This chapter discusses how managers must assess their organization's external environment, including economic, demographic, cultural, competitive, political, legal, and technological factors. It covers how these macroenvironmental forces shape industry competition and can require organizations to adapt. Specific topics covered include how changes in human capital, globalization, diversity, and technology are altering competitive dynamics. Frameworks for analyzing cultural dimensions and Porter's five competitive forces that determine an industry's profitability are also presented.

1. Don Hellriegel
John W. Slocum, Jr.
Susan E. Jackson
MANAGING: A COMPETENCY
BASED APPROACH
11th Edition
Chapter 4—Assessing the
Environment
Prepared by
Argie Butler
Texas A&M University

2. Chapter 4: PowerPoint 4.1
Learning Goals
1. Explain how economic, demographic, and
cultural factors affect organizations
2. State the five competitive forces in an industry
3. Describe the political and legal strategies
managers use to cope with changes in the
environment
4. Explain how technology changes the structure
of industries

3. Chapter 4: PowerPoint 4.2
General Environment—sometimes called the
macroenvironment, includes the external
factors that usually affect all or
most organizations

4. Chapter 4: PowerPoint 4.3 (Adapted from Figure 4.1)
Demographics
Technology
Economy
Country
Cultural
Values
Competitors
Macroenvironment
Organization
Politics

5. Chapter 4: PowerPoint 4.4
 Economics is the discipline that
focuses on understanding how
people or nations produce,
distribute, and consume
various goods and services

6. Chapter 4: PowerPoint 4.5 (Adapted from Table 4.1)
The New Age of Competition
Source: Adapted from Friedman, T.L. The World is Flat. New York: Farrar,
Straus & Giroux, 2005, 48-172.
Old New
Low-cost manufacturing Value-added services
Self-reliance Outsourcing
Made in U.S.A. Borderless competition
The Economy (cont’d)
Local knowledge Customer convenience
Physical labor
Human capital, software,
knowledge management
Smoke-stack industries Environmental stewardship

7. Chapter 4: PowerPoint 4.6
Snapshot
“Our assets leave on the elevator every night.
Organizations do not own human capital;
they can only rent them. In today’s world,
human capital will have greater power than
other resources because it is the people who
create knowledge.”
Andy Grove, Founder and CEO
Intel Corporation

8. Chapter 4: PowerPoint 4.7
Impact of Changing Demographics
on Organizations
 Increasing diversity
 Women participation rate increasing
 Hispanic men rate increasing
 People of color rate increasing
 Managerial challenges
 Multicultural awareness programs
 Language offerings
 Career challenges
 Lifestyle issues
 Illegal immigration

9. Chapter 4: PowerPoint 4.8
 Culture: the dominant pattern of living, thinking,
and believing that is developed and transmitted
by people, consciously or unconsciously, to
subsequent generations
 Value: a basic belief about a condition that has
considerable importance and meaning to
individuals and is relatively stable over time
 Value system: comprises multiple beliefs that are
compatible and supportive of one another

10. Chapter 4: PowerPoint 4.9
Values can effect how a manager
Why is Culture Important to Managers?
(cont’d)
Views other
people and
groups
Perceives
situations and
problems
Goes about
solving problems
Determines
what is
and is not
ethical behavior
Leads
and controls
employees

11. Chapter 4: PowerPoint 4.10 (Adapted from Figure 4.2)
Why is Culture Important to Management:
Overview of Cultural Factors
Long-Term
Orientation
Power
Distance
Uncertainty
Avoidance
Gender Role
Orientation
Individualism
Culture

12. Chapter 4: PowerPoint 4.11
Why is Culture Important to Management:
Hofstede’s Framework
 Power Distance—the degree to which less powerful
members of society accept that influence is unequally
divided
 Uncertainty Avoidance—the extent to which members
of a culture feel threatened by risky or unknown
situations
 Individualism—a combination of the degree to which
society expects to take care of themselves and their
immediate family and the degree to which people
believe they are masters of their own destinies

13. Chapter 4: PowerPoint 4.12
Why is Culture Important to Management:
Hofstede’s Framework (cont’d)
 Gender Role Orientation—refers to the extent to
which a society reinforces traditional norms of
masculinity versus femininity
 Long-Term Orientation—reflects the extent to which a
culture stresses that its members accept delayed
gratification of material, social, and emotional needs
 The opposite of individualism is collectivism—a tight
social framework in which group (family, clan,
organization, and nation) members focus on the
common welfare and feel strongly toward one another

14. Chapter 4: PowerPoint 4.13
0
10
20
30
40
50
60
70
80
90
100
Power Distance Uncertainty
Avoidance
Individualism Gender Role
Orientation
Short-term/
Long-term
Orientation
Cultural Value Dimension
Importance
of
Cultural
Orientation
Japan
USA
Canada
France

15. Chapter 4: PowerPoint 4.14 (Adapted from Figure 4.4)
Suppliers
Substitute
goods and
services
New
Entrants
Customers Competitors
Rivalry among
existing firms
in industry

16. Chapter 4: PowerPoint 4.15
Bruce D. Henderson, founder and chairman of the
Boston Consulting Group
“For virtually all organizations,
the critical environment constraint is their actions
in relation to competitors. Therefore, any change in
the environment that affects any competitor will have
consequences that require some degree of adaptation.
This requires continual change and adaptation by all
competitors merely to maintain
relative position.”
Competitors

17. Chapter 4: PowerPoint 4.16
 High versus low barriers to entry
 Economies of scale: achieved when increased volume
lowers the unit cost of a good or service produced by a
firm
 Government regulation: barrier to entry if it bars or
severely restricts potential new entrants to an industry
 Product differentiation: the uniqueness in quality,
price, design, brand image, or customer service that
gives one firm’s product an edge over another firm’s
 Capital requirements: the dollars needed to finance
equipment, purchase supplies, purchase or lease land,
hire staff, and the like

18. Chapter 4: PowerPoint 4.17
 In a general sense, all competitors produce
substitute goods or services, or goods or services
that can easily replace another’s goods or services
 Movie rental versus movie theatres
 Books versus TV versus newspapers
 Purchase versus rental
 Cell phone versus hard lines

19. Chapter 4: PowerPoint 4.18
 Customer bargaining power may be relatively
great when:
 Customer purchases a large volume relative
to the supplier’s total sales
 Product or service represents a significant
expenditure by the customer
 Large customers pose a threat of backward
integration
 Customers have readily available alternatives
for the same services or products

20. Chapter 4: PowerPoint 4.19
 Bargaining power of suppliers often
controls:
1. how much they can raise prices above
their costs or
2. reduce the quality of goods and services
they provide before losing customers

21. Chapter 4: PowerPoint 4.20 (Adapted from Figure 4.5)
Political-Legal Forces: Managerial
Political Strategies
Political Strategies Political-Legal Forces
 Negotiation
 Lobbying
 Alliance
 Representation
 Socialization
 Political action
committees (PACs)
 Laws
 Government
 Labor unions
 Others

22. Chapter 4: PowerPoint 4.21 (Adapted from Figure 4.6)
Technology
Workplace Strategy Manufacturing Distribution

23. Chapter 4: PowerPoint 4.22
Snapshot
Meg Whitman, CEO, eBay
“With 135 million users selling goods in
more than 45,000 categories in 27
international markets, eBay has left all
competitors in the dust. Technology has
really changed people’s lives for the
better.”

24. Chapter 4: PowerPoint 4.23
 Workers need greater problem-
solving skills
 Outsourcing routine tasks
 Virtual organizations

25. Chapter 4: PowerPoint 4.24
 Faster new product introductions to market
 Entrance of “electronic” competitors
 Formation of “electronic shopping malls”
 Wider choice of suppliers for company
 More substitute goods and services available
to company
 Product differentiation based on technological
sophistication

26. Chapter 4: PowerPoint 4.25
Mass
Customization
Reduction in
Manufacturing time
Outsourcing of routine jobs

27. Chapter 4: PowerPoint 4.26
Internet
access for
shopping
Telecommunication
devices
Information superhighway
for global competition