Business Management 2. The Management Environment PDF

Academic Year 2024/25 Business Management 2. The Management Environment...

Academic Year 2024/25 Business Management 2. The Management Environment Carlos Tam, PhD ([email protected]) 1 Learning objectives 2.1 Explain what the external environment is and why it’s important. 2.2 Discuss how the external environment affects managers. 2.3 Define what organizational culture is and why it’s important. 2.4 Describe how organizational culture affects managers. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 2 2 1  Myth Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 3 3 Truth To be happy, don’t just “settle” for a job… find a workplace and a culture that “fits” you! Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 4 4 2  5 Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 5 Summary An organization’s culture can be an important indicator of “fit” – will I like working here and does this seem like a place where I can fit in and contribute? Anyone who thinks they can be happy working in any type of organizational setting might be in for a big surprise! Even working at a company rated as a “Best Company to Work For” isn’t for everyone. Organizational cultures differ and so do people. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 6 6 3  2.1 What is the external environment and why is it important? Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 7 7 2.1 What is the external environment and why is it important? Factors, forces, situations, and events outside the organization that affect its performance. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 8 8 4  Components of the External Environment Source: Robbins, Stephen P., Coulter, Mary, Management, 13th Ed., © 2016, p. 73. Reprinted and electronically reproduced by permission of Pearson Education, Inc., New York, NY. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 9 9 Political & legal The political / legal component looks at federal, state, and local laws, as well as laws of other countries and global laws (e.g. environmental policy). Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 10 10 5  Demographic The demographic component is concerned with trends in population characteristics such as age, race, gender, education level, geographic location, income, and family composition (e.g. low/high birth rate). Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 11 11 Economic The economic component encompasses factors such as interest rates, inflation, employment/unemployment rates, exchanges in disposable income, stock market fluctuations, and business cycle stages. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 12 12 6  Sociocultural The sociocultural component is concerned with societal and cultural factors such as values, attitudes, trends, traditions, lifestyles, beliefs, tastes, and patterns of behavior. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 13 13 Technological The technological component is concerned with scientific or industrial innovations. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 14 14 7  Global The global component encompasses those issues associated with globalization and a world economy. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 15 15 What is the economy like today? (before COVID-19) After several years in crisis mode, the U.S. economy and other global economies seem to have turned the corner. However, it’s not smooth sailing for managers. Global productivity still slow Global trade is sluggish U.S. employment is up Is the American dream still a possibility? Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 16 16 8  What is the economy like today? (before COVID-19) (cont.) The slowdown in productivity has moderated globally although it continues to lag in the United States. Global trade continues to be sluggish. Some analysts wonder if this is an indicator that the world economy is becoming less connected. Total U.S. employment is up, but the strongest employment growth has been in low-wage jobs and many U.S. workers are trapped in part-time jobs, unable to find full-time work. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 17 17 What is the economy like today? (before COVID-19) (cont.) Many businesses in low-wage industries are using part- time workers to soften the impact of health-care law mandates. A New York Times poll found that only 64 percent of Americans state that they still believe in the American dream – work hard and you can achieve success and riches. The World Economic Forum identified a significant risk facing business leaders and policy makers over the next decade: “severe income disparity.” Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 18 18 9  Economic Inequality and the Economic Context Only 10 percent of adults think economic inequality is “not a problem at all.” People are becoming more discontented with the income gap between the rich and everyone else. People’s belief that anyone can achieve prosperity is decreasing. Business leaders need to recognize how social attitudes in the economic context affect business decisions. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 19 19 The Sharing Economy What is this? Examples? Asset owners share with other individuals through peer-to- peer service, for a set fee, their underutilized physical assets or their knowledge, expertise, skills, or time (e.g. Airbnb, Uber, Zipcar, and SnapGoods). Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 20 20 10  Demographics The size and characteristics of a country’s population can have a significant effect on what it’s able to achieve. Demographics, the characteristics of a population used for purposes of social studies, can and do have a significant impact on how managers manage. Demographic characteristics of concern to organizations include: age, income, sex, race, education level, ethnic makeup, employment status, and geographic location. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 21 21 Demographics (cont.) Age is a particularly important demographic for managers since the workplace often has different age groups all working together (e.g. Pressure on health and welfare services, positive aging, gradual retirement). Baby Boomers are those individuals born between 1946 and 1964. The sheer numbers of people in that cohort means they’ve had a significant impact on every aspect of the external environment – including the Social Security System. Gen X is used to describe those individuals born between 1965 and 1977. This age group has been called the baby bust generation since it followed the baby boom and is one of the smaller age group. Gen Y (or the “Millennials”) is an age group typically considered to encompass those individuals born between 1978 and 1994. As the children of the Baby Boomers, this age group is large in number and making its imprint on external environmental conditions as well. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 22 22 11  Demographics (cont.) Gen Z describes the group born between 1995 and 2010. Gen Z is huge – those under age 20 represent 25.9 percent of the U.S. population. This is the most diverse and multicultural of any generation in the United States. It’s the first group whose only reality revolves around the “Internet, mobile devices, and social networking.” Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 23 23 Learning activity What are some key demographic trends in your country? Explain why and how demographic change will impact upon business development and management practices. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 24 24 12  2.2 How the external environment affects managers Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 25 25 How does external environment affect managers? There are three ways that the external environment affects managers: Impacts on Jobs and employment The amount of environmental uncertainty The nature of stakeholder relationships Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 26 26 13  Jobs and employment Economic downturns result in higher unemployment and place constraints on staffing and production quotas for managers. Not only does the external environment affect the number of jobs available, but it also impacts how jobs are managed and created. Changing conditions can create demands for more temporary work and alternative work arrangements. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 27 27 Assessing Environmental Uncertainty (cont.) Environments differ in their amount of environmental uncertainty, which relates to (1) the degree of change in an organization’s environment and (2) the degree of complexity in that environment: (1) Degree of change is characterized as being dynamic or stable. In a dynamic environment, components of the environment change frequently. If change is minimal, the environment is called a stable environment. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 28 28 14  Assessing Environmental Uncertainty (cont.) (2) The degree of environmental complexity is the number of components in an organization’s environment and the extent of an organization’s knowledge about those components. If the number of components and the need for sophisticated knowledge is minimal, the environment is classified as simple. If a number of dissimilar components and a high need for sophisticated knowledge exist, the environment is complex. Because uncertainty is a threat to organizational effectiveness, managers try to minimize environmental uncertainty. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 29 29 Assessing Environmental Uncertainty Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 30 30 15  Managing stakeholder relationships Stakeholders are any constituencies in an organization’s environment that are affected by that organization’s decisions and actions. Stakeholder relationship management is important for two reasons: It can lead to improved predictability of environmental changes, more successful innovation, greater degrees of trust among stakeholders, and greater organizational flexibility to reduce the impact of change. It is the “right” thing to do, because organizations are dependent on external stakeholders as sources of inputs and outlets for outputs and the interest of these stakeholders should be considered when making and implementing decisions. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 31 31 Organizational Stakeholders Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 32 32 16  2.3 What is organizational culture? Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 33 33 What is organizational culture? Just as individuals have a personality, so too, do organizations. We refer to an organization’s personality as its culture. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 34 34 17  What is organizational culture? Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. This definition implies: Individuals perceive organizational culture based on what they see, hear, or experience within the organization. Organizational culture is a descriptive term. It describes, rather than evaluates. Organizational culture is shared by individuals within the organization Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 35 35 How can culture be described? 7 dimensions of Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 36 36 18  Where culture comes from? The original source of an organization’s culture is usually a reflection of the vision or mission of the organization’s founders. Founders project an image of what the organization should be and what its values are. Founders “impose” their vision on employees. Organizational members create a shared history or “who we are”. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 37 37 How do employees learn the culture? Culture is transmitted principally through stories, rituals, material symbols, and language. Organizational stories typically involve a narrative of significant events or people. Corporate rituals: repetitive sequences of activities that express and reinforce important organizational values and goals. Material symbols or artifacts: layout of facilities, how employees dress, size of offices, material perks provided to executives, furnishings, etc. Language: special acronyms; unique terms to describe equipment, key personnel, customers, suppliers, processes, products. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 38 38 19  2.4 How organizational culture affects managers Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 39 39 How does organizational culture affect managers An organization’s culture is important because it establishes constraints on what employees and managers can do. Effect on what employees do and how they behave Effect on what managers do Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 40 40 20  How does culture affect what employees do? Strong cultures are found in organizations where key values are intensely held and widely shared. Most organizations have moderate-to-strong cultures. In these organizations, high agreement exists about what is important and what defines “good” employee behavior, for example. Strong cultures can create predictability, orderliness, and consistency without the need for written documentation. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 41 41 How does culture affect what managers do? Constraints from organizational culture are rarely explicit. The link between corporate values and managerial behavior is fairly straightforward. The culture conveys to managers what is appropriate behavior. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 42 42 21  Company values affect managers’ behavior Ready-aim-fire” versus “Ready-fire-aim” In the “ready-aim-fire” culture, managers will study and analyze proposed projects endlessly before committing to them. In a “ready-fire-aim” culture, managers take action and then analyze what has been done. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 43 43 Company values affect managers’ behavior Authoritarian leadership versus democratic Authoritarian leadership means that the leader has full power. Authoritarian leaders tell groups what to do and expect group members to execute. Democratic leadership balances decision-making responsibility between the group and the leader. Democratic leaders actively participate in discussions, but also make sure to listen to the views of others. Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 44 44 22  Managerial decisions influenced by culture Instituto Superior de Estatística e Gestão de Informação Universidade Nova de Lisboa 45 45 Business Management Thank you Carlos Tam ([email protected]) Campus de Campolide 1070-312 Lisboa Portugal Tel: +351 213 828 610 Fax: +351 213 828 611 46 23