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1. Organizational Environments
&
Organizational Culture
Introduction to MANAGEMENT

2. Organizational Environments
• Internal Environment
– Organizational Culture
– Owners and Shareholders
– Board of Directors
– Employees
• External Environment
– Task Environment
– General Environment

4. 1. External Environment
The term external environment refers to forces
and institutions outside the organization that
potentially can affect its performance.
The external environment is made up of two
components:
1. Task/specific environment
2. General environment,

5. i. The Task/specific environment
• The Task/specific environment includes those
external forces that have a direct impact on
managers’ decisions and actions and are
directly relevant to the achievement of the
organization's goals.
• Each organization's specific environment is
unique and changes with conditions.

6. Customers
• Customers represent potential uncertainty to an
organization. Their tastes can change, or they can become
dissatisfied with the organization's products or services.
• Some organizations face considerably more uncertainty as a
result of their customers than do others.
• E.g. McDonald’s has been forced to overhaul its menus,
concepts and restaurant designs in the last few years to try
and reverse flagging sales.
• McDonald’s has responded to the changing demands of its
customers by offering healthier choices and new restaurant
designs, the company has found that changing its image

7. Suppliers
• firms that provide materials and equipment e.g. for a
building contractor, this includes firms that sell and rent
bulldozers and trucks, office supply firms, timber yards,
hardware suppliers, and distributors of bricks and concrete.
• suppliers also includes providers of financial and labour
inputs. Shareholders, banks, insurance companies,
superannuation funds and other similar institutions are
needed to ensure a continuous supply of capital.
• these inputs represent uncertainties – that is, their
unavailability or delay can significantly reduce the
organisation’s effectiveness –managers typically go to great
lengths to ensure a steady, reliable flow.

8. Competition
• Nike competes against Adidas, Reebok and Fila etc. Coca-
Cola competes against Pepsi and other soft-drink companies.
Not-for-profit organizations such as World Vision and
Concern also compete for dollars, volunteers and customers.
• Even monopolies e.g. Pakistan Post which have a form of
monopoly on basic mail services, have to compete against
DHL, TCS, FedEx and other forms of parcel and courier
delivery, as well as the telephone, email and fax.
• Managers cannot afford to ignore the competition.
• As technological capabilities continue to expand, the
number of viewing and entertainment options will provide
even more competition for the broadcast networks.
• internet is also having an impact on determining an
organisation’s competitors because it has virtually
eliminated the geographic boundaries.

9. Pressure Groups
• Managers must recognize the special interest groups that
attempt to influence the actions of organizations.
• E.g. PETA’s (People for the Ethical Treatment of Animals)
pressure on the McDonald’s Corporation, over its handling
of animals during the slaughter process
• Vocal individuals/groups at shareholder meetings putting
uncomfortable questions to the board or threatening to
disrupt the meeting.
• Its due to the power of pressure groups has also raised
public awareness about other environmental concerns such
as climate change, the destruction of ecological habitats
and industrial pollution. Managers should be aware of the
power these groups can exert on their decisions.

10. ii. The General Environment
• The general environment includes the broad
Economic, Political/legal, Socio cultural,
Demographic, Technological and Global
conditions that affect an organization.
• Although these external factors do not affect
organizations to the extent that changes in the
specific environment do, yet managers must
consider them as they plan, organise, lead and
control.

11. Economic conditions
• Interest rates, inflation, changes in disposable
income, share market fluctuations, and the
stage of the general business cycle are some
of the economic factors in the general
environment that can affect management
practices in an organisation.
• E.g. many specialty retailers, IKEA acutely
aware of the impact the level of consumer
disposable income has on their sales.

12. Political/legal conditions
• Federal, state and local governments influence what organizations
can and cannot do. In general, the involvement of government has
increased over the years through various regulations and policies.
Areas where governments have played a major role include trade
practices regulations, environmental protection laws, anti-
discrimination policies and industrial relations legislation.
• They also reduce managerial discretion by limiting the choices
available to managers. Consider the decision to dismiss an
employee.
• Other aspects of the political/legal sector are political conditions
and the general stability of a country in which an organization
operates and the specific attitudes that elected government
officials hold towards business.
• Management in some of our large MNC organizations is now a
global activity, managers in these types of organizations should
also be aware of the major political changes in the various
countries in which they operate,

13. • Environmental Protection Act , Securities Act,
• Companies Act 1981, Freedom of Information
Act, Official Information Act .
• Discrimination Act , Fair Trading Act
• National Occupational Health and Safety
Commission, Equal Employment Opportunity Act
• Health and Safety in Employment Act
• Accident Rehabilitation and Compensation Act
• Human Rights Act.

14. Socio cultural conditions
• Managers must adapt their practices to the changing
expectations of the society in which they operate.
• E.g. as workers expect more balance in their lives,
organizations have to adjust it by offering family leave
policies, flexible work hours and arrangements, and even
onsite child-care facilities.
• Other socio cultural changes that have been identified
include the increasing concerns about global warming and
greenhouse gas emissions, pursuit of healthy lifestyles,
increasing fear of crime and violence, and increasing
dependence on technology.
• Each of these trends may pose a potential constraint on
managers’ decisions and actions.

15. Demographic Conditions
• It encompass trends in the physical characteristics of a population, such as
gender, age, level of education, geographic location, income, family
composition, etc. the type of information that the Pakistan Bureau of
Statistics collects.
• ‘baby boomers’. (born 1945-1960) This group have had an enormous
impact because of their sheer numbers. (e.g. going to primary school,
teenage years, climbing the career ladder, and now the middle-age years)
• Depression group (born 1912–21)
• First World War group (born 1922–27),
• the post-war group (born 1928–45),
• the Generation X (or ‘zoomers’) group (born 1961–77),
• Generation Y (born 1978–94) and
• iGen (1995 onwards).
• demographics does not only look at current statistics; it also looks to the
future.
• E.g. by 2050, it is predicted that China will have more people age 65 and
older than the rest of the world combined. Consider the impact of such
population trends on organisations and managers in the future!

16. Technological conditions
• most rapid changes during the past quarter-century have occurred in technology.
We live in a time of continuous technological change. E.g.,
• the human genetic code has been cracked.
• Information gadgets, becoming smaller and more powerful.
• automated offices,
• electronic meetings,
• robotic manufacturing,
• lasers,
• integrated circuits,
• faster and more powerful microprocessors,
• synthetic fuels,
• new models of doing business in an electronic age.
• Companies that capitalise on technology – such as Apple, Samsung, eBay and
Google – prosper.
• e-business systems, reduce the cost of inventory management, facilitate supplier
interface and, in general, stay ahead of their competitors.
• Similarly, hospitals, universities, airports, police services and even non-profit
organisations that adapt to major technological advances gain a competitive edge
over those that do not.

17. Global conditions
• globalization is one of the main factors affecting managers and
organizations. National borders are becoming increasingly
meaningless in defining the boundaries of business. Advances in
communication technology and reductions in cross-nation trade
barriers have contributed to creating a truly global market.
• US companies such as ExxonMobil, Procter & Gamble, General
Electric, Microsoft and Citigroup earn more than 60 per cent of their
sales from outside the United States. And Toyota of Japan, Electrolux
of Sweden, Nestlé of Switzerland, BHP Billiton of Australia and Royal
Dutch Shell plc of the Netherlands are just five among the hundreds
of corporations that operate in dozens of countries around the world.
• The near future will also see large, powerful corporations emerging
out of China. But globalization does not just mean doing business
across national borders. It also means expanded competition for
almost every type of organization.
• Organizations are motivated to expand beyond their national borders
in order to gain cost advantages. Companies have moved their
production facilities to places like Southeast Asia can be explained
largely in terms of lower labor costs.

18. The external environment:
Constraints and challenges
• Org. as an open system, interacts with external
environment as it takes-in inputs and distributes
outputs.
• The Global Financial Crisis (GFC) started in 2007,
worse than the Great Depression of 1930s.
• Economic breakdown 2010, European sovereign
debt crisis in Greece, Ireland, Portugal, Italy and
Spain.

19. Organizational culture
• Organizational culture has been described as the shared values,
principles, traditions and ways of doing things that influence the
way organizational members act.
• In most organizations, these shared values and practices have
evolved over time and determine, in large degree, what employees
perceive about their organizational experiences and how they
behave in the organization.
• E.g. Tribal cultures have rules and taboos that dictate how members
will act towards each other and outsiders, so organizations have
cultures that govern how their members should behave.
• When confronted with problems or work issues, the organizational
culture is:
-‘the way we do things around here’
- what employees can do, how they view, define, analyse and
resolve problems and issues.

20. A culture is a
• Perception
• Shared
• Descriptive

21. 7-Dimensions of an Organization's Culture

22. • Above figure demonstrates how these dimensions
can be mixed to create significantly different
organizations.
• The characteristics listed in Figure are relatively
stable and permanent over time. Just as an
individual’s personality is stable and permanent

23. Examples
• Sony Corporation: the focus is on product innovation (innovation and
risk taking)
• Rivers Footwear & Clothing Merchants has made its employees a
central part of its culture (people orientation)
• The software giant, Microsoft is often characterised as super-
aggressive, exhibiting both the best and worst characteristics of the
entrepreneurial spirit. Fighting competitors, protecting its copyrights
and using the court system against rivals has created a long list of
adversaries (including the US federal government and the European
Commission)
• Coca-Cola: It competes fiercely in every one of its global markets,
whether Australia, Europe or Southeast Asia. The company’s fierce
competitiveness and aggressiveness can be seen in a statement made
by one of Coke’s previous presidents: ‘What do you do when your
competitor is drowning? Get a live hose and stick it in his mouth.’

24. Strong cultures
Organizations in which the key values are intensely
held and widely shared.
Strong cultures embrace sustainability as they have:
• Deeply ingrained values:
• Strategic positioning:
• Top management support:
• Systematic alignment:
• Metrics:
• Holistic integration:
• Stakeholder engagement:

25. Organizational Stakeholders

26. Contrasting Strong and Weak Cultures

27. Why important, that strong and weak cultures
have different effects on strategy?
The content of a culture has a major effect on strategies pursued:
In a strong culture, almost all employees have a clear understanding of what the
organisation is about. This clarity makes easy for managers to convey to new employees
the organisation’s core competencies and strengths. E.g. at Nordstrom’s, have very
strong culture of customer service and satisfaction, managers can instil cultural values
in new employees in a much shorter time than they could if the company had a weak
culture.
Negative side of a strong culture:
More difficult to change organisational strategies. Successful organisations with strong
cultures may become prisoners of their own successes. Research shows that the kind of
culture an organisation has, can promote or hinder its strategic actions.
‘Strategically Appropriate Cultures’:
Firms with ‘strategically appropriate cultures’ outperformed corporations with less
appropriate cultures. Strategically appropriate culture is one that supports the firm’s
chosen strategy. E.g. Avis, the number-two US car rental company, for many years stood
on top of its category in an annual survey of brand loyalty. By creating a culture where
employees possess every step of the rental car experience, Avis has built an unmatched
record for customer loyalty.

28. Creating an Ethical Culture
1. Be a visible role model.
2. Communicate ethical expectations.
3. Provide ethics training.
4. Visibly reward ethical acts and punish unethical ones.
5. Provide protective mechanisms, so employees can
discuss ethical dilemmas and report unethical behavior
without fear.

29. Characteristics of an Innovative Culture
By Swedish researcher Goran Ekvall:
1. Challenge and involvement:
Are employees involved in, motivated by and committed to the long-term goals and success of the
org?
2. Freedom:
Can employees independently define their work, exercise discretion and take initiative in their day-
to-day activities?
3. Trust and openness:
Are employees supportive and respectful to each other?
4. Idea time:
Do individuals have time to elaborate on new ideas before taking action?
5. Playfulness/humour:
Is the workplace spontaneous and fun?
6. Conflict resolution:
Do individuals make decisions and resolve issues based on the good of the organisation versus
personal interest?
7. Debates:
Are employees allowed to express their opinions and put forth their ideas for consideration and
review?
8. Risk taking:
Do managers tolerate uncertainty and ambiguity, and are employees rewarded for taking risks?

30. Creating Customer-Responsive Culture
1. Type of employee:
Hire people with personalities and attitudes consistent with customer service:
friendly, attentive, enthusiastic, patient, good listening skills
2. Type of job environment:
Design jobs so employees have as much control as possible to satisfy
customers, without rigid rules and procedures
3. Empowerment:
Give employees the discretion to make day-to-day decisions on job-related
activities
4. Role clarity:
Reduce uncertainty about what employees can and cannot do by providing
continual training on product knowledge, listening and other behavioral skills
5. Consistent desire to satisfy and delight customers:
Clarify the org.’s commitment to do whatever it takes, even if it is outside an
employee’s normal job requirements