Changing Environments Characteristics of Changing External Environments Environmental

Environmental Change is the rate at which a company’s environments change § stable environments

Punctuated Equilibrium: U. S. Airline Industry 1. 1 Chapter 3 Copyright © 2007 by

Environmental Complexity: the number of external factors in the environment that affect organizations Simple

Resource Scarcity The degree to which an organization’s external environment has an abundance or

Uncertainty 1. 4 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson

External Environment 2 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson

Components of the General Environment • • Economy Technological trends Sociocultural trends Political /

Economy • Growing vs. shrinking economies • Predicting future economic activity • Business confidence

Technological Component Technology-- Input Knowledge Tools Techniques Output Raw Materials Products Information Services 2.

Impact of Technology • Technology can be a great benefit or a daunting threat.

Sociocultural Component • Sociocultural Components – Demographic changes – Changes in behavior, attitudes, and

Demographics Example 2. 3 Chapter 3 Copyright © 2007 by South-Western, a division of

Political / Legal Component § § § 2. 3 Legislation Regulations Court decisions Managers

Specific Environment Customer Competitor Supplier Industry Regulation Advocacy Group 3 Chapter 3 Copyright ©

Customer Component Monitoring customer wants and needs is critical for business success Reactive customer

Competitor Component Competitive Analysis Deciding who your competitors are Anticipating competitors’ moves Determining competitors’

Supplier Component Buyer Dependence Suppliers Opportunistic Behavior Supplier Dependence Relationship Behavior 3. 3 Chapter

Industry Regulation Component Industry Regulation Consists of regulations and rules that govern the business

Federal Regulation Agencies Consumer Product Safety Commission http: //www. cpsc. gov Department of Labor

Cost of Compliance Researchers studied U. S. manufacturers and the cost they incur complying

Dealing with Gifts and Suppliers Guidelines to Avoid Conflicts of Interest § There’s no

Advocacy Groups § Groups of concerned citizens who band together to try to influence

Advocacy Groups PETA is a well-known advocacy group that attempts to influence consumers and

Making Sense of Changing Environments Environmental Scanning Evaluating External Environments Interpreting Environmental Factors Acting

Environmental Scanning § Environmental scanning: § searching the environment for events or issues that

Interpreting Environmental Factors Environmental Scan Opportunities? Threats? 4. 2 Chapter 3 Copyright © 2007

Acting on Threats and Opportunities Cognitive Maps § simplified models of external environments §

Internal Environments Internal Environment Consists of the trends and events within an organization that

The Organization’s Culture • Organizational Culture – A system of shared meanings and common

Strong versus Weak Cultures • Strong Cultures – Are cultures in which key values

Benefits of a Strong Culture • Creates a stronger employee commitment to the organization.

Creation and Maintenance of Organizational Cultures Company Founder Organizational Stories Organizational Heroes 5. 1

Successful Organizational Cultures Adaptability Consistency Involvement Clear Vision 5. 2 Sales Growth Return on

Levels of Organizational Culture ¤ Symbolic artifacts 1. Surface ¤ Behaviors Level SEEN ¤

Changing Organizational Cultures • Behavioral addition – is the process of having managers and

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Changing Environments Characteristics of Changing External Environments Environmental Change Environmental Complexity Resource Scarcity Uncertainty 1 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 1

Environmental Change is the rate at which a company’s environments change § stable environments § dynamic environments Punctuated equilibrium theory Companies cycle through long, stable periods and shorter, dynamic environments. 1. 1 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 2

Environmental Complexity: the number of external factors in the environment that affect organizations Simple environments Complex 1. 2 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 4

Resource Scarcity The degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources 1. 3 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 5

Components of the General Environment • • Economy Technological trends Sociocultural trends Political / Legal trends 2 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 8

Economy • Growing vs. shrinking economies • Predicting future economic activity • Business confidence indices 2. 1 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 9

Technological Component Technology-- Input Knowledge Tools Techniques Output Raw Materials Products Information Services 2. 2 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 10

Impact of Technology • Technology can be a great benefit or a daunting threat. MP 3 players have created a tremendous new business opportunity for some, like Apple, Creative, and other manufacturers. But record labels have suffered from the rapid acceptance of digital music and persistent file swapping. Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 11

Sociocultural Component • Sociocultural Components – Demographic changes – Changes in behavior, attitudes, and beliefs 2. 3 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 12

Political / Legal Component § § § 2. 3 Legislation Regulations Court decisions Managers must be educated about the laws, regulations, and potential lawsuits that could affect business Web Link http: //www. eeoc. gov/laws/cra 91. html http: //www. dol. gov/esa/whd/fmla/ Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 14

Customer Component Monitoring customer wants and needs is critical for business success Reactive customer monitoring § responding to problems, trends, and events 3. 1 Proactive customer monitoring § anticipating problems, trends, and events Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 16

Competitor Component Competitive Analysis Deciding who your competitors are Anticipating competitors’ moves Determining competitors’ strengths and weaknesses 3. 2 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 17

Supplier Component Buyer Dependence Suppliers Opportunistic Behavior Supplier Dependence Relationship Behavior 3. 3 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 18

Industry Regulation Component Industry Regulation Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions 3. 4 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 19

Federal Regulation Agencies Consumer Product Safety Commission http: //www. cpsc. gov Department of Labor http: //www. dol. gov Environmental Protection Agency http: //www. epa. gov Equal Employment Opportunity Commission Federal Communications Commission 3. 4 http: //www. eeoc. gov http: //www. fcc. gov Federal Reserve System http: //www. federalreserve. gov Federal Trade Commission http: //www. ftc. gov Food and Drug Administration http: //www. fda. gov National Labor Relations Board http: //www. nlrb. gov Occupational Safety and Health Administration Securities and Exchange Chapter 3 Commission Copyright © 2007 by South-Western, a division of Thomson Learning. http: //www. osha. gov All rights reserved http: //www. sec. gov 20

Cost of Compliance Researchers studied U. S. manufacturers and the cost they incur complying with the 25 major federal regulations. Researchers found: There about 300, 000 manufacturing companies in the U. S. Each company spends roughly $2. 2 million So, the aggregate cost of complying with federal regulations is roughly $660 billion And that’s just for manufacturing. Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 21

Dealing with Gifts and Suppliers Guidelines to Avoid Conflicts of Interest § There’s no such thing as a free lunch § Meals and entertaining are valid business § No gifts worth more than $25 in value § No cash or cash equivalents § No discount on goods and services § No stock in suppliers’ companies § Don’t allow personal friendship to influence decisions 3 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 22

Advocacy Groups § Groups of concerned citizens who band together to try to influence the business practices of specific industries, businesses, and professions § Techniques to try to influence companies § public communications § media advocacy § product boycotts 3. 5 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 23

Advocacy Groups PETA is a well-known advocacy group that attempts to influence consumers and companies to pursue animal-friendly practices. Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 24

Making Sense of Changing Environments Environmental Scanning Evaluating External Environments Interpreting Environmental Factors Acting on Threats and Opportunities 4 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 25

Environmental Scanning § Environmental scanning: § searching the environment for events or issues that might affect an organization ü keeps companies current on industry factors ü reduces uncertainty ü alters organizational strategies ü contributes to organizational performance 4. 1 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 26

Acting on Threats and Opportunities Cognitive Maps § simplified models of external environments § depicts how managers believe environmental factors relate to possible organizational actions 4. 3 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 28

Internal Environments Internal Environment Consists of the trends and events within an organization that affect the management, employees, and organizational culture § important because it affects what people think, feel, and do at work § organizational culture is the set of key values, beliefs, and attitudes shared by organizational members 5 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 29

The Organization’s Culture • Organizational Culture – A system of shared meanings and common beliefs held by organizational members that determines, in a large degree, how they act towards each other. – “The way we do things around here. ” • Values, symbols, rituals, myths, and practices – Implications: • Culture is a perception. • Culture is shared. • Culture is descriptive. Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 30

Strong versus Weak Cultures • Strong Cultures – Are cultures in which key values are deeply held and widely held. – Have a strong influence on organizational members. • Factors Influencing the Strength of Culture – Size of the organization – Age of the organization – Rate of employee turnover – Strength of the original culture – Clarity of cultural values and beliefs Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 31

Benefits of a Strong Culture • Creates a stronger employee commitment to the organization. • Aids in the recruitment and socialization of new employees. • Fosters higher organizational performance by instilling and promoting employee initiative. Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 32

Creation and Maintenance of Organizational Cultures Company Founder Organizational Stories Organizational Heroes 5. 1 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 33

Successful Organizational Cultures Adaptability Consistency Involvement Clear Vision 5. 2 Sales Growth Return on Assets Employee Satisfaction Profits Quality Adapted from Exhibit 3. 7 D. R. Denison & A. K. Mishra, Organization Science 6 (1995): 204 -223 Chapter 3 34 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved

Levels of Organizational Culture ¤ Symbolic artifacts 1. Surface ¤ Behaviors Level SEEN ¤ What people say ¤ How decisions are made 2. Expressed Values and Beliefs ¤ Beliefs and assumptions ¤ Rarely discussed 3. Unconsciously Held Assumptions and Beliefs HEARD BELIEVED 5. 3 Adapted from Exhibit 3. 8 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 35

Changing Organizational Cultures • Behavioral addition – is the process of having managers and employees perform a new behavior • Behavioral substitution – is having managers and employees perform a new behavior in place of another behavior • Change visible artifacts – such as the office design and layout, company dress codes, etc. 5. 3 Chapter 3 Copyright © 2007 by South-Western, a division of Thomson Learning. All rights reserved 36