CHAPTER TWO 1 ment ition illiams Copyright 2005

  • Slides: 37
Download presentation
CHAPTER TWO 1 ment ition illiams Copyright © 2005 by South-Western, a division of

CHAPTER TWO 1 ment ition illiams Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved

What Would You Do? You are the CEO of Mc. Donald’s… . Sales are

What Would You Do? You are the CEO of Mc. Donald’s… . Sales are declining, stores are closing. Competitors are stronger. Food quality is dropping, food preferences have changed. Service is rude and inaccurate How can you deal with these external and internal problems and turn them into opportunities? Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 2

External Environments After reading the next four sections, you should be able to: 1.

External Environments After reading the next four sections, you should be able to: 1. discuss how changing environments affect organizations. 2. describe the four components of the general environment. 3. explain the five components of the specific environment. 4. describe the process that companies use to make sense of their changing environments. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 3

Changing Environments Characteristics of Changing External Environments Environmental Change Environmental Complexity Resource Scarcity Uncertainty

Changing Environments Characteristics of Changing External Environments Environmental Change Environmental Complexity Resource Scarcity Uncertainty 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 4

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

Environmental Change is the rate at which a company’s environments change Ø stable environments Ø dynamic environments. Punctuated equilibrium theory Ø companies cycle through stable and dynamic environments 1. 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 5

Punctuated Equilibrium: U. S. Airlines 1. 1 Copyright © 2005 by South-Western, a division

Punctuated Equilibrium: U. S. Airlines 1. 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 6

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

Environmental Complexity: the number of external factors in the environment that affect organizations Ø Simple environments § have few environmental factors Ø Complex environments § have many environmental factors 1. 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 7

Resource Scarcity. Resource scarcity is the degree to which an organization’s external environment has

Resource Scarcity. Resource scarcity is the degree to which an organization’s external environment has an abundance or scarcity of critical organizational resources 1. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 8

Uncertainty is how well managers can understand or predict the external changes and trends

Uncertainty is how well managers can understand or predict the external changes and trends affecting their businesses 1. 4 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 9

General Environment Organization Specific Environment General Environment 2 Copyright © 2005 by South-Western, a

General Environment Organization Specific Environment General Environment 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 10

Components of the General Environment. Economy. Technological. Sociocultural. Political / Legal 2 Copyright ©

Components of the General Environment. Economy. Technological. Sociocultural. Political / Legal 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 11

Economy. Growing vs. shrinking economies. Future economic activity is difficult to predict. Business confidence

Economy. Growing vs. shrinking economies. Future economic activity is difficult to predict. Business confidence indices Ø show confident managers are about future business growth 2. 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 12

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

Technological Component Technology-- Input Knowledge Tools Techniques Output Raw Materials Products Information Services 2. 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 13

Sociocultural Components Ø Demographic changes Ø Changes in behavior, attitudes, and beliefs 2. 3

Sociocultural Components Ø Demographic changes Ø Changes in behavior, attitudes, and beliefs 2. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 14

Demographics Example 2. 3 Copyright © 2005 by South-Western, a division of Thomson Learning.

Demographics Example 2. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 15

Political / Legal Component. Legislation. Regulations. Court decisions Managers must be educated about the

Political / Legal Component. Legislation. Regulations. Court decisions Managers must be educated about the laws, regulations, and potential lawsuits that could affect business http: //www. eeoc. gov/laws/cra 91. html 2. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 16

Specific Environment. Customer. Competitor. Supplier. Industry regulation. Advocacy group 3 Copyright © 2005 by

Specific Environment. Customer. Competitor. Supplier. Industry regulation. Advocacy group 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 17

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

Customer Component Monitoring customer wants and needs is critical for business success. Reactive customer monitoring § responding to problems, trends, and events. Proactive customer monitoring § anticipating problems, trends, and events 3. 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 18

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

Competitor Component Competitive Analysis Deciding who your competitors are Anticipating competitors’ moves Determining competitors’ strengths and weaknesses 3. 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 19

Competitive Analysis The Ten Commandments for Ethical Decision Making http: //www. scip. org/library/8(3)eea. pdf

Competitive Analysis The Ten Commandments for Ethical Decision Making http: //www. scip. org/library/8(3)eea. pdf Thou Shalt … • • • 3. 2 Not lie when representing yourself Observe the company’s legal guidelines Not tape-record a conversation Not bribe Not plant eavesdropping devices Not deliberately mislead anyone in an interview Not obtain nor give price information to a competitor Not swap misinformation Not steal a trade secret Not press someone for information if it may jeopardize that person’s job or reputation Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved Adapted from Fuld & Company 20

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

Supplier Component Buyer Dependence Suppliers Opportunistic Behavior Supplier Dependence Relationship Behavior 3. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 21

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

Industry Regulation Component. Consists of regulations and rules that govern the business practices and procedures of specific industries, businesses, and professions 3. 4 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 22

Federal Regulation Agencies Consumer Product Safety Commission http: //www. cpsc. gov Environmental Protection Agency

Federal Regulation Agencies Consumer Product Safety Commission http: //www. cpsc. 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 Commission Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved http: //www. osha. gov http: //www. sec. gov 23

Advocacy Groups of concerned citizens who band together to try to influence the business

Advocacy 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 Ø public communications Ø media advocacy Ø product boycotts 3. 5 Copyright © 2005 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

Making Sense of Changing Environments Environmental Scanning Evaluating External Environments Interpreting Environmental Factors Acting on Threats and Opportunities 4 Copyright © 2005 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

Environmental Scanning. Environmental scanning: searching the environment for events or issues that might affect an organization. Scanning the environment: Ø keeps companies current on industry factors Ø reduces uncertainty Ø alters organizational strategies Ø contributes to organizational performance 4. 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 26

Interpreting Environmental Factors. Managers determine what environmental events and issues mean to the organization

Interpreting Environmental Factors. Managers determine what environmental events and issues mean to the organization Ø Opportunities Ø Threats 4. 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 27

Acting on Threats and Opportunities. Managers have to decide how to respond to these

Acting on Threats and Opportunities. Managers have to decide how to respond to these environmental factors. Cognitive maps Ø simplified models of external environments Ø depicts how managers believe environmental factors relate to possible organizational actions 4. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 28

Cognitive Maps 4. 3 Copyright © 2005 by South-Western, a division of Thomson Learning.

Cognitive Maps 4. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 29

Internal Environments After reading this section, you should be able to: 5. explain how

Internal Environments After reading this section, you should be able to: 5. explain how organizational cultures are created and how they can help companies be successful. Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 30

Internal Environments. Internal environment consists of the trends and events within an organization that

Internal Environments. Internal environment consists of the trends and events within an organization that affect the management, employees, and organizational culture Ø important because it affects what people think, feel, and do at work Ø organizational culture is the set of key values, beliefs, and attitudes shared by organizational members Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 31

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

Creation and Maintenance of Organizational Cultures Company Founder Organizational Stories Organizational Heroes 5. 1 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 32

Successful Organizational Cultures Adaptability Consistency Involvement Clear Vision Sales Growth Return on Assets Employee

Successful Organizational Cultures Adaptability Consistency Involvement Clear Vision Sales Growth Return on Assets Employee Satisfaction Profits Quality 5. 2 Adapted from Exhibit 2. 7 D. R. Denison & A. K. Mishra, Organization Science 6(1995): 204 -223 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 33

Blast from the Past. Corporate history helps employees and managers understand the people, and

Blast from the Past. Corporate history helps employees and managers understand the people, and events, and changes that shaped a company. Preserves culture and values. Gets people involved in the culture of a company 5. 2 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 34

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

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 5. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved HEARD BELIEVED Adapted from Exhibit 2. 8 35

Been There Done That. The beliefs and values of Starbucks Coffee Ø success has

Been There Done That. The beliefs and values of Starbucks Coffee Ø success has to be shared Ø people are the most significant component Ø a culture of meaning and loyalty Ø grassroots decision making Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 36

Changing Organizational Cultures. Behavioral addition Ø is the process of having managers and employees

Changing Organizational Cultures. Behavioral addition Ø is the process of having managers and employees perform a new behavior . Behavioral substitution Ø is having managers and employees perform a new behavior in place of another behavior . Change visible artifacts Ø such as the office design and layout, company dress codes, etc. 5. 3 Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved 37