Mgt Chapter 3 PDF

Because learning changes everything. ® Chapter 3 The Organizational Environment and Culture © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives L O 1 Describe the five element...

Because learning changes everything. ® Chapter 3 The Organizational Environment and Culture © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Learning Objectives L O 1 Describe the five elements of an organization’s macroenvironment. L O 2 Explain the five components of an organization’s competitive environment. L O 3 Understand how managers stay on top of changes in the external environment. L O 4 Summarize how managers respond to changes in the external environment. L O 5 Discuss how to use organizational cultures to overcome challenges in the external environment. © McGraw Hill 2  Open Systems Organizations that affect and are affected by their environments and other systems. Inputs are goods and services that organizations take in and use to create products or services. Outputs are the products and services organizations create. © McGraw Hill 3  External Environment All relevant forces outside a firm’s boundaries. Gordon Logan, founder of Sport Clips, created the successful business after conducting market research that showed there was little competition in the men’s haircut market. © McGraw Hill Wendy Yang/KRT/Newscom 4  The Macroenvironment Macroenvironment The general environment; includes governments, economic conditions, and other fundamental factors that generally affect all organizations. May be uncontrollable. © McGraw Hill 5  Exhibit 3.1: Environments Access the text alternative for slide images. © McGraw Hill 6  The Economy Affects Managers and Organizations Economic Factors Interest and inflation rates. Unemployment rates. Stock market. Venezuelan president Nicolás Maduro won reelection in 2018 despite leading his oil-rich nation into a shattering economic depression that has prompted one of the worst migration crises in recent Latin American history. © McGraw Hill Molina86/Shutterstock 7  Technology Is Changing Every Business Function Technological Advances Create new products. Provide more efficient ways to manage and communicate. © McGraw Hill 8  Demographics Describe Your Employees and Customers Demographics Statistical characteristics of a group or population such as age, gender, and education level. Factors that are affecting the size and composition of the labor force include: Population growth. Education and skill levels of the workforce. Immigration. Women. © McGraw Hill 9  Social Values Shape Attitudes Toward Your Company and Its Products Societal Trends Have major implications for management of the labor force, corporate social actions, and strategic decisions about products and markets. Companies introducing more supportive policies, including family leave, flexible working hours, and childcare assistance. Prominent issues related to natural resources. Companies’ responses to social issues may affect their reputation. © McGraw Hill 10  The Competitive Environment Competitive Environment The immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like. © McGraw Hill 11  Exhibit 3.2: Porter’s Five Forces Source: Adapted from M. E. Porter, “The Five Competitive Forces That Shape Strategy,” Harvard Business Review. www. hbr.org (January 2008), pp. 78-93. Access the text alternative for slide images. © McGraw Hill 12  Rivals Can Be Domestic or Global Identify the Competition Analyze How They Small domestic firms. Compete Strong regional Competitors use tactics competitors. such as price reductions, new-product introductions, Big new domestic and advertising companies exploring campaigns to gain new markets. advantage over their Global firms. rivals. Newer ventures. © McGraw Hill 13  New Entrants Appear When Barriers to Entry Are Low Barriers to Entry Conditions that prevent new companies from entering an industry. Includes: Government policy. Capital requirements. Brand identification. Nike spokesperson Serena Cost disadvantages. Williams, whose celebrity Distribution channels. endorsement enhances Nike’s strong branding. © McGraw Hill Neale Cousland/Shutterstock 14  Customers Determine Your Success Customers Final consumers are those who purchase products in their finished form. Intermediate consumers are customers who purchase raw materials or wholesale products before selling them to final customers (B2B companies). Customer service means giving customers what they want or need, the way they want it, the first time. © McGraw Hill 15  Competitors’ Products Can Complement or Substitute for Yours Substitutes A potential threat; customers use it as an alternative, buying less of one kind of product but more of another. Firms can develop substitutes with technological advances and economic efficiencies. Complements A potential opportunity; customers buy more of a given product if they also demand more of the complementary product. © McGraw Hill 16  Suppliers Provide Your Resources Suppliers Provide the resources needed for production: people, raw materials, information, and financial capital. Switching costs are fixed costs buyers face when they change suppliers. Supply chain management is the managing of the network of facilities and people that obtain materials from outside the organization, transform them into products, and distribute them to customers. © McGraw Hill 17  Keeping Up with Changes in the Environment Environmental Uncertainty When management lacks information to understand or predict the future. Uncertainty arises from: Complexity—The number of issues a manager must attend to and the degree to which they are interconnected. Dynamism—The degree of discontinuous change that occurs within an industry. © McGraw Hill 18  Environmental Scanning Keeps You Aware Environmental Competitive Intelligence Scanning Information that helps Searching for and managers determine how sorting through best to manage in the information about the competitive environment. environment. Environments can be attractive or unattractive. © McGraw Hill 19  Exhibit 3.3: Attractive and Unattractive Environments Environmental Attractive Unattractive Factor Competitors Few; high industry growth; Many; low industry growth; unequal size differentiated. equal size; commodity. Threat of entry Low threat; many barriers. High threat; few entry barriers. Substitutes Few. Many. Suppliers Many; low bargaining power. Few; high bargaining power. Customers Many; low bargaining power. Few; high bargaining power. Sources: Adapted from S. Ghoshal, “Building Effective Intelligence Systems for Competitive Advantage,” Sloan Management Review 28, no 1 (Fall 19 86), pp. 49-58; and K. D. Cory, “Can Competitive Intelligence Lead to a Sustainable competitive Advantage?” Competitive Intelligence Review 7, no. 3 (Fall 19 96), pp. 45-55. © McGraw Hill 20  Scenarios, Forecasting, and Benchmarking Scenarios A narrative that describes a particular set of future conditions. Best-case, worst-case. Forecasting Method for predicting how variables will change the future. Benchmarking The process of comparing an organization’s practices and technologies with those of other companies. © McGraw Hill 21  Responding to the Environment 1 Effective Responses Adapting to the environment. Influencing the environment. Selecting a new environment. Adapt to the External Environment Empowerment shares power with employees at all levels to enhance their contributions to the organization. © McGraw Hill 22  Your Organization’s Internal Environment and Culture Internal Environment All relevant forces inside a firm’s boundaries. Managers, employees, resources, and organizational culture. © McGraw Hill 23  What Is Organizational Culture? 1 Organizational Culture The set of assumptions about the organization and its goals and practices that members of the company share. Source: Adapted from E.H. Schein, “Coming to a New Awareness of Organizational Culture,” Sloan Management Review 25, no. 2 (Winter 19 84), pp. 3-16. Access the text alternative for slide images. © McGraw Hill 24  What Is Organizational Culture? 2 Strong Culture Weak Culture Everyone understands Different people hold and believes in the firm’s different values, there is goals, priorities, and confusion about practices. corporate goals, and it is not clear from one day to the next what principles should guide decisions. © McGraw Hill 25  Companies Give Clues About Their Culture Culture Clues Corporate mission statements and official goals. Business practices. Symbols, rites, and ceremonies. The stories people tell. Annie’s C E O John Foraker pictured. Everyone at Annie’s shares a common passion for food, people, and the planet we all share. © McGraw Hill 26  Four Types of Organizational Cultures Four Types Clan culture is internally oriented and flexible. Hierarchical culture is internally oriented by more focus on control and stability. Market culture is externally oriented and focused on controls. Adhocracy is externally oriented and flexible. © McGraw Hill 27  Exhibit 3.7: Competing-Values Model of Culture Source: Adapted from K.S. Cameron and R.E. Quinn, Diagnosing and Changing Organizational Culture, 3rd edition, 2011, Jossey-Bass. Access the text alternative for slide images. © McGraw Hill 28  Chapter Review 1 Five elements of an organization’s macroenvironment: Laws and regulations, the economy, technology, demographics, and social values. Five components of an organization’s competitive environment: Impact of new competitors, power of customers, impact of substitute or complement products, power of suppliers, competition between existing rivals in the industry. © McGraw Hill 29  Chapter Review 2 Keeping up with the environment: Environmental scanning, scenarios, competitive intelligence, forecasting, benchmarking. Responding to the environment: Buffering, smoothing, flexible processes. Organizational culture: Clan, hierarchy, market, adhocracy. © McGraw Hill 30  Because learning changes everything. ® www.mheducation.com Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Accessibility Content: Text Alternatives for Images © McGraw Hill 32  Exhibit 3.1: Environments – Text Alternative Return to parent-slide containing images. The three environments are: macro environment which comprises of: laws and regulations economy, technology, demographics and social values. Competitive environment which comprises of: rivals, new competitors, customers, substitute of products and suppliers. Internal environment which comprises of: culture and values. Return to parent-slide containing images. © McGraw Hill 33  Exhibit 3.2: Porter’s Five Forces – Text Alternative Return to parent-slide containing images. The diagram illustrates that there is competition among existing rivals in the industry. Then there is the impact of new competitors entering the market. The impact of substitute and complementary services products. Finally the power of suppliers and customers. Return to parent-slide containing images. © McGraw Hill 34  Exhibit 3.4: Four Structural Approaches for Managing Uncertainty – Text Alternative Return to parent-slide containing images. The four approaches are: complex-stable, this is decentralized and bureaucratic (standardized skill); complex- dynamic, this is decentralized and organic (mutual adjustment); simple-stable, this is centralized and bureaucratic (standardized work processes); simple- dynamic, this is centralized and organic (direct supervision); Return to parent-slide containing images. © McGraw Hill 35  Exhibit 3.5: Ways That Managers Can Influence Their Environment – Text Alternative Return to parent-slide containing images. The ways to influence the environment are: Competitive aggression; Competitive pacification; Public Relations; Voluntary action; Legal action; and Political action. Return to parent-slide containing images. © McGraw Hill 36  What Is Organizational Culture? – Text 1 Alternative Return to parent-slide containing images. A pyramid displays the three layers of organization culture. The first level is visible artifacts: these components are structure and behavior like dress, office space, and organizational chart. The second level of culture refers to its values: these are under the surface and comprise of: desirable qualities and behaviors like "let's become a green company." The third and deepest level of an organization’s culture refers to unconscious assumptions: these are deeply held beliefs that are taken for granted like, "employees can be trusted." Return to parent-slide containing images. © McGraw Hill 37  Exhibit 3.7: Competing-Values Model of Culture – Text Alternative Return to parent-slide containing images. The matrix has four attributes within which the four types are combined. The four attributes are: internal maintenance and external positioning; flexible processes and control-oriented processes. Internal maintenance and flexible processes: Type: Clan (Collaborate) Dominant attribute: Cohesiveness. participation, teamwork. sense of family. Leadership style: Mentor, facilitator. parent figure. Bonding: Loyalty. tradition, interpersonal cohesion. Strategic emphasis: Toward developing human resources. commitment, and morale. Internal maintenance and control-oriented processes: Type: Hierarchy (Control) Dominant attribute: Order, rules and regulations, uniformity, efficiency. Leadership style: Coordinator, organizer. administrator. Bonding: Rules. policies and procedures, clear expectations. Strategic emphasis: Toward stability, predictability, smooth. External positioning and flexible processes: Type: Adhocracy (Create) Dominant attribute: entrepreneurship, adaptability, dynamism. Leadership style: Innovator. entrepreneur, risk taker. Bonding: Flexibility, risk. entrepreneur. Strategic emphasis: Toward innovation, growth. new resources. Flexible processes and control-oriented processes: Type: Market (Compete) Dominant attribute: Goal achievement, environment exchange, competitiveness. Leadership style: Production and achievement oriented, decisive. Bonding: Goal orientation, production, competition. Strategic emphasis: Toward competitive advantage and market superiority. Return to parent-slide containing images. © McGraw Hill 38