Lecture-3

INTERACTIONS BETWEEN
ORGANIZATIONS AND THEIR
ENVIRONMENTS
Organizational Environment

● General environment – affects indirectly

● Task environment
- Affects directly

- Influences operations and performances

● Internal environment – elements within the

organization’s boundaries

2
Organizational Environments

Technological General Environment

Customers

Competitors
Labor Market

Task Environment

Management

Suppliers
Internal
Environment
International Dimension

● Provides New
• Customers
• Competitors
• Suppliers

● Shapes:
• Social trends
• Technological trends
• Economic trends
Technological Dimension
 Scientific and technological advances
 Specificindustries
 Society at large

 Impact
 Competition

 Relationship
with Customers
 Medical advances

 Nanotechnology advances
Socio-Cultural Dimension

 Dimension of the general environment

 Demographic characteristics
 Norms
 Customs
 Values
Economic Dimension

● General economic health

● Consumer purchasing power
● Unemployment rate
● Interest rates

● Recent Trends
● Frequency of mergers and acquisitions
● Small business sector strengthen
Task Environment
Sectors that have a direct working relationship with
the organization
● Customers
● Competitors
● Suppliers
● Labor Market
Labor Market Forces

Labor Market Forces Affecting Organizations today

● Growing need for computer literate information
technology workers
● Necessity for ongoing investment in human resources –
recruitment, education, training
● Effects of international trading blocks, automation,
outsourcing, shifting facility locations upon labor
dislocations
 Adopting to the Environment

 Boundary-spanning
 Inter-organizational partnerships
 Mergers or joint ventures

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External Environment and Uncertainty

High
Adapt to
High
Environment
Rate of Uncertainty
Change in
Factors in
Environment

Low
Uncertainty
Low
Low High

Number of Factors in Organization Environment

Competitive Intelligence - CI

 What - Activities to get as much information as possible

about one’s rivals

 Where - Web sites, commercial databases, financial

reports, market activities, news clippings, trade
publications, personal contacts

 Why – Spot potential threats or opportunities

Inter-organizational Partnerships

Shift in paradigm
● Trust, value added to both sides
● Equity, fair dealing, everyone profits
● E-business links to share information and conduct digital
transactions
● Close coordination; virtual teams and people on site
● Involvement in partner’s product design and production
● Long-term contracts
● Business assistance goes beyond the contract
Environment and Culture

 A big influence on internal corporate culture is

the external environment
 Cultures can vary widely across organizations
 Organizations within same industry reveal similar
cultural characteristics
Cultural Leadership

● Articulates a vision that employees can believe in

● Defines and communicates central values that employees believe in
● Values are tied to a clear and compelling mission, or core purpose
● Heeds (Pay attention) the day-to-day activities
that reinforce the cultural vision – work procedures and
reward systems match and reinforce the values
High-Performance Culture
Creating and maintaining a high-performance culture in today’s
turbulent environment and changing workplace is not easy.
 Managers widely communicate their cultural values
through their words and particularly their actions
 Value statements that are not reinforced by
management behavior are meaningless or even
harmful for employees and the organization
 Cultural leaders uphold their commitment to values
during difficult times or crises.
 (Managing in a Global Environment)
Importance of International Business

If you are not thinking

international,

you are not thinking business

management
(Managing in a Global Environment)
Global Environment Challenges

 Difficulties Operating in Borderless World

 Challenges
 Economic

 Legal-political

 Socio-cultural

 Multinational Corporations
 Foreign Markets - Entrance
(Managing in a Global Environment)
A Borderless World
 Business is becoming a unified, global field
 Companies that think globally have a competitive
edge
 Domestic markets are saturated for many
companies
 Consumers can no longer tell from which country
they are buying

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(Managing in a Global Environment)
Four Stages of Globalization
Domestic stage:
market potential is limited to the home country
production and marketing facilities located at home
International stage:
exports increase
company usually adopts a multi-domestic approach
Multinational stage:
marketing and production facilities located in many countries
more than 1/3 of its sales outside the home country
Global (or stateless) stage:
making sales and acquiring resources in whatever country offers the
best opportunities and lowest cost
ownership, control, and top management tend to be dispersed
(Managing in a Global Environment)
Global (stateless) Corporations
 Number is increasing
 Awareness of national borders decreasing
 Rising managers expected to know a 2nd or 3rd language
 Corporate Example – Nestle (Swiss)
 CEO Peter Brabeck–Letmathe (Austrian)
 Half of general managers (non-Swiss)
 Strong faith in regional managers who are native to the region
The International Business Environment

 International management is management of

business operations conducted in more than one
country
 Fundamental tasks do not change
 Basic management functions
 are the same - domestic or international
 Greater difficulties and risks when performing on an
international scale
Starting a New Business

 Since the 1970, the number of businesses in the

U.S. economy has been growing faster than the
labor force

 The annual number of business launches continues

to increase
Entrepreneurship

● Process of initiating a business venture

● Organizing the necessary resources
● Assumes associated risks and rewards
 Five types of Small Business Owners

Rewarded by chance to Thrive on the challenge of Enjoy chance to balance work

work on something new and building a larger, more and personal life
creative profitable business

Idealists Optimizers Hard Jugglers Sustainers

24% 21% Workers 20% 15%
20%

Get personal satisfaction from High energy people who enjoy

being a business owner handling every detail of their own
business

SOURCE: Study conducted by Yankelovish Partners, reported in Mark Henricks, “The-

Cast,” Entrepreneur (March 2000), 14-16.
Why Small Business Today?

Economic changes

Globalization

Increased competition

Advancing technology

New market niches

Definition of Small Business

● Independently owned and operated

● Not dominant in its field of operation
● Number of employees, depending on the industry
● Annual sales consideration, depending on the
industry
General Types of Small Business

 Most entrepreneurs start...

 Retail
 Manufacturing
 Service
 Additional types
 Construction
 Communications
 Finance
 Real estate