The Environment of Management

Contemporary Management

• Contemporary management is a broad topic encompassing various concepts and perspectives.
• Learning objectives in contemporary management include outlining organizational environments, identifying influencing forces, examining managerial barriers, and classifying Hofstede cultural dimensions for managerial effectiveness.
• Organizational environment comprises forces external to an organization that impact it. These forces vary over time and are grouped into opportunities and threats.

Organizational Environment

• Opportunities describe openings for managers to improve revenues or explore new market prospects. This includes adopting new technologies, venturing into untapped markets, and generating fresh ideas.
• Threats represent issues that pose harm to an organization. They include economic downturns, material shortages, labor disputes, etc.
• Managers need a strategic approach to capitalize on opportunities and avoid threats for organizational success.

Forces in the Organizational Environment

• General environment encompasses broader societal trends like technological advancements, socioeconomic shifts, political & legal forces, and economic conditions. (e.g., interest rates, unemployment, economic growth). Managers typically cannot directly control this environment.
• Task environment comprises forces from suppliers, distributors, customers, and competitors. Managing this domain effectively can include building strong supplier relationships, finding effective distribution channels, understanding customer needs, and maintaining a competitive edge against competitors.

Task Environment

• Suppliers provide the raw materials, components, and labor essential to an organization's operations. Managers must secure reliable and effective suppliers.
• Distributors facilitate the sale of products to customers. Different distributors may have varying levels of power and influence.
• Customers are the ultimate consumers of goods or services; managing customer relationships is a key function.
• Competitors are other organizations producing similar products. High levels of rivalry typically result in lower prices. Maintaining profitability within a competitive market often requires the presence of strong barriers to entry protecting the firm.

Industry Life Cycle

• Describes the various stages in an industry's evolution, encompassing birth, growth, shakeout, maturity, and decline stages.
• Birth stage: firms focus on innovative technology.
• Growth stage: product acceptance increases and the company expands.
• Shakeout stage: rivalry increases, prices drop, and weaker players exit.
• Maturity stage: product demand stabilizes.
• Decline stage: demand falls, and the industry experiences decreased profitability.

The General Environment

• Consists of broader economic, technological, demographic, and other societal factors. Managers generally have little control over this environment.
• Economic factors involve interest rates, unemployment, inflation, and economic growth impacting the demand for goods and services.
• Technological forces affect the skills and equipment used in production and distribution.
• Sociocultural forces emerge from societal changes impacting organizational interactions.

Demographic Forces

• Results from shifts in population characteristics (e.g., age, gender, ethnic background).
• Key societal shifts drive new market opportunities and influence business decisions.

Political-Legal Forces

• Results from changes in the political arena (e.g., deregulation, legislation).
• This also includes the laws and standards of governing bodies.

Global Forces

• Result from changes in international relationships between countries.
• They can encompass international trade agreements (e.g., NAFTA), economic integration, and the increasing need for organizations to compete in international markets.

Managing Organization Environment

• Managers must recognize the complexity of the environment, the nature of change, and the interconnectedness of various forces. Measures of environmental complexity are based on the number and variety of forces impacting a business.
• Effective management requires actively engaging with environmental changes.

Reducing Environmental Impact

• Minimizing external forces is a key element in managing environmental impacts to ensure long-term organizational success. This involves strategies at all organizational levels.

Organizational Structure

• Managers can develop new organizational structures that facilitate swift responses to changing environments.
• Mechanistic structures are characterized by central authority and clearly defined roles; they are best suited for stable environments.
• Organic structures, on the other hand, have decentralized authority and overlapping roles; they are effective in dynamically changing environments.

Boundary Spanning

• Managers use boundary spanning to leverage information from outside channels.
• This involves interacting with stakeholders to understand their needs, feedback, and concerns.

Scanning and Monitoring

• Environmental scanning is a vital boundary-spanning activity enabling organizations to gain insight into developments shaping industries.
• Gatekeeping plays a role in filtering information.
• Inter-organizational relations are essential for global organizations to leverage external resources.

Change as a 2-Way Process

• Environmental changes influence organizations in diverse ways, leading to a feedback loop and constant interaction. Managers need to proactively adapt to market shifts.

The Global Environment

• This pertains to the increasing globalization making markets more intertwined.
• Businesses often view international markets as separate units, but it's important to understand their interconnectedness.

Tariff Barriers

• Barriers like tariffs (taxes on imports) are obstacles to international trade.

Distance & Culture

• Geo-political distances and cultural differences are significant trade barriers.

Globalization effects on Managers

• Decreasing trade barriers open up enormous opportunities for managers to do business globally.
• The dynamic job market requires managers to adapt rapidly to new, global competition by buying resources and components globally.

NAFTA

• Represents trade agreements that dismantle trade barriers between countries, offering opportunities for manufacturing and reduced freight.

Global Task Environment

• Identifies key stakeholders like suppliers, competitors, customers, and distributors central to global business.

Suppliers and Distributors:

• Understanding that supplies and distribution systems are impacted by geopolitical influences and local customs is essential.

Customers and Competitors

• Managers must customize products in different cultures and acknowledge the competitive landscape as global.

Forces in the Global General Environment

• Diverse factors like political systems, cultures, and economic systems influence a business' global reach.

Political-Legal Forces

• This encompasses diverse political systems and their inherent rules, ranging from democratic to totalitarian regimes.
• It encompasses considerations like freedom of expression, economic freedom, regulations, and the legal frameworks guiding businesses.

Economic Systems

• Understanding different economic systems (free market, command, mixed) in international markets is crucial.

Recent Trends

• Current trends move toward democratic societies and free market economies.

Changing Political and Economic Forces

• Historic trends and shifts in political and economic systems (e.g., from communist to capitalist).

Sociocultural Forces

• Culture encompassing different societies' values, norms, and beliefs.
• Societal norms have an impact on a given enterprise.

Norms

• Norms encompassing customs and rules about what is generally expected in a society.

Hofstede's Model of National Culture

• A framework to understand the fundamental cultural dimensions influencing organizations operating on a global scale.

Individualism vs. Collectivism

• These influence how individuals interact with organizational structures and with each other. This also includes the extent to which societies value individual or group rights.

Power Distance

• The accepted level of inequality in societies, influencing relationships and expectations regarding authority.

Achievement vs. Nurturing

• Distinctions in societal values; achievement-oriented cultures emphasize success, while nurturing cultures emphasize quality of life and relationships.

Uncertainty Avoidance

• Societies' tolerances towards ambiguity and risk.

Long-Term Outlook

• Distinctions in how countries value long-term vision vs. immediate needs.

International Expansion

• Methods of international expansion include exporting and importing, licensing, franchising, strategic alliances, and creating wholly-owned subsidiaries.

Ethics and Stakeholders

• Stakeholders encompass various individuals or groups with interests in an organization (e.g., employees, customers, shareholders).
• Ethics guide how stakeholders interact with their organizations and each other.

Ethical Decisions

• Addresses the issue of how firms balance the needs of diverse stakeholders.

Ethical Models

• Systems for considering societal ethics, professional ethics, and individual ethics.

Why Behave Ethically?

• Ethical conduct is critical for long-term success in organizations, avoiding harming stakeholders, maintaining resources.

Promoting Ethics

• Ethics ombudsman and codes help enforce ethical standards.

Managing Diverse Workforces

• Workforce diversity leads to variety of perspectives, and equal opportunity.

Managing Diversity

• Understand and acknowledge diverse backgrounds.

Sexual Harassment

• Recognizing, understanding, and managing sexual harassment.

Avoiding Harassment

• Methods to prevent and appropriately address sexual harassment.

Forum

• Specific discussion of uncertainty avoidance and cultural differences.

This quiz explores the fundamentals of contemporary management, focusing on organizational environments and the forces that influence them. It delves into opportunities and threats that managers face and emphasizes the importance of a strategic approach for effectiveness. Test your understanding of these key concepts in management today!