Chapter 3 The Environment and Corporate Culture

Presented by Group 2, EMBA 10

The Environment and Corporate Culture
• Businesses are increasingly becoming dynamic • Must be ready to react and respond to even subtle environmental shifts • Need to adapt their companies to new competition, shifting consumer interests or new technologies • Close System (focus on factors within organization, leading, motivating & controlling employees) • Open System (monitor & respond to external environment) – for more effective managers

External Organizational Environment
• Includes all elements existing outside the boundary of the organization that have the potential to affect the organization • Includes competitors, resources, technology and economic conditions that influence the organization

Two Layers of the External Environment  General environment - outer layer that is widely dispersed and affects organizations indirectly includes social. but they do affect all organizations eventually  Task environment - closer to the organization and includes the sectors that conduct day-to-day transactions with the organization and directly influence its basic operations and performance includes competitors. customers and the labor market . legal/political. suppliers. international. economic. natural and technological factors that influence all organizations about equally These events do not directly change day-to-day operations.

current employees 2. Management 3.Internal Environment • Includes the elements within the organization's boundaries • Composed of 1. especially corporate culture .

Organizational Environment General Environment Technological Task Environment Customers Labor Market Internal Environment Employees Culture Competitors Management Suppliers .

Provides new competitors. new customers and new suppliers .Represents events originating in foreign countries .International Dimension .Shapes social trends. technological trends and economic trends . complex & ever-changing .Compared to domestic.

Technological Dimension • Includes scientific and technological advancements in a specific industry as well as in society at large • Created massive changes for organizations in all industries in recent years • Its advancement effects organizations and managers .

Socio-Cultural Dimension • Represents demographic characteristics. age. customs. . norms. and values of the population within which the organization operates • Important characteristics are geographical and population density. and education levels.

Economic Dimension • Represents the general economic health of the country or region in which the organization operates. Consumer purchasing power Unemployment rate Interest rates .

as well as political activities designed to influence company behavior • Managers must also recognize a variety of pressure groups that work within the legalpolitical framework to influence companies to behave in socially responsible ways .Legal-Political Dimension • Includes government regulations at the local. state and federal levels.

an climate. rocks. – Eliminating non-biodegradable plastic bags from the environment – Improving efficiency of plants and factories – Investing in cleaner technology . • Concern about the environment has prompted companies to take these actions. animals. and natural resources such as air.Natural Dimension • Includes all elements that occur naturally on earth. including plants. water.

Task Environment • Includes those sectors that have a direct working relationship with the organization • Customers – People and organizations in the environment that acquire goods or services from the organization • Competitors – Other organizations in the same industry or type of business that provide goods or services to the same set of customers • Supplier – People and organizations that provide the raw materials the organization uses to produce its output • Labor Market – the people available for hire by the organization .

3. 2. Every organization needs a supply of trained. creating unused labor pools in same areas and labor shortages in others . automation. and shifting facility locations on labor dislocations. education and training to meet the competitive demands of the borderless world The effects of international trading blocs.Labor Market Forces Affecting Organizations • 1. Growing need for computer literate knowledge workers The necessity for continuous investment in human resources through recruitment. outsourcing. qualified personnel.

managers experience low uncertainty and can devote less attention to external issues . the organization experiences high uncertainty  When an organization deals with only a few external factors.Environmental Uncertainty • Uncertainty means that managers do not have sufficient information about environmental factors to understand and predict environmental needs and changes  When external factors change rapidly.

External Environment and Uncertainty High High Uncertainty Adapt to Environment Rate of Change in Factors in Environment Low Uncertainty Low Low High Number of factors in organization environment .

Adapting to the Environment • Managers can use several strategies to adapt to the following changes – boundary-spanning roles – inter-organizational partnerships – mergers or joint ventures. .

Boundary-spanning Role • Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external environment  Detect and process information about changes in the environment  Represent the organization’s interest to the environment .

arm’s length Price. fair dealing. everyone profit E business links to share information and conduct digital transaction Close coordination. efficiency. value added to both sides Equity. own profits Information and feedback limited Trust.Inter-organizational Partnership • Reduce boundaries and increase collaboration with other organizations From Adversarial Orientation To Partnership Orientation Suspicion. competition. virtual teams and people onsite Involvement in partner’s product design and production Lawsuits to resolve conflict Minimal involvement and up front investment Short-term contract Contracts limit the relationship Long-term contract Business assistance goes beyond the contract .

expensive. or uncertain for one firm to handle alone .Mergers and Joint Ventures • To reduce environmental uncertainty • Mergers occurs when two or more organizations combine to become one • A Joint Venture involves a strategic alliance or program by two or more organizations – Occurs when a project is too complex.

beliefs. and norms shared by members of an organization • Helps managers understand the hidden. and physical facilities • Internal culture must fit the needs of the external environment and company strategy • Culture is defined as the set of key values. production technology.The Internal Environment: Corporate Culture • A pattern of shared values and assumptions about how things are done within the organization • Includes corporate culture. complex aspects or organizational life . organization structure. understands.

office layout. such as “The Penney Idea. such as “people here care about one another like a family” Deeper values and shared understandings held by organization members .Levels of Corporate Culture Culture that can be seen at the surface level Visible 1.” “The HP Way” 3. slogans. ceremonies Invisible 2. Artifacts. Underlying assumptions and deep beliefs. Expressed values. such as dress. symbols.

Visible Manifestations – Symbol • An object. act or event that conveys meaning to others – Story • A narrative based on true events and repeated frequently and shared among organizational employees – Heroes • A figure who exemplifies the deeds. character and attributes of a strong corporate culture – Slogan • A phrase or sentence that succinctly expresses a key corporate value – Ceremony • A planned activity at a special event that is conducted for the benefit of an audience .

As a result. They strongly value people and processes that can create useful change (e. stockholders. leadership initiatives up and down the management hierarchy). and employees.g. their immediate work group. Expressed Values Managers care deeply about customers. even if it entails taking some risks.. and initiate change when needed to serve their legitimate interests. politically. They value the orderly and risk-reducing management process much more highly than leadership initiatives. and bureaucratically. Managers care mainly about themselves. Unadaptive Culture Managers tend to behave somewhat insularly. . especially customers.Corporate Cultures Adaptive Culture Visible Behavior Managers pay close attention to all their constituencies. or some product (or technology) associated with that work group. they do not change their strategies quickly to adjust to or take advantage of changes in their business environments.

ADAPTIVE CULTURES (how well they encourages adaptation to external environment) • Adaptive Corporate cultures have different values and behavior from Unadaptive Corporate cultures Customers • Adaptive Corporate cultures Internal people and process • Unadaptive Corporate cultures themselves .

methodical.Four Types of Corporate Culture Needs of the Environment Flexibility External Stability Adaptability Culture Achievement Culture Serve specific clients not needing rapid changes / result oriented Strategic Focus Require fast response & high risk decision / employee autonomy Internal Involvement Culture Consistency Culture Internal focus & consistency oriented / follow rules. orderly / few companies operates this way Get participation of employees to rapidly adapt to changes / highly values & caring towards employees .

or organizational crises • Companies that succeed in a turbulent world are those that pay careful attention to both cultural values and business performance .Shaping Corporate Culture for Innovative Response • Corporate culture plays a key role in creating an organizational climate that enables learning and innovative responses to threats from the external environment challenging new opportunities.

Combining Culture and Performance High Attention to Performance Goods for short term .sustainable? Give results and inspiration – sustainable success through high performance culture D Strong culture/good for morale – can they afford without result B High Attention to Value C May be going out of business – Little result / value A Low Low .

Cultural Leadership • A cultural leader defines and uses signals and symbols to influence corporate culture • Influence culture in two key roles – The cultural leader articulates a vision for the organizational culture that employees can believe in – The cultural leader heeds the day-to-day activities that reinforce the cultural vision .

THANK YOU ! .

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