Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-1TheOrganizationalEnvironment3
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-2Organizational EnvironmentOrganizational Environment: those fo...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-3Forces in the Organizational EnvironmentFigure 3.1DistributorsF...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-4Task EnvironmentTask Environment: forces from suppliers,distri...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-5Task EnvironmentDistributors: organizations that help others t...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-6Task EnvironmentCompetitors: other organizations that produces...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-7Industry Life CycleReflects the changes that take place in ani...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-8Shakeout stage: at end of growth, there is aslowing customer d...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-9The General EnvironmentConsists of the wide economic,technolog...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-10Technological forces: skills & equipment usedin design, produ...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-11The Industry Life CycleFigure 3.3Birth Growth Shakeout Maturit...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-12Demographic forces: result from changes inthe nature, composi...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-13Political-legal forces: result from changes inthe political a...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-14Managing the Organization EnvironmentManagers must measure th...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-15Environmental change: refers to thedegree to which forms in t...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-16Reducing Environmental ImpactManagers can counter environment...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-17Organizational StructureManagers can create new organizationa...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-18Boundary SpanningManagers must gain access to informationneed...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-19Boundary Spanning RolesFigure 3.5Managers in boundaryspanning ...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-20Scanning and MonitoringEnvironmental scanning is an important...
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-21Change as a 2-way ProcessEnvironmentEnvironment OrganizationOr...
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Management Chpt03

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Management Chpt03

  1. 1. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-1TheOrganizationalEnvironment3
  2. 2. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-2Organizational EnvironmentOrganizational Environment: those forcesoutside its boundaries that can impact it. Forces can change over time and are made up ofOpportunities and Threats.Opportunities: openings for managers toenhance revenues or open markets. New technologies, new markets and ideas.Threats: issues that can harm anorganization. economic recessions, oil shortages.Managers must seek opportunities and avoidthreats.
  3. 3. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-3Forces in the Organizational EnvironmentFigure 3.1DistributorsFirmFirmTaskEnvironmentSuppliersCompetitorsCustomersGeneralEnvironmentEconomicForcesGlobalForcesSocioculturalForcesDemographicForcesTechnologicalForcesPolitical &Legal Forces
  4. 4. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-4Task EnvironmentTask Environment: forces from suppliers,distributors, customers, and competitors.Suppliers: provide organization with inputs Managers need to secure reliable input sources. Suppliers provide raw materials, components, and evenlabor.Working with suppliers can be hard due to shortages,unions, and lack of substitutes.Suppliers with scarce items can raise the price and arein a good bargaining position. Managers often prefer to have many, similar suppliersof each item.
  5. 5. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-5Task EnvironmentDistributors: organizations that help others tosell goods. Compaq Computer first used special computer stores tosell their computers but later sold through discount storesto reduce costs. Some distributors like Wal-Mart have strong bargainingpower.They can threaten not to carry your product.Customers: people who buy the goods. Usually, there are several groups of customers.For Compaq, there are business, home, & governmentbuyers.
  6. 6. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-6Task EnvironmentCompetitors: other organizations that producesimilar goods. Rivalry between competitors is usually the most seriousforce facing managers. High levels of rivalry often means lower prices.Profits become hard to find. Barriers to entry keep new competitors out and resultfrom:Economies of scale: cost advantages due to large scaleproduction.Brand loyalty: customers prefer a given product.
  7. 7. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-7Industry Life CycleReflects the changes that take place in anindustry over time.Birth stage: firms seek to develop a winningtechnology. VHS vs. Betamax in video, or 8-track vs. cassette inaudio.Growth stage: Product gains customeracceptance and grows rapidly. New firms enter industry, production improves,distributors emerge.
  8. 8. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-8Shakeout stage: at end of growth, there is aslowing customer demand. Competitor rivalry increases, prices fall. Least efficient firms fail and leave industry.Maturity stage: most customers have boughtthe product, growth is slow. Relationships between suppliers, distributors morestable. Usually, industry dominated by a few, large firms.Decline stage: falling demand for theproduct. Prices fall, weaker firms leave the industry.
  9. 9. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-9The General EnvironmentConsists of the wide economic,technological, demographic and similarissues. Managers usually cannot impact or control these. Forces have profound impact on the firm.Economic forces: affect the nationaleconomy and the organization. Includes interest rate changes, unemployment rates,economic growth. When there is a strong economy, people have moremoney to spend on goods and services.
  10. 10. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-10Technological forces: skills & equipment usedin design, production and distribution. Result in new opportunities or threats to managers. Often make products obsolete very quickly. Can change how we manage.Socialcultural forces: result from changes inthe social or national culture of society. Social structure refers to the relationships between peopleand groups.Different societies have vastly different social structures. National culture includes the values that characterize asociety.Values and norms differ widely throughout the world. These forces differ between cultures and over time.
  11. 11. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-11The Industry Life CycleFigure 3.3Birth Growth Shakeout Maturity Decline
  12. 12. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-12Demographic forces: result from changes inthe nature, composition and diversity of apopulation. These include gender, age, ethnic origin, etc.For example, during the past 20 years, women haveentered the workforce in increasing numbers. Currently, most industrial countries are aging.This will change the opportunities for firms competingin these areas.New demand for health care, assisting living can beforecast.
  13. 13. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-13Political-legal forces: result from changes inthe political arena. These are often seen in the laws of a society. Today, there is increasing deregulation of many state-run firms.Global forces: result from changes ininternational relationships betweencountries. Perhaps the most important is the increase in economicintegration of countries. Free-trade agreements (GATT, NAFTA, EU) decreasesformer barriers to trade. Provide new opportunities and threats to managers.
  14. 14. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-14Managing the Organization EnvironmentManagers must measure the complexity ofthe environment and rate of environmentalchange.Environmental complexity: deals with thenumber and possible impact of differentforces in the environment. Managers must pay more attention to forces with largerimpact. Usually, the larger the organization, the greater thenumber of forces managers must oversee.The more forces, the more complex themanger’s job becomes.
  15. 15. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-15Environmental change: refers to thedegree to which forms in the task andgeneral environments change over time. Change rates are hard to predict. The outcomes of changes are even harder to identify.Managers thus cannot be sure that actionstaken today will be appropriate in thefuture given new changes.
  16. 16. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-16Reducing Environmental ImpactManagers can counter environmentalthreats by reducing the number of forces. Many firms have sought to reduce the number ofsuppliers it deals with which reduces uncertainty.All levels of managers should work tominimize the potential impact ofenvironmental forces. Examples include reduction of waste by first linemanagers, determining competitor’s moves bymiddle managers, or the creation of a new strategy bytop managers.
  17. 17. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-17Organizational StructureManagers can create new organizationalstructures to deal with change. Many firms use specific departments to respond toeach force.Managers also create mechanistic ororganic structures. Mechanistic structures have centralized authority.Roles are clearly specified.Good for slowly changing environments. Organic structures authority is decentralized.Roles overlap, providing quick response to change.
  18. 18. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-18Boundary SpanningManagers must gain access to informationneeded to forecast future issues. Rod Canion’s forecast of Compaq’s future was wrong dueto his incorrect view of the environment.Boundary spanning is the practice of relating to peopleoutside the organization. Seek ways to respond and influence stakeholder perception. By gaining information outside, managers can make betterdecisions about change.More management levels involved in spanning, yieldsbetter overall decision making.
  19. 19. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-19Boundary Spanning RolesFigure 3.5Managers in boundaryspanning roles feedbackinformation to other managers
  20. 20. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-20Scanning and MonitoringEnvironmental scanning is an importantboundary spanning activity. Includes reading trade journals, attending tradeshows, and the like.Gatekeeping: the boundary spanner decideswhat information to allow into organizationand what to keep out. Must be careful not to let bias decide what comes in.Interorganizational Relations: firms needalliances globally to best utilize resources. Managers can become agents of change and impactthe environment.
  21. 21. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 20003-21Change as a 2-way ProcessEnvironmentEnvironment OrganizationOrganizationChange in Environment affectsManagerial actions impactFigure 3.6

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