Lesson 4 biz environment anelysis

The General Environment• Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services • Results in new opportunities üSocial structure: th

Lesson 4

Instructor: LTT Xuan 1

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1 Contrast the actions of managers according to the

omnipotent and symbolic views

2 Describe the constraints and challenges facing

managers in today’s external environment

§Develop your skill at scanning the environment so

you can anticipate and interpret changes taking place

3 Discuss the characteristics and importance of

What Is the Organizational Environment?

• The set of forces and conditions that operate beyond an

organization’s boundaries but affect a manager’s ability to acquire and utilize resources

• Forces and conditions change over time creating:

üOpportunities for managers to enhance revenues, enter new markets, and strengthen the firm’s competitive position.

ü Threats to the firm from new competitors, economic downturns, and diminished access to critical resources.

• Managers usually cannot impact or control these.

• Forces have profound impact on the firm

The General Environment

• Outcomes of changes in the technology that managers use to design, produce, or distribute goods and services

• Results in new opportunities

üSocial structure: the arrangement of relationships between individuals and groups in society

üNational culture: the set of values that a society considers important and the norms of behavior that are approved or sanctioned in that society

• Cultures and their associated social structures, values, and norms differ widely

The General Environment

• Outcomes of change in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class

• During the past two decades, women have entered the workforce in increasing

numbers and most industrial countries’

populations are aging

• This will change the opportunities for firms competing in these areas as demands for childcare and health care are forecast to increase dramatically

Instructor: LTT Xuan 9

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organizations, and increased emphasis

on environmental protection

• Increases in laws and regulations increase the costs of resources and limit the uses of resources that managers are responsible for acquiring and using effectively and efficiently

The General Environment

• Outcomes of changes in international relationships; changes in nations’ economic, political, and legal systems; and changes in technology, such as falling trade barriers, the growth of representative democracies, and reliable and instantaneous communication

• Important opportunities and threats to managers:

üThe economic integration of countries through free-trade agreements (GATT, NAFTA, EU) that decrease the barriers to trade

Instructor: LTT Xuan 13

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The Task Environment

The Task Environment

SUPPLIERS

• Individuals and organizations that provide an

organization with the input resources that it

needs to produce goods and services

üRaw materials, component parts, labor

(employees)

• Relationships with suppliers can be difficult due

to materials shortages, unions, and lack of

substitutes

üSuppliers that are the sole source of a

critical item are in a strong bargaining

position to raise their prices

• Managers can reduce these supplier effects by

increasing the number of suppliers of an input

Instructor: LTT Xuan 15

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The Task Environment

DISTRIBUTORS

• Organizations that help other

organizations sell their goods or

services to customers

üPowerful distributors can limit

access to markets through its control of customers in those markets

üManagers can counter the

effects of distributors by seeking alternative distribution

channels

The Task Environment

CUSTOMERS

• Individuals and groups that buy

goods and services that an

organization produces

üIdentifying an organization’s

main customers and producing the goods and services they want is crucial to organizational and managerial success

Instructor: LTT Xuan 17

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The Task Environment

• Organizations that produce goods

and services that are similar to a

particular organization’s goods and

services

• Potential Competitors

üOrganizations that presently are

not in the task environment but

could enter if they so chose

• Strong competitive rivalry results in

price competition, and falling prices

reduce access to resources and

lower profits

The Task Environment

BARRIERS TO ENTRY

• Factors that make it difficult and

costly for the organization to enter a

particular task environment or

Instructor: LTT Xuan 21

The Industry Life Cycle

• The changes that take place in an industry as it goes through the stages of birth,

growth, shakeout, maturity, and decline

• Birth: industry competitors seek to develop the winning technology

• Growth: industry products gain acceptance and rapid growth in product demand

attracts new competitors

• Shakeout: industry growth slows, weak firms exit the industry, and rivalry

increases

• Maturity: the market stabilizes as demand levels off, the industry is now

dominated by a few large competitors

• Decline: demand for industry products declines, competition increases, failing

competitors either exit the market or are acquired by rival firms

The Task Environment

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The Industry Life Cycle The Task Environment

— Reducing the Impact of Environmental Forces

—Top management: devise strategies that take advantage of opportunities and counter threats

—Middle managers: collecting about competitors’ intentions, new customers, and new suppliers for the firm’s crucial or low-cost inputs

—First-line managers: use resources efficiently and get closer to customers

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Managing the Organizational Environment

• Creating an Organizational Structure

• Increasing the complexity of the organization’s

structure in response to the changing organizational

environment

• Departments are assigned to develop the skills and

knowledge necessary to deal with environmental

changes and to cooperate with other departments to

efficiently and effectively get products to customers

üFacilitates comparisons of suppliers’ pricesüInforms suppliers of changes in purchasers’ specification and allows them to bid on contracts to supply inputsüInforms customers about new and existing productsüProvides information to other stakeholders

Instructor: LTT Xuan 27

Managers as Agents of Change

• Environmental change can be the direct consequence of actions

taken by managers in an organization.

Change in the Environment

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The internal environment

• Organizational culture

• Ethics and Corporate Social Responsibility

• Human resource capabilities

• R&D

• Financial capabilities

• …

Organizational Culture

• What is organizational culture?

• When is organizational culture

functional? Dysfunctional?

• How do employees learn about the

culture of their organization?

Instructor: LTT Xuan 31

Questions for consideration

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Organizational Culture

• The pattern of shared values, beliefs and assumptions considered

to be the appropriate way to think and act within an organization.

• Culture is shared

• Culture helps members solve problems

• Culture is taught to newcomers

• Culture strongly influences behaviour

Characteristics of Organizational Culture

• Innovation and risk-taking: The degree to which employees are encouraged to be

innovative and take risks

• Attention to detail: The degree to which employees are expected to exhibit precision,

analysis, and attention to detail

• Outcome orientation: The degree to which management focuses on results or outcomes

rather than on technique and process

• People orientation: The degree to which management decisions take into consideration

the effect of outcomes on people within the organization

• Team orientation: The degree to which work activities are organized around teams

rather than individuals

• Aggressiveness: The degree to which people are aggressive and competitive rather than

easygoing

• Stability: The degree to which organizational activities emphasize maintaining the status

quo in contrast to growth

Instructor: LTT Xuan 35 Instructor: LTT Xuan 34

• Core values or dominant (primary) values are accepted throughout the organization

• Dominant culture

• Expresses the core values that are shared by a majority of the organization’s members

Do Organizations Have Uniform

Cultures?

Instructor: LTT Xuan 39

• Social glue that helps hold an organization together

• Provides appropriate standards for what employees should say or do

• Boundary-defining

• Conveys a sense of identity for organization members

• Facilitates commitment to something larger than one’s individual self-interest

• Enhances social system stability

• Serves as a “sense-making” and control mechanism

• Guides and shapes the attitudes and behaviour of employees

Culture’s Functions

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Culture as a LiabilityCulture can have dysfunctionalaspects in some instances

• Culture as a Barrier to ChangeüWhen organization is undergoing change, culture may impede change

• Culture as a Barrier to DiversityüStrong cultures put considerable pressure on employees to conform

• Culture as a Barrier to Mergers and Acquisitions

üMerging the cultures of two organizations can be difficult, if not impossible

• Is it possible to change organizational

culture? If yes, how to change?

Instructor: LTT Xuan 41

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• Employees form an overall subjective perception of the organization based on such

factors as degree of risk tolerance, team emphasis, and support of people

üThis overall perception becomes, in effect, the organization’s culture or personality

üThese favourable or unfavourable perceptions then affect employee performance and

satisfaction, with the impact being greater for stronger cultures

• Just as people’s personalities tend to be stable over time, so too do strong cultures

üThis makes strong cultures difficult for managers to change

• One of the more important managerial implications of organizational culture relates to

selection decisions

üHiring individuals whose values don't align with those of the organization is not good

Summary and Implications Organizational Culture

Instructor: LTT Xuan 43

Point-Counter-Point

• Why Culture Doesn’t Change

▲Culture develops over many

years, and becomes part of how the organization thinks and feels

▲Selection and promotion policies

guarantee survival of culture

▲Top management chooses

managers likely to maintain culture

• When Culture Can Change

▲There is a dramatic crisis

▲There is a turnover in leadership

▲The organization is young and small

▲There is a weak culture

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