecting the organization

• Strategic partners (also called strategic allies): Two or more companies work together in joint ventures

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FIGURE 2.1 McDonald’s Task Environment

The Internal Environment

• Conditions and forces within an organization

– Owners with legal property rights to a business.

– Board of directors who oversee management of the firm to best serve stockholders’ interest.

– Employees who work for the firm and have a vested interest in its continued operation and

existence

– Physical work environment of the organization and the work that people do.

Individual Ethics In Organizations

• Ethics

– An individual’s personal beliefs regarding what is right or wrong or good or bad

• Ethical Behavior

– Behavior that is acceptable in the eye of the beholder

• Examples of Unethical Behavior

– “Borrowing” office supplies for personal use

Question: Does an organization have ethics?

Determinants of Individual Ethics

Factors

Fostering Ethical Organization Behavior

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password-Train Employees

Ethics in Organizations

• Managing Ethical Behavior

• Establishes a strong culture and defines what will and will not be acceptable behavior

• Provides ethical leadership by serving as ethical role models

–Includes

• Training on how to handle ethical dilemmas

• Developing a code of ethics

Emerging Ethical Issues

Ethical Leadership

(Integrity)

Ethics and Information Technology (Privacy)

Corporate Governance (Sarbanes-Oxley Act)

Ethical Issues in Organizations

Social Responsibility in Organizations

• Social Responsibility

–The set of obligations (to behave responsibly) that an organization has to protect and enhance the social context in which it functions

• Areas of Social Responsibility

–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

Question: Should organization consider social responsibility as its main goal?

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FIGURE 2.2 Arguments for and against Social Responsibility

Arguments for

Social Responsibility

Arguments against Social Responsibility

Social Responsibility

Managing Social Responsibility:

Formal Organizational Dimensions

Managing Social Responsibility:

Informal Organizational Dimensions

• Organizational Leadership and Culture

–Leadership practices and the culture of the organization define the social responsibility stance

an organization and its members will adopt

• Whistle Blowing

–The organizational response to the disclosure by an employee of illegal or unethical conduct

on the part of others within the organization is indicative of the organization’s stance on social responsibility

Question: Will you “blow the whistle” if it meant the possible loss of a job?

Managing Social Responsibility

Legal compliance

Ethical compliance

Philanthropic giving

Formal Organizational Dimensions

Organization leadership and culture

Whistle Blowing

Informal Organizational Dimensions

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password-Trends in International Business

• Economic Recovery

• Decreasing Isolation from Foreign Competition

• US firms dominate in some industries, including auto making and fast food, but many other industries are dominated by non-US firms, including chemicals, steel, banking, and electronics.

• Increasing Globalization of World Markets

–Larger percentages of U.S firms’ profits are now earned in international markets

International Business Activity

Types of International Business Activity

Importing Exporting

Licensing

Direct Investment

Alliances and Joint Ventures

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password-Levels of International Business Activity

technology, patent, copyright, or other assets in exchange for a royalty based on sales

Franchising is a special form of licensing

Levels of International Business… (cont’d)

• Strategic Alliance and Joint Ventures

– Firms jointly cooperate for mutual gain, by sharing costs and/or sharing ownership of a new

enterprise

• Direct Investment

– Occurs when a firm headquartered in one country builds or purchases operating facilities or

subsidiaries in a foreign country (e.g Coca-Cola invested $150 billions to build a new bottling and distributing network in India)

– Maquiladoras

• Light-assembly plants in northern Mexico which are given special tax breaks by the Mexican government A large population of workers is willing to work for low wages

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Table 2.1 Advantages and Disadvantages of Different Approaches

to Internationalization

Approach to Internationalization Advantages Disadvantages

Importing or Exporting 1. Small cash outlay

2. Little risk

3. No adaptation necessary

1. Tariffs and taxes

2. High transportation costs

Strategic Alliances or Joint Ventures 1. Quick market entry

2. Access to materials and technology

Shared ownership (limits control and profits)

Direct Investment 1. Enhanced control

The Context of International Management

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password-International Management Functions

Political/Legal Environment

Government stability

Incentives for international trade

Controls on international trade

Economic communities

Economic Environment

Economic system Natural resources Infrastructure

Cultural Environment

Values, symbols, beliefs, and language Individual differences across cultures

The Cultural Environment

• Cultural: Cultural values and beliefs are often unspoken Managers need to take special caution on this For example:

–Different value of time between US and middle east

–Different family structure between US and China

• Language:

• Culture Quiz!

Controls on International Trade

• Tariffs are taxes collected on goods shipped across national boundaries.

–Import tariffs can be levied to protect domestic companies or raise money for the

Controls on International Trade

• Export restraint agreements are voluntary limits

on the volume or value of goods

exported to, or imported from, another country.

–This is, in fact, export quotas

–E.g Japanese steel producers voluntarily limit the amount of steel they send to the US each year

• “Buy National” legislation gives preference to domestic producers through content

or price restrictions.

–E.g Brazil requires that Brazilian companies purchase only Brazilian-made computers

The Structure of the Global Economy

• Economic Communities

–Sets of countries that engage in high levels

of trade with each other through the elimination

of trade barriers such as quotas and tariffs

• European Union (EU) – 27 countries work together to eliminate most trade barriers (e.g

eliminate their home currencies and adopted the euro.

• North American Free Trade Agreement (NAFTA): To ease the trade between US,

Canada, and Mexico

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password-The Role of the GATT and the WTO

• General Agreement on Trade and Tariffs (GATT) (It was first ratified in 1948)

– A trade agreement that promoted international trade by lowering trading barriers and tariffs

• World Trade Organization (WTO) (It was ratified in 1995 It replaced the GATT and absorbed its mission) It includes 140 member nations and 32 observer countries

–To promote trade flows by encouraging nations to adopt nondiscriminatory and predictable trade policies

–To reduce remaining trade barriers through multilateral negotiations

–To establish impartial procedures for resolving trade disputes among its members

The Organization’s Culture

• 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 organization’s overall effectiveness and term success

long-E.g Employees at JC Penney are still called associates rather than employees (to reflect partnership)

Managing Organization Culture

• Understand the current culture and decide whether to maintain or change it.

• Articulate the culture through slogans , ceremonies , and shared experiences

offsite meetings

–Slogans: Customer first!

• Reward and promote people whose behaviors are consistent with desired cultural values.