Topic 2

The Manager’s Environment

&
International Management

Annie Wang PL
Learning Objectives
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 organisational culture.
Know how to read and assess an organisation’s culture.
4 Describe current issues in organisational culture.
 2/3/2020

• 1. Do you have a way to measure and understand the values and culture
of your organisation?
• 2. Do you measure and manage the dysfunction and fear (energy
leakages) in your organisation?
• 3. Have you shared your vision, mission and values throughout your
organisation? Do people have a clear understanding of where the
organisation is going and how this relates to their role? Do the vision,
mission and values empower people to work inter-dependently?
• 4. Are your strategy and culture aligned? Have you spent time thinking
about how your strategy should be executed based on the culture you
want to grow?
 2/3/2020

• When Indra Nooyi took the reins of PepsiCo nine years ago, she
insisted on developing the company’s product line to respond to shifts
in the external environment as the trend toward healthier eating grew.
Three categories of products were introduced including one for the
organisation’s traditional junk food products, one for healthier versions
of the same products, and one for healthy products such as oatmeal.
Under Nooyi’s leadership, PepsiCo has experienced continued growth
and Nooyi was recognised on Fortune’s list of Most Powerful Women.
• What can you learn from this leader making a difference?
The Manager: Omnipotent or Symbolic?
• Omnipotent view: managers are directly responsible for an
organisation’s success or failure
• Symbolic view: much of an organisation’s success or failure is due
to external forces outside managers’ control
Managerial Constraints
• In reality, managers are neither all-powerful nor helpless. But their
decisions and actions are constrained.
• External constraints come from the organisation’s environment and
internal constraints come from the organisation’s culture.
Exhibit 1
Constraints on Managerial Discretion

Exhibit 3-1 shows that external constraints come from the organisation’s environment and internal constraints come from
the organisation’s culture.
 2/3/2020

https://www.icaew.com/-/media/corporate/files/about-icaew/what-we-do/just-
good-business/resources-case-studies-coca-cola.ashx?la=en
The External Environment
• Those factors and forces outside the organisation that affect its
performance
– Economic
– Demographic
– Political/Legal
– Sociocultural
– Technological
– Global
Exhibit 2
Components of External Environment

Exhibit 3-2 shows the different components that make up the external environment.
The Economic Environment
• Managers need to be aware of the economic context so they can
make the best decisions for their organisations.
 Developed economies
 Larger economies with effective capital markets

Economic  Emerging economies

Dimension  Rapidly growing with underdeveloped capital
markets

 Developing economies
 Weak economies with little capital available for
growth
The Global Economy and the Economic Context
• The lingering global economic challenges began with the turmoil in
the U.S. housing market.

Economic Inequality and the Economic Context

Polls show that in many countries, people believe that the

gap between the rich and poor is problematic.
 2/3/2020

Political-Legal Dimension
 Includes country’s political risk, regulations,
laws, and enforcement
 Governments develop laws to govern
behaviour of citizens and organisations
Political-Legal
 Some “rules” are excessive and discourage
Dimension foreign investment

 Effect on Business
 Intellectual property rights
 Securities law
 Amount of regulation/deregulation
Country’s Institutional Environment:
Physical Infrastructure
Includes quantity and quality
• roads/highways, bridges
• telephone lines
• airports
• Poor infrastructure makes it difficult for
foreign firms to distribute products

• Countries wanting foreign investment must

develop infrastructure

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

 Country’s Institutional Environment Clusters
Cluster Description Examples

Developing and transitional economies. High in Brazil, Russia,

1 regulatory control and low in political rights. Nigeria
Emerging market countries that are more advanced China, India,
2 than Cluster 1 but still need to develop institutional Netherlands,
dimensions. Higher on political rights but lowest Singapore
on monetary policy and second highest on
investment restrictions.
Political-legal
Second highest regulatory controls but high on Finland,
3 political rights. Strong physical infrastructures. France,
Germany
Most developed institutional infrastructure with Japan, the
4 balanced regulatory controls and political rights United States
and strong economic and physical infrastructure.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
The Demographic Environment
• Age is a particularly important demographic since the workplace
often has different age groups all working together
Baby Boomers Generation Y, Echo Boomers or Millenniums
Born: 1946-1954 Born: 1977-1994
Coming of Age: 1963-1972 Coming of Age: 1998-2006
Age in 2004: 50-58 Age in 2004: 10 to 22
Current Population: 33 million Current Population: 71 million
Gen X Generation Z
Born: 1966-1976 Born: 1995-2012
Coming of Age: 1988-1994 Coming of Age: 2013-2020
Age in 2004: 28 to 38 Age in 2004: 0-9
Current Population: 41 million Current Population: 23 million and growing
rapidly
 2/3/2020

• https://www.linkedin.com/pulse/how-changes-demographic-
economic-environments-affect-marketing-andre
Cultural Environment
 Culture
 Learned set of assumptions, values, and behaviours
 Accepted by group of people
 Passed on to newcomers
 Affects human behaviour

 Begins when a group of people faces a set of challenges

Evolves and changes with time

 Dramatically influences how people observe and interpret the business

world—opportunity vs. threat

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

https://www.valuescentre.com/sites/default/files/
uploads/article_transforming_culture_in_larger_
organizations.pdf

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

How the External Environment Affects Managers
• Jobs and Employment: the impact of external factors on jobs and
employment is one of the most powerful constraints managers face
Assessing Environmental Uncertainty
• Environmental uncertainty: the degree of change and complexity
in an organisation’s environment
– Change: stable to dynamic
– Complexity: simple to complex
Exhibit 3
Environmental Uncertainty Matrix
Managing Stakeholder Relationships
• Stakeholders: any constituencies in the organisation’s environment
that are affected by an organisation’s decisions and actions
Exhibit 4
Organisational Stakeholders
Benefits of Good Stakeholder Relationships
• Improved predictability of environmental changes
• Increased successful innovations
• Increased trust among stakeholders
• Greater organisational flexibility to reduce the impact of change
Organisational Culture
• Just as each individual has a unique personality, an organisation,
too, has a personality.
What is Organisational Culture?
• Organisational culture: the shared values, principles, traditions,
and ways of doing things that influence the way organisational
members act and that distinguish the organisation from other
organisations
Exhibit 5
Dimensions of Organisational Culture
Contrasting Organisational Culture
• At Tesla Motors, the focus is product innovation (innovation and risk
taking).
• In contrast, Southwest Airlines has made its employees a central
part of its culture.

https://www.entrepreneur.com/article/249174
Exhibit 6
Contrasting Organisational Culture

• Risk-taking and change discouraged

• Creativity discouraged
• Close managerial supervision
• Work designed around individual employees
• Risk-taking and change rewarded
• Creativity and innovation rewarded
• Management trusts employees
• Work designed around teams
Strong Cultures
• Strong cultures: organisational cultures in which the key values
are intensely held and widely shared
 Exhibit 7
Strong Versus Weak Cultures
Strong Cultures Weak Cultures

Values widely shared Values limited to a few people – usually top

management

Culture conveys consistent messages about what’s Culture sends contradictory messages about what’s
important important

Most employees can tell stories about company history Employees have little knowledge of company history or
or heroes heroes

Employees strongly identify with culture Employees have little identification with culture

Strong connection between shared values and behaviors Little connection between shared values and behaviors
Where Culture Comes From and How it Continues
• The original source of the culture usually reflects the vision of the
founders.
• Once the culture is in place, certain organisational practices help
maintain it.
• The actions of top managers also have a major impact on the
organisation’s culture.
Exhibit 8
Establishing and Maintaining Culture
How Employees Learn Culture
• Stories
• Rituals
• Material Artifacts and Symbols
• Language
How Culture Affects Managers
• Because an organisation’s culture constrains what they can and
cannot do and how they manage, it’s particularly relevant to
managers.
Exhibit 9
Types of Managerial Decisions Affected by Culture
Creating an Innovative Culture
• Challenge and involvement
• Freedom
• Trust and openness
• Idea time
• Playfulness/humour
• Conflict resolution
• Debates
• Risk taking
 2/3/2020

• http://www.workinginuncertainty.co.uk/cases_org_famous_
boa.shtml

• https://www.hofstede-insights.com/
 Exhibit 10 Creating a Customer Responsive Culture
Characteristics of Suggestions for Managers
Customer Responsive
Culture
Type of employee Hire people with personalities and attitudes consistent with
customer service: friendly, attentive, enthusiastic, patient, good
listening skills
Type of job environment Design jobs so employees have as much control as possible to
satisfy customers, without rigid rules and procedures
Empowerment Give service-contact employees the discretion to make day-to-
day decisions on job-related activities
Role clarity Reduce uncertainty about what service-contact employees can
and cannot do by continual training on product knowledge,
listening, and other behavioural skills
Consistent desire to Clarify organisation’s commitment to do whatever it takes,
satisfy and delight even if it’s outside an employee’s normal job requirements
Creating a Sustainability Culture
• For many companies, sustainability is developed into the
organisation’s overall culture.
Review Learning Objective 1
• Contrast the actions of managers according to the omnipotent
and symbolic views.
– Omnipotent view: Managers are directly responsible for the organisation’s
success or failure.
– Symbolic view: Much of the organisation’s success or failure is due to
external forces outside of the manager’s control.
– The two constraints on managers' discretion are organisational culture
(internal) and the environment (external).
Review Learning Objective 2
• Describe the constraints and challenges facing managers in
today’s external environment.
– The external environment includes those factors and forces outside the
organisation that affect its performance).
– The main components of the external environment are economic, demographic,
political/legal, sociocultural, technological, and global.
– These components can constrain and challenge managers because they have an
impact on jobs, environmental uncertainty, and stakeholder relationships.
Review Learning Objective 3
• Discuss the characteristics and importance of organisational
culture.
– The seven dimensions of culture are: attention to detail, outcome orientation, people
orientation, team orientation, aggressiveness, stability, innovation, and risk taking.
– The stronger the culture, the greater the impact on the way managers plan, organise, lead,
and control.
– The original source of the organisational culture reflects the founder’s vision.
– Culture is transmitted through stories, rituals, material symbols, and language.
Review Learning Objective 4
• Describe current issues in organisational culture.
– The characteristics of an innovative culture are challenge and involvement, freedom, trust
and openness, idea time, playfulness/humour, conflict resolution, debates, and risk taking.
– A customer responsive culture has five characteristics: outgoing and friendly employees;
jobs with few rigid rules, procedures, and regulations; empowerment; clear roles and
expectations; and employees who are conscientious in their desire to please the customer.
– Companies that achieve business goals and increase long-term share-holder value by
integrating economic, environmental, and social opportunities into business strategies may
develop sustainability into the organisation’s overall culture.