CHAPTER 3:

The External
Environment and
Organizational
Culture
LEARNING OBJECTIVES
 Describe the five elements of an organization’s macroenvironment.
 Explain the five components of an organization’s competitive environment.
 Understand how managers stay on top of changes in the external
environment.
 Summarize how managers respond to changes in the external environment.
 Discuss how organizational cultures can be leveraged to overcome challenges
in the external environment.
Macroenvironment
MACROENVIRONMENT
1) Laws and Regulations Protect and Restrain Organizations
2)   The Economy Affects Managers and Organizations
3) Technology is Changing Every Business Function
4) Demographics Describe Your Employees and Customers
5) Social Values Shape Attitudes Toward Your Company and
Its Products
COMPETITIVE ENVIRONMENT
COMPETITIVE ENVIRONMENT
1) Rivals Can be Domestic or Global
Competitors may include many types of companies:
 Small domestic firms, especially upon their entry into tiny, premium markets.
 Strong regional competitors.
 Big new domestic companies exploring new markets.
 Global firms, especially those that try to solidify their position in small niches
(a traditional Japanese tactic) or can draw on an inexpensive labor force on a
large scale (as in India and China).
 Newer ventures launched by all types of entrepreneurs.
COMPETITIVE ENVIRONMENT
2) New Entrants Increase When Barriers to Entry are Low
Government Policy
Capital Requirements
Brand Identification
Cost Disadvantages
Distribution Channels
COMPETITIVE ENVIRONMENT
3) Buyers Determine Your Success
 Speed of filling and delivering normal orders.
 Willingness to meet emergency needs.
 Merchandise delivered in good condition.
 Readiness to take back defective goods and resupply quickly.
 Availability of installation and repair services and parts.
 Service charges
COMPETITIVE ENVIRONMENT
4) Products Can be Substitutes or Complements of Yours
COMPETITIVE ENVIRONMENT
5) Suppliers Provide Your Resources
Suppliers provide the resources needed for production, and
those resources may come in several forms:
 People —supplied by trade schools and universities
 Raw materials —from producers, wholesalers, and
distributors.
 Information —supplied by researchers and consulting firms.
 Financial capital —from banks and other sources.
KEEP UP WITH CHANGES IN THE
ENVIRONMENT
1. Environmental Scanning Keeps You Aware
2. Scenario Development Helps You Analyze the
Environment
3. Forecasting Predicts Your Future Environment
4. Benchmarking Helps You Become Best in Class
 RESPONDING TO THE ENVIRONMENT
1. Adapting to the environment.
2. Influencing the environment.
3. Selecting a new environment.
 1a. Where employees work well
Experiential together in teams.
Exercise
2a. Where top management maintains
a sense of order in the workplace.
3a. Where employees are
treated fairly.
4a. Where employee adapt
OBJECTIVE: quickly to ne work requirements. OR
5a. Where senior executives
This self-assessment is receive special benefits not
designed to help you t available to other employees.
identify a corporate
6a. Where employees who
culture that fits most performs the best get paid the
closely with your most.
personal values and 7a. Where everyone gets their
assumptions. jobs done like clockwork.
1b. Where employees work well
OR
together in teams.
2b. Where the organization listens to
OR
customers and responds quickly to their
needs.
3b. Where employees continuously
OR search for ways to work more efficiently.
4b. Where corporate leaders work
hard to keep employees happy.
5b. Where employees are proud
OR when the organization achieves
its performance goals.
OR 6b. Where senior executives are
respected.
7b. That is on top of new
OR innovations in the industry.

8a. Where employees receive
Experiential assistance to overcome any
personal problems.
Exercise 9a. That is always experimenting
with new ideas in the marketplace.
10a. That quickly benefits from
market opportunities.
OBJECTIVE: 11a. That can quickly respond to
competitive threats.
This self-assessment is
designed to help you t 12a. Where management keeps
identify a corporate under control.
culture that fits most
closely with your
personal values and
assumptions.
8b. Where employees abide by
OR
company rules.
OR
9b. That expects everyone to put
in 110 % for peak performance.
10b. Where employees are
OR always kept informed of what’s
happening in the organization.
OR 11b. Where most decisions are
made by the top executives.
OR 12b. Where employees care for
each other.
 SCORING KEY. Scoring Instructions: In each space below, write in “1” if
Experiential you chose the statement and write “0” if you did not. Then add up each
score for each subscales.
Exercise CONTROL CULTURE: ____ + ____ + ____ + ____ + ____ + ____ = _____
(2a) (5a) (6b) (8b) (11b) (12a)

PERFORMANCE CULTURE: ____ + ____ + ____ + ____ + ____ + ____ = _____

(1b) (3b) (5b) (6a) (7a) (9b)

OBJECTIVE: RELATIONSHIP CULTURE: ____ + ____ + ____ + ____ + ____ + ____ = _____
(1a) (3a) (4b) (8a) (10b) (12b)
This self-assessment is
designed to help you t RESPONSIVE CULTURE: ____ + ____ + ____ + ____ + ____ + ____ = _____
(2b) (4a) (7b) (9a) (10a) (11a)
identify a corporate
culture that fits most Score Interpretation:
closely with your Corporate = High: 3 to 6, Medium: 1 to 2, Low: 0
personal values and
Performance = High: 5 to 6, Medium: 3 to 4, Low: 0 to 2
assumptions.
Relationship = High: 6, Medium: 4 to 5, Low: 0 to 3
Responsive = High: 6, Medium: 4 to 5, Low: 0 to 3
 CORPORATE CULTURE DIMENSION AND DEFINITION
Experiential
Exercise CONTROL CULTURE: This culture values the role of
senior executives to lead the organization. Its goal is
to keep everyone aligned and under control.
PERFORMANCE CULTURE: This culture values individual
OBJECTIVE: and organizational performance and strives for
This self-assessment is effectiveness and efficiency.
designed to help you t
RELATIONSHIP CULTURE: This culture values nurturing and
identify a corporate well-being. It considers open communication, fairness,
culture that fits most teamwork and sharing a vital part of organizational life.
closely with your
personal values and RESPONSIVE CULTURE: This culture values its ability to keep
assumptions. in tune with the external environment, including being
competitive and realizing new opportunities.