Organizational Environment Quiz

Contemporary Management

• This is a broad topic covering various aspects of management
• The slides primarily focus on the organizational environment and how to manage it.

The Environment of Management

• Learning Objectives:
  • Outline the organizational environment
  • Identify forces influencing the organizational environment
  • Examine barriers affecting managers
  • Classify Hofstede cultural dimensions affecting managerial effectiveness

Organizational Environment

• Organizational Environment: These are forces outside an organization that have an impact
• Made up of Opportunities and Threats
• Opportunities: openings to increase revenue or open new markets (new technologies, markets, ideas)
• Threats: issues harmful to the organization (economic recessions, oil shortages)

Forces in the Organizational Environment

• Divided into General and Task environments.
• General Environment: technological forces, global forces, political & legal forces, sociocultural forces, economic forces, demographic forces. This is wider scope of influencing forces
• Task Environment: suppliers, distributors, competitors, customers. More directly in contact with the firm

Task Environment

• Suppliers: organizations providing inputs (raw materials, components, labor). Important to managers to secure reliable sources, often needing to manage shortages, unions, bargaining power.
• Distributors: organizations helping sell goods. Different channel strategies can be used to reach target customers, some distributors have superior bargaining.
• Customers: individuals/groups buying goods/services. Diverse groups exist (business, home, government).
• Competitors: other organizations producing similar goods. Rivalry between competitors impacts pricing decisions.

Industry Life Cycle

• Reflects changes in an industry over time
• Birth Stage: firms develop winning technologies (e.g., VHS vs Betamax).
• Growth Stage: product gains customer acceptance, and rapid growth (new firms enter, production and distribution improves).
• Shakeout Stage: slowing customer demand, competitor rivalry increases, price falls, and least efficient firms leave the industry.
• Maturity Stage: most customers have bought the product, growth is slow, relationships between suppliers and distributors are stable.
• Decline Stage: falling demand, prices fall, weaker firms leave the industry.

The General Environment

• Consists of wide economic, technological, demographic, and other issues.
• Managers typically cannot directly impact these
• Economic forces: significant impact on the national economy and the organization. Includes interest rates, unemployment, economic growth. A strong economy encourages spending.

Technological Forces

• Skills & equipment in design, production, and distribution.
• Can create opportunities or threats for managers.
• Often make products obsolete quickly.
• Impact how business is managed

Sociocultural Forces

• Result from changes in the social/national culture of society.
• Social structure refers to relationships between people and groups.
• National culture includes values that characterize a society.
• Values and norms vary across cultures and over time.
• Large impact on how business is done

Demographic Forces

• Result from changes in the nature, composition, and diversity of a population. (age, gender, ethnicity, heritage; cultural influences)
• Examples include increase in women in the workforce and aging populations.
• These changes influence opportunities for competing firms.

Political-Legal Forces

• Result from changes in the political arena.
• Often visible in laws and regulations within a society.
• Includes increasing deregulation of many state-run firms.
• Global Forces: result from changes in international relationships between countries. Increased economic integration via free-trade agreements (examples include GATT, NAFTA and The EU reducing trade barriers).

Managing the Organization Environment

• Managers must understand the complexity of the environment and the rate of change.
• Environmental complexity: deals with the number and potential impact of different forces
• Managers pay more attention to forces with larger impacts
• Job becomes more complex with more forces managers must oversee.

Environmental Change

• Refers to how readily environments can change.
• Change rates are difficult to predict, the possible outcomes of the changes are equally hard to foresee
• The difficulty is managers cannot be completely sure that today's decisions will be appropriate for tomorrow

Reducing Environmental Impact

• Managers work to reduce the number and effects of different environmental forces.
  • They may minimize dealings with suppliers
  • Decisions and actions by all levels of managers can be employed to decrease environmental force impacts

Organizational Structure

• Managers can create new organizational structures to deal with change.
  • Some firms use specific departments to respond to particular environmental forces
  • Mechanistic Structures: highly centralized authority, roles are clearly defined, good for stable environments
  • Organic Structures: decentralized authority, overlap of roles, good for rapidly changing environments

Boundary Spanning

• Managers obtain information needed to anticipate future problems and to influence stakeholder perceptions.
• Important to understanding the environment and future forces affecting the firm.
• The practice of relating to people outside the organization
• Helps managers make better decisions about change.

Scanning and Monitoring

• Used to understand and adapt to changes within the environment
  • Environmental scanning involves reading trade journals, attending trade shows, and other activities to monitor the environment.
  • Gatekeeping is used by boundary spanners to decide what information enters the organization and what does not.
  • Interorganizational relations are created with other firms. These may include global alliances.

Change as a 2-Way Process

• Change in the environment impacts the organization
• Managerial actions impact the environment

The Global Environment

• In the past, markets were largely viewed as closed/isolated between countries.
  • Firms only considered domestic competition and exports
• Today's global environment is open.
• Organizations buy and sell across the globe
• Managers must understand global competition and how it impacts the company strategy.

Tariff Barriers

• Tariffs are taxes levied upon imports
• Protects domestic jobs within a company's home country
• Other countries commonly retaliate

Distance & Culture Barriers

• The second leading source of trade barriers
• Distance creates significant limitations as far as managers are concerned.
• Communication across borders could be a challenge.
• Languages and various cultures pose hurdles across borders

Effects on Managers

• Globalization reduces trade barriers (allowing buying & selling worldwide).
  • Generates diverse opportunities for managers

NAFTA

• Abolishes tariffs on goods traded between the US, Mexico, and Canada
• Allows cross-border resources
• Many firms invest in Mexico for lower labor costs.

Global Task Environment (Suppliers, Competitors, Distributors, Customers)

• Suppliers: firms worldwide provide inputs or components.
• Competitors: fierce global competition is present throughout the world.
• Distributors: firms worldwide have unique distribution systems of goods and services
• Customers: many different countries with their own tastes. Preferences require managers to customize some products to fit.

Suppliers & Distributors

• Managers buy products from global input suppliers
• Key is to maintain good quality and competitive pricing.
• Global outsourcing (using suppliers worldwide) is possible

Customers & Competitors

• Global markets are merging
• Requires firms to adapt to diverse needs and demands by tailoring products for differing local wants.
• Global competitors add to the challenges faced by managers

Forces in the Global General Environment (Political & Legal, Sociocultural, Economic)

• Political & Legal: Diverse, changing political systems and laws for each country must be considered.
  • Totalitarian and Democratic systems are examined.
• Sociocultural: Each country uniquely has its own culture.
  • Includes values, norms, language and behaviors.
• Economic: various types of economic systems around the world must be understood (Free Market, Command, and Mixed economies).

Political-Legal Forces (Diverse and Changing)

• These changes require firms to consider various political systems and legal constraints in different countries.
• Examples include totalitarian governments (China etc), and democratic regimes (U.S., Britain).

Economic Systems

• This examines the various modes of production in different parts of the world for managers to consider.
• Free market, command economy, mixed economy

Recent Trends (Shift away from totalitarian dictatorship to democratic regimes)

• These shifts can represent significant changes in the norms of a country
• The new norms create opportunities for firms to do business in new and diverse markets

Changing Political and Economic Forces

• The shift from totalitarian to democratic regimes is also affecting and impacting a country's economy.

Sociocultural Forces (Values and Norms)

• A key component of a country's culture.
• Includes values, beliefs, norms, and behaviors prevalent within a society.
• Values are the abstract ideas about what is good, desirable, and beautiful.
• Norms are social rules, codes, and behavior guidelines

Norms (Folkways, Mores)

• Folkways: everyday customs (dress codes, manners)
• Mores: core values and behaviors a society holds important (theft, adultery). These are often incorporated into laws.

Hofstede's Model of National Culture (Individualism v. Collectivism, Power Distance, Achievement v. Nurture, Uncertainty Avoidance, Long-Term v. Short-Term)

• Helps understand differences between countries/cultures.

Individualism vs. Collectivism

• Individualism (values freedom, self-expression; belief in personal rights and achievements).
• Collectivism (values group over individual; widespread in communism and Japan).

Power Distance

• How a society accepts differences in citizens' well-being due to factors like heritage and capabilities.
• High power distance: large gap between rich and poor
• Low power distance: taxation and welfare programs reduce gap.

Achievement vs. Nurture

• Achievement-oriented societies value assertiveness, performance, and success.
• Nurturing-oriented societies value quality of life, personal relationships, and service.

Uncertainty Avoidance

• How societies and people approach risk and diversity.
• Those who are not okay with risk have a high uncertainty avoidance.
• Those who are open to risk have a low uncertainty avoidance.

Long-Term vs. Short-Term Orientation

• Long-term orientation emphasizes values like saving, persistence.
• Short-term orientation prioritizes personal stability and current happiness.

International Expansion

• Different methods to expand into international markets (Import/Export, Licensing, Franchising, Strategic Alliances, Wholly Owned Subsidiaries)

Ethics, Social Responsibility, and Diversity

• Stakeholders: people/groups with an interest in the organization
• Ethics: set of beliefs about right and wrong affecting people/stakeholders
• Social responsibility: manager's duty to nurture, protect, and enhance the welfare of stakeholders.
• Corporate Social Responsibility.

Ethical Issues

• Managers need to fairly disperse benefits and harms among stakeholders during times of great success and during layoffs.
• Potential ethical dilemmas arise when firms must contend with paying workers, suppliers, and treating employees fairly when faced with economic downturns
  • Must decide how to fairly treat all groups, including employees and suppliers

Ethical Models (Societal, Professional, Individual ethics).

• Societal ethics: standards society uses in interactions.
• Professional ethics: values and standards groups of managers follow.
• Individual ethics: an individual's set of values.

Ethics in Decisions

• Managers must consider fairness to all types of stakeholders.
• Stockholders, employees, suppliers, and customers are examples of types of stakeholders

Promoting Ethics

• Ethical and responsible managers usually benefit in the long term
• Formal systems are adopted by some firms to encourage ethical conduct (e.g. an ethics ombudsman)
• Culture has a huge impact on whether firms adopt ethical codes and norms

Managing Diverse Workforces

• Workforces have become more diverse in recent years (age, gender, race, religion).
• Benefits exist when managers make appropriate efforts to treat all groups equally, giving each worker appropriate opportunities.
  • Must understand this is a legal and ethical issue

Diversity (Different Forms)

• Includes gender, race, religion, age, disabilities etc

Managing Diversity

• Improving diversity awareness, understanding cultural differences, improving communication and commitment from top leaders are helpful.

Avoiding Workplace Issues

• Develop appropriate sexual harassment policies
  • Set up an appropriate complaint system
  • Give employees training on harassment

Forum (Discussion and Question-and-Answer)

• Raises questions for further discussion about an example of a particular culture, its unique perspective on risk and cultural norms, and how management practices are impacted.

Test your knowledge on the components and forces of the organizational environment. This quiz covers various factors like political, legal, and cultural aspects that influence managerial effectiveness and decision-making. Understand the impact of demographic trends and the industry life cycle on organizations.