Total qualitative management

1. Organizational
Environments
and Cultures
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CHAPTER TWO
Management
3rd Edition
Chuck Williams

2. What Would You Do?
You are the CEO of McDonald’s…
 Sales are declining,
stores are closing
 Competitors are stronger
 Food quality is dropping,
food preferences have
changed
 Service is rude and inaccurate
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How can you deal with these
external and internal problems
and turn them into opportunities?

3. External Environments
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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.

4. Changing Environments
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1
Environmental Change
Environmental Complexity
Resource Scarcity
Uncertainty
Characteristics of
Changing External Environments

5. Environmental Change
 Environmental Change is the rate at which a
company’s environments change
 stable environments
 dynamic environments
 Punctuated equilibrium theory
 companies cycle through stable and dynamic environments
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1.1

6. Punctuated Equilibrium: U.S.
Airlines U.S. Airline Industry
-$15,000,000
-$10,000,000
-$5,000,000
$0
$5,000,000
$10,000,000
$15,000,000
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year
$
in
Thousands
Operating
Operating
1st Revolutionary
Period:
Deregulation of U.S.
Airline Industry
Equilibrium: Followed by a
period of industry stability.
2nd
Revolutionary
Period: Rising
Cost of Jet Fuel
and Employee
Salaries and
Benefits
Equilibrium: Followed by
another period of industry
stability.
3rd Revolutionary Period: Following
September 11th terrorist attack.
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1.1

7. Environmental Complexity
 Environmental Complexity: the number of external
factors in the environment that affect organizations
 Simple environments
 have few environmental factors
 Complex environments
 have many environmental factors
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1.2

8. Resource Scarcity
 Resource scarcity is the degree to which
an organization’s external environment
has an abundance or scarcity of critical
organizational resources
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1.3

9. Uncertainty
 Uncertainty is how well managers can understand or
predict the external changes and trends affecting their
businesses
Exhibit 2.2 Environmental Uncertainty
Environmental Complexity, Environmental Change, & Resource Scarcity
Environmental Characteristics
Environmental
Uncertainty
Environmental Complexity Environmental Change Resource Scarcity
Low
Medium
High
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1.4

10. General Environment
General Environment
Specific Environment
Organization
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2

11. Components of the General
Environment
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 Economy
 Technological
 Sociocultural
 Political / Legal
2

12. Economy
 Growing vs. shrinking economies
 Future economic activity is difficult to predict
 Business confidence indices
 show how confident managers are about future business growth
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2.1

13. Technological Component
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2.2
Information
Output
Input
Technology--
Knowledge
Tools
Techniques
Raw
Materials
Services
Products

14. Sociocultural Component
 Sociocultural Components
 Demographic changes
 Changes in behavior, attitudes, and beliefs
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2.3

15. Demographics Example
% of Married Women with Children Who Work
62.8%
58.9%
45.1%
30.3%
18.6%
7 7 .2 %
4 9 .2 %
6 2 .0 %
7 3 .6 %
3 9 .0 %
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
1960 1970 1980 1990 2000
Children Under 6 Children 6 to 17
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2.3

16. Political / Legal Component
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http://www.eeoc.gov/laws/cra91.html
2.3
 Legislation
 Regulations
 Court decisions
Managers must be
educated about the laws,
regulations, and potential
lawsuits that could affect
business

17. Specific Environment
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3
 Customer
 Competitor
 Supplier
 Industry regulation
 Advocacy group

18. Customer Component
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3.1
 Reactive customer monitoring
 responding to problems, trends, and events
 Proactive customer monitoring
 anticipating problems, trends, and events
Monitoring customer
wants and needs
is critical for
business success

19. Competitor Component
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3.2
Competitive Analysis
Deciding who your competitors are
Anticipating competitors’ moves
Determining competitors’
strengths and weaknesses

20. Competitive Analysis
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3.2
http://www.scip.org
http://www.scip.org/library/8(3)eea.pdf
• 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
The Ten Commandments for
Ethical Decision Making
Adapted from Fuld & Company
Thou Shalt …

21. Supplier Component
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3.3
Opportunistic Behavior
Suppliers
Buyer
Dependence
Supplier
Dependence
Relationship Behavior

22. Industry Regulation Component
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3.4
 Consists of regulations and rules that govern the
business practices and procedures of specific
industries, businesses, and professions

23. Federal Regulation Agencies
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3.4
Consumer Product
Safety Commission
http://www.cpsc.gov
Environmental Protection Agency http://www.epa.gov
Equal Employment
Opportunity Commission
http://www.eeoc.gov
Federal Communications
Commission
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
http://www.osha.gov
Securities and Exchange
Commission
http://www.sec.gov

24. Advocacy Groups
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3.5
 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

25. Making Sense of Changing
Environments
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4
Acting on
Threats and Opportunities
Interpreting
Environmental Factors
Environmental
Scanning
Evaluating
External
Environments

26. Environmental Scanning
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4.1
 Environmental scanning: searching the
environment for events or issues that might affect
an organization
 Scanning the environment:
keeps companies current on industry factors
reduces uncertainty
alters organizational strategies
contributes to organizational performance

27. Interpreting Environmental
Factors
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4.2
 Managers determine what environmental events and
issues mean to the organization
 Opportunities
 Threats

28. Acting on Threats and
Opportunities
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4.3
 Managers have to decide how to respond to these
environmental factors
 Cognitive maps
simplified models of external environments
depicts how managers believe environmental
factors relate to possible organizational actions

29. Cognitive Maps
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4.3

30. Internal Environments
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After reading this section,
you should be able to:
5. explain how organizational cultures are created and
how they can help companies be successful.

31. Internal Environments
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 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

32. Creation and Maintenance of
Organizational Cultures
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5.1
Organizational Heroes
Organizational Stories
Company Founder

33. Successful Organizational
Cultures
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5.2 Adapted from Exhibit 2.7
Employee
Satisfaction
Quality
Consistency
Adaptability
Involvement
Clear Vision
Sales
Growth
Return on
Assets
Profits
D.R. Denison & A.K. Mishra, Organization Science 6(1995): 204-223

34. 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
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5.2

35. Levels of Organizational Culture
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5.3
 Symbolic artifacts
 Behaviors
1. Surface
Level
SEEN
 What people say
 How decisions
are made
2. Expressed Values
and Beliefs
HEARD
 Beliefs and
assumptions
 Rarely discussed
3. Unconsciously
Held Assumptions
and Beliefs
BELIEVED
Adapted from Exhibit 2.8

36. Been There Done That
 The beliefs and values of Starbucks Coffee
 success has to be shared
 people are the most
significant component
 a culture of meaning and loyalty
 grassroots decision making
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37. 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.
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5.3