The Environment and

Corporate Culture
CHAPTER 2-1
 Organizational Environment

 All elements existing outside the

boundary of the organization that
have the potential to affect the
organization
 Organization as a system

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 External Environment

● General environment – affects indirectly

● Task environment
- Affects directly
- Influences operations and
performances

● Internal environment – elements within

the organization’s boundaries

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 Organizational Environments

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 International Dimension
● Portion of the external
environment that represents
events originating in foreign
countries as well as
opportunities for Ethiopian
companies in other countries.

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 Technological Dimension

 Scientific and technological advances

– Specific industries
– Society at large
 Impact
– Competition
– Relationship with Customers
– Medical advances
– Nanotechnology advances

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 Socio-Cultural Dimension
 Dimension of the general
environment
– Demographic characteristics
– Norms
– Customs
– Values

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 Economic Dimension

● General economic health

● Consumer purchasing power
(increasing middle income)
● Unemployment rate (?)
● Interest rates (?)

● Recent Trends
● Frequency of mergers and
acquisitions
● Small business sector vitality (to
support large businesses)
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 Legal-Political Dimension

 Dimension of the general environment

that includes federal, state, and local
government regulations and political
activities designed to influence company
behavior.
 Discuss our situation (consistency, stability,
etc…taxation, employment, investment, land, financial
etc)

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 Task Environment

Sectors that have a direct working

relationship with the organization
● Customers
● Competitors
● Suppliers
● Labor Market

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 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

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 Adapting to the Environment

 Boundary-spanning roles
 Roles assumed by people and/or departments that
link and coordinate the organization with key
elements in the external environment.
 Inter-organizational partnerships
 To reduce boundaries and increase collaboration with
other organizations.
 Mergers and 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

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 Interorganizational Partnerships
Shift in paradigm to a partnership orientation
● 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

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 Culture

 The set of key values, beliefs,

understandings, and norms that
members of an organization share.

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 Levels of Corporate Culture
Culture
that can be
seen at the
surface 1. Artifacts, Visible
such as dress, office
level layout, symbols, slogans,
ceremonies

Invisible
2. Expressed values, such as “The
Penney Idea,” “The HP Way” Deeper values
and shared
3. Underlying assumptions and deep understandings
beliefs, such as “people are lazy held by
and can’t be trusted” organization
members

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 Visible Manifestations

 Symbols
 Stories
 Heroes
 Slogans
 Ceremonies

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 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

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 Corporate Culture Adaptability

Adaptive Culture Unadaptive Culture

Visible Behavior Managers pay close attention to Managers tend to behave
all their constituencies, especially somewhat insularly, politically, and
customers, and initiate change bureaucratically. As a result, they
when needed to serve their do not change their strategies
legitimate interests, even if it quickly to adjust to or take
entails taking some risks. advantage of changes in their
business environments.
Managers care deeply about Managers care mainly about
Expressed Values
customers, stockholders, and themselves, their immediate work
employees. They strongly value group, or some product (or
people and processes that can technology) associated with that
create useful change (e.g., work group. They value the orderly
leadership initiatives up and down and risk-reducing management
the management hierarchy). process much more highly than
leadership initiatives.
Source: John P. Kotter and James L. Heskett, Corporate Culture and Performance (New York, The Free Press, 1992), 51.

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 Four Types of Corporate Cultures

Needs of the Environment

Flexibility Stability
External
Achievement
Adaptability Culture
Strategic Focus

Culture

Involvement Consistency
Culture Culture
Internal

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 High-Performance Culture

A culture that
 Is based on a solid organizational mission or
purpose
 Embodies shared adaptive values that guide
decisions and business practices, and
 Encourages individual employee ownership of
both bottom-line results and the organization’s
cultural backbone

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 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 the day-to-day activities that
reinforce the cultural vision – work
procedures and reward systems match and reinforce the
values

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 Assignment

 Form a group of FIVE

 Select an organization of fairly large size
 Conduct SLOC analysis for the
organization environments

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