bateman.Chap002.2 - The External Environment and...

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Unformatted text preview: The External Environment and Organizational Culture Organizational Organizational Environment Organizational All elements existing outside the boundary of the organization that have the potential to affect the organization Organization Inputs and Outputs Organization Figure 2.1 2­3 Open Systems Open Open systems • Organizations that are affected by, and that affect, their environment. 2­4 The External Environment The Suppliers Suppliers Supply chain management • managing the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers 2­6 What are Porter’s 5 Forces? What 1. 2. 3. 4. 5. Nature of the competition Threat of new entrants Threat of substitutes Power of suppliers Power of customers Concept of “switching costs” Question Question ____________ costs are fixed costs buyer face if they change suppliers. A. Exchange B. Lever C. Switching D. Transfer 2­8 Environmental Analysis Environmental Information not always easily available When the environment is relatively unpredictable, managers face environmental uncertainty Uncertainty arises from complexity and dynamism Environmental Uncertainty Environmental Environmental complexity • The number of issues to which a manager must attend as well as the interconnectedness of these issues Environmental dynamism • The degree of discontinuous change that occurs within an industry 2­10 Environmental Scanning Environmental Environmental scanning means searching for and sorting through information about the environment Competitive intelligence is information that helps managers determine how to compete better Scenario Development Scenario Scenarios • Narratives that describe a particular set of future outcomes • Effective managers regard scenarios as living documents, not prepared once then put aside Forecasting Forecasting Forecasting is used to predict exactly how some variable or variables will change in the future For example, firms may forecast: • • • • How interest rates might change Demand for goods and services Labor supply and demand New competitiors Question Question What is the process of comparing an organization’s practices and technologies with those of other companies? A. Comparative technology B. Benchmarking C. Process synchronization D. Process asynchronization 2­14 Benchmarking Benchmarking Benchmarking • The process of comparing an organization’s practices and technologies with those of other companies In other words, benchmarking attempts to identify the best­in­class performance and compare your organization to the best­in­ class organization Responding to Environmental Uncertainty Uncertainty When uncertainty arises from environmental complexity, organizations tend to adapt by decentralizing decision making Decentralization requires empowerment ­ Sharing power with employees, thereby enhancing their confidence to perform their jobs and their belief that they are influential contributors to the organization Changing the Environment You are In are Adapting to the Environment Adapting Buffering • Creating supplies of excess resources in case of unpredictable needs. Smoothing • Leveling normal fluctuations at the boundaries of the environment. Flexible • Meet varied needs of the client 2­18 Influencing Your Environment Influencing Independent strategies • Strategies that an organization acting on its own uses to change some aspect of its current environment. Cooperative strategies • Strategies used by two or more organizations working together to manage the external environment. 2­19 Changing the Environment You are In You Strategic maneuvering • An organization’s conscious efforts to change the boundaries of its task environment. Domain selection • Entrance to a new market or industry with an existing expertise Diversification • Occurs when a firm invests in a different product, business, or geographic area Your Changing Environment Your Mergers • One or more companies combine with another Acquisitions • One firm buys another Divestiture • A firm sells one or more businesses Prospectors • Continuously change the boundaries or their task environment by seeking new products and markets, diversifying and merging, or acquiring new enterprises Defenders • Stay within a stable product domain as a strategic maneuver Culture Culture The set of key values, beliefs, understandings, and norms that members of an organization share. Culture and the Internal Environment of the Organization Environment Organizational culture • The set of important assumptions about the organization and its goals and practices that members of the company share • In strong cultures, the majority of people within the organization agree on organizational goals • In weak cultures, the majority of people within the organization disagree on organizational goals Levels of Corporate Culture Levels Culture that can be seen at the surface level Visible 1. Artifacts, such as dress, office layout, symbols, slogans, ceremonies Invisible 2. Expressed values, such as “The Penney Idea,” “The HP Way” 3. Underlying assumptions and deep beliefs, such as “people are lazy and can’t be trusted” Deeper values and shared understanding s held by organization members Types of Culture Types Culture Definition Group culture Internally oriented and flexible; values stability Hierarchical culture Internally oriented; values and norms associated with bureaucracy Rational culture Externally oriented and focused on control Externally oriented and flexible Adhocracy Components of Culture Components Laws & regulations The economy Changing technology Demographics Social issues Competitors New Entrants/ Substitutes Suppliers & Customers Uncertainty Laws and Regulations Laws Regulators include agencies such as • Occupational Safety and Health Administration (OSHA) • Interstate Commerce Commission (ICC) • Federal Aviation Administration (FAA) • Equal Employment Opportunity Commission (EEOC) • National Labor Relations Board (NLRB) • And many others The Economy The Complex interconnections among economies of different countries External pressure of stock markets Periods of growth and recession Technology Technology Strategies developed around new technologies can create a competitive advantage Strategies that ignore or lag competitors technology can lead to obsolescence and extinction Demographics Demographics Measures of characteristics of the people who make up groups or other social units Demographic trends • • • • • Growth of the labor force Increasing education and skill levels Immigration Increased numbers of women in the workforce Increasingly diverse workforce Social Issues and the Natural Environment Environment Social trends include • Delaying having children to focus on careers • Domestic partners covered under employee benefit programs Natural environmental issues affect organizations reputations; reputations in turn can affect competitiveness Competitors Competitors Who is the competition? How do they compete? For example: • • • Price New products Advertising campaigns • • • There are many direct competitors Industry growth is slow Product/service is not easily differentiated Competition is most intense when New Entrants & Substitutions New New entrants compete with established companies Barriers to entry are conditions that help prevent new companies from entering an industry Substitutes are alternate products/ services Compliments are products which increase the purchase of main product. Suppliers & Customers Suppliers Suppliers provide resources or inputs needed for production Switching costs are fixed costs buyer face if they change suppliers Customers purchase good & services that an organization offers Final & Intermediate customers buy finished or semi finished products Environmental Uncertainty Environmental Environmental complexity • The number of issues to which a manager must attend as well as the interconnectedness of these issues Environmental dynamism • The degree of discontinuous change that occurs within an industry Competitive Intelligence Competitive 1) 2) 3) 4) 5) Managers can begin developing competitive intelligence by asking five questions Who are our current competitors? Are there few or many entry barriers to our industry? What substitutes exist for our product? Is the company too dependent on powerful suppliers? Is the company too dependent on powerful customers? ...
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