Chapter 2

Organizational Environments and Cultures

©2004 by Nelson, a division of Thomson Canada Limited

1

What Would You Do?
 

The “Southwest” of Europe Stiff competition from “go” & rising costs How do you react to the competition & political pressures? What would you do?

©2004 by Nelson, a division of Thomson Canada Limited

2

Learning Objectives: 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 of that companies use to make sense of their changing environments
©2004 by Nelson, a division of Thomson Canada Limited

3

Changing Environments

Environmental complexity and munificence Environmental change Uncertainty

©2004 by Nelson, a division of Thomson Canada Limited

4

Environmental Change

The rate at which a company’s general and specific environments change
 

stable environments dynamic environments

Punctuated equilibrium theory

©2004 by Nelson, a division of Thomson Canada Limited

Companies cycle through stable and dynamic environments 5

Environmental Complexity and Munificence
Environmental complexity  The number of external factors in the environment that affect organizations

Simple environments

have few environmental factors have many environmental factors
6

Complex environments

©2004 by Nelson, a division of Thomson Canada Limited

Environmental Munificence

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

©2004 by Nelson, a division of Thomson Canada Limited

7

Environmental Change, Complexity, and Munificence

Exhibit 2.1 ©2004 by Nelson, a division of Thomson Canada Limited

8

Uncertainty

How well managers can understand or predict the external changes and trends affecting their businesses

©2004 by Nelson, a division of Thomson Canada Limited

9

General and Specific Environments

Exhibit 2.2 ©2004 by Nelson, a division of Thomson Canada Limited

10

General Environment
   

Economy Technological Component Sociocultural Component Political/Legal Component

©2004 by Nelson, a division of Thomson Canada Limited

11

Economy

Growing versus shrinking economies Future economic activity is difficult to predict Business confidence indices

managers’ confidence in the growth of the economy
12

©2004 by Nelson, a division of Thomson Canada Limited

Technological Component

Technology is the knowledge, tools, and techniques used to transform inputs (raw materials, information, etc.) into outputs (products and services) Technological changes can benefit or threaten businesses
13

©2004 by Nelson, a division of Thomson Canada Limited

Sociocultural Component

Refers to the demographic characteristics and general behaviour, attitudes and beliefs of people in a particular society Two important components
 

Demographic changes Changes in behaviour, attitudes, and beliefs
14

©2004 by Nelson, a division of Thomson Canada Limited

Political/Legal Component

Includes the legislation, regulation, and court decisions that govern and regulate business behaviour Managers must be aware of relevant laws and regulations

Education is a key component

©2004 by Nelson, a division of Thomson Canada Limited

15

Specific Environment
    

Customer Component Competitor Component Supplier Component Industry Regulation Component Advocacy Groups

©2004 by Nelson, a division of Thomson Canada Limited

16

Customer Component

Companies cannot exist without customers Managers must monitor customer wants and needs

reactive

responding after the fact anticipating problems
17

proactive

©2004 by Nelson, a division of Thomson Canada Limited

Competitor Component

Companies in the same industry that sell similar products or services to customers Competitive analysis
  

deciding who your competitors are anticipating competitors’ moves determining competitors’ strengths and weaknesses
18

©2004 by Nelson, a division of Thomson Canada Limited

Supplier Component

 

Companies that provide material, human, financial, and informational resources to other companies Supplier & buyer dependence Opportunistic vs. relationship behaviour
19

©2004 by Nelson, a division of Thomson Canada Limited

Industry Regulation Component

Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions

©2004 by Nelson, a division of Thomson Canada Limited

20

Advocacy Groups
Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions. Influence techniques:
  

public communications media advocacy product boycott
21

©2004 by Nelson, a division of Thomson Canada Limited

Making Sense of Changing Environments
  

Environmental scanning Interpreting environmental factors Acting on threats and opportunities

©2004 by Nelson, a division of Thomson Canada Limited

22

Environmental Scanning
Searching the environment for important events or issues that might affect an organization. Scanning:
  

reduces uncertainty alters organizational strategies contributes to organizational performance
23

©2004 by Nelson, a division of Thomson Canada Limited

Interpreting Environmental Factors

Managers determine what environmental events and issues mean to the organization Opportunities versus threats

©2004 by Nelson, a division of Thomson Canada Limited

24

Acting on Threats and Opportunities

Managers have to decide how to respond to these environmental factors Cognitive maps

©2004 by Nelson, a division of Thomson Canada Limited

simplified models of external environments depicts how managers believe environmental factors relate to possible organizational actions

25

Cognitive Maps

Exhibit 2.4 ©2004 by Nelson, a division of Thomson Canada Limited

26

Learning Objectives: Internal Environments
After reading the next section, you should be able to: 5. explain how organizational cultures are created and how they can help companies be successful
©2004 by Nelson, a division of Thomson Canada Limited

27

Organizational Cultures: Creation, Success, and Change

 

Creation and maintenance of organizational cultures Successful organizational cultures Changing organizational cultures

©2004 by Nelson, a division of Thomson Canada Limited

28

Creation and Maintenance of Organizational Cultures
 

Visible artifacts Company founders help create culture Cultures are maintained through:
  

stories organizational heroes rituals, ceremonies, and symbols
29

©2004 by Nelson, a division of Thomson Canada Limited

Successful Organizational Cultures

Exhibit 2.5 ©2004 by Nelson, a division of Thomson Canada Limited

30

Changing Organizational Cultures

Behavioural addition

is the process of having managers and employees perform a new behaviour is having managers and employees perform a new behaviour in place of another behaviour Such as the office design and layout, company dress codes, etc.
31

Behavioural substitution

Change visible artifacts

©2004 by Nelson, a division of Thomson Canada Limited

What Really Happened?

Challenges in the economic, supplier, competitor, and industry components Avoids travel agents by using the Web Directly confronts competitors and regulators Experiences new opportunities
32

©2004 by Nelson, a division of Thomson Canada Limited