Organizational Environments: Internal and External

• Organizations exist within both internal and external environments.
• The external environment includes everything outside an organization's boundaries that can affect it.
• The internal environment includes the conditions and forces within the organization.
• There are two types of external environments general and task environments.

General and Task environments

• The general environment consists of the broad dimensions and forces in an organization's surroundings that create its over context.
• The task environment includes specific organizations or groups that can influence an organization.

General Environment Components

• The general environment includes economic, technological, sociocultural, political-legal, and international dimensions.
• The economic dimension refers to the overall health and vitality of the economic system.
• The technological dimension refers to the available methods for converting resources into products or services.
• The sociocultural dimension refers to the customs, mores, values, and demographic characteristics of society.
• The political-legal dimension concerns government regulation of business and the relationship between business and government.
• The international dimension refers to extent to which an organization is involved in or affected by business in other countries.

Task Environment Components

• The task environment includes competitors, customers, suppliers, strategic partners, and regulators.
• Competitors are organizations that compete for resources.
• Customers are those entities that acquire an organization's products or services for a fee.
• Suppliers provide resources for other organizations.
• Strategic partners (or strategic allies) are organizations that work together in a joint venture or similar arrangement. Regulators

Regulators

• Regulators can control, legislate, or influence an organization's policies and practices.
• Regulatory agencies are government entities created to regulate business activities.
• Interest groups are organizations whose members try to influence businesses.

Internal Environment Components

• An organization's internal environment consists of owners, boards of directors, employees, physical work environments, and cultures.
• Owners can claim property rights to an organization.
• A corporation board of directors is a governing body elected by its stockholders, which oversees the general management of the firm, ensuring it best serves stockholder interests.
• Employee issues include a diverse workforce, reliance on "temp" workers, and labor unions.
• Physical work environment issues include location, design, and layout.

Organization Culture

• Organization culture comprises values, beliefs, behaviors, customs and attitudes that helps organization members understand what it stands for, how it does things, and what it considers important.
• Organizational culture can shape a firm's long-term effectiveness, and increase productivity.
• Organizational culture develops over time, often starts with the founder, and includes elements like corporate success and common / shared experiences.

Managing Organizational Culture

• Managers must understand their current culture.
• Managers should reward behavior consistent with the culture, if it's in the company's best interest.
• Managers must identify their preferred culture and bring in outsiders, while adopting new slogans and success stories to establish a required culture.

Multiculturalism and Diversity

• Diversity exists in a group or organization when its members differ from one another along one or more important dimensions i.e age, gender, or ethnicity.
• Multiculturalism refers to the broad issues associated with differences in values, beliefs, behaviors, customs, and attitudes held by people in different cultures.
• Organization culture, multiculturalism, and diversity are closely related concepts.

Trends in Diversity and Multiculturalism

• Increased awareness of diversity, improvements in the quality of the labor force, changing demographics, globalization and legislation drive diversity/multiculturalism in organizations.
• The greatest increase in expected growth is within the Hispanic population.
• U.S. immigration is at its highest rate since 1910.
• Some organizations enhance their multiculturalism in response to these changes.

Organization – Environmental Relationships

• Organizations are open systems that interact with various dimensions in different ways.
• Environments affect organizations and organizations adapt to their environments.

How Environments Affect Organizations

• Environments affect organizations via three perspectives:
  • Environmental Change and Complexity.
  • Competitive Forces.
  • Environmental Turbulence.

Environmental Change, Complexity, and Uncertainty

• Degrees of homogeneity and change combine to create uncertainty.

Competitive Forces

• Michael Porter defined the Five Competitive Forces:
  • Threat of new entrants.
  • Competitive rivalry.
  • Threat of substitute products.
  • Power of buyers.
  • Power of suppliers.

Environmental Turbulence

• Consists of changes in the environment which may or may not be expected.
• Crisis is the most common form of turbulence.
• Some organizations have developed a crisis team and/or plan.

How Organizations Adapt to Their Environments

• Organizations adapt to their environments through six basic mechanisms:
  • Information management.
  • Strategic response.
  • Mergers, acquisitions, and alliances.
  • Organization design and flexibility.
  • Social responsibility.
  • Direct influence.

Environment Adaptations

• Boundary spanner - someone who spends much of their time with others outside the organization.
• Environmental scanning – monitoring the environment through observation and reading.
• Information systems – electronic systems which gather, organize and summarize information.
• An acquisition occurs when on firm buys another. Most are friendly.
  • A hostile takeover occurs when one firm buys another against its will.
• In an alliance (partnership), the firm undertakes a new venture with another firm.
• Vertically integrating.
• Lowering price, affecting competitors.
• Creating new products.
• Lobbying and bargaining.