Chapter 19 Future Directions of Organizations and Management Items in red are new observations since the publication of the book.

Chapter 19Future Directions of

Organizations and Management

Items in red are new observations since the publication of the book.

Learning Goals

• Summarize the domestic and international future for work, organizations, and management

• Discuss the role a global orientation will play as organizations try to compete in the future

• Describe the types of technological changes that will affect organizations and their management in the future

Learning Goals (Cont.)

• Explain the direction that organizational design is expected to take in the future

• Understand the changes in management behavior that are needed both to compete in a global environment and to manage within new organization structures

• Describe the ethical issues that will emerge in the future

Chapter Overview

• Domestic Changes

• International Changes

• Technological Changes

• Organization and Management Changes

• Ethical Issues in the Future

Introduction

• Differs from other chapters in the book

• Looks into the future instead of describing well-grounded knowledge of organizational behavior

• Predicting the future carries the risk of being wrong

• Exciting times ahead, if these predictions are right

Introduction (Cont.)

• Mainly based on press reports• Drew from academics and respected

statistical sources• Examines four areas of expected changes

– Domestic changes– International changes– Technological changes– Organization and management changes– Ethical issues in the future

Introduction (Cont.)

Domestic International Technological

Organizationchanges

Managementchanges

Major changes and implications

Domestic Changes

Domesticchanges

Populationdemographics

Job skillrequirements

Workforcecomposition

Economicchanges

Domestic Changes (Cont)

• Population demographics – Total population: 221 million– Includes net immigration of 820,000– 53 percent men and 47 percent women, about

the same since 1976– Younger (16-24) and older (55-64) groups will

have a higher percentage change than in the past

– Minority groups will increase faster than the white nonHispanic group

Domestic Changes (Cont.)

• Population demographics (cont.)– Older people living longer than in the past– International scope of ethnic diversity; major

differences in• Values

• Attitudes

• Languages

Domestic Changes (Cont)

• Job skill requirements– New jobs will require higher skills and more

education– Education implications– Many companies turning to skilled labor in

other countries. For example, there was a 56 percent increase in software development work sent to India in 1997


• Workforce diversity: Bureau of Labor statistics predictions for the workforce in 2006– More female (47 percent) and minority

workers (29 percent)– Fifteen percent of workforce will be age 55 or

over– Continued increase in contract or temporary

workers


• Economic changes– Foreign trade and technology sectors will have

the fastest growth– Technology-based and computer-related

products will become the most dynamic parts of the economy

– Interconnections among national economies will continue to produce uncertainty


• Manufacturing innovations– Quality will reach unprecedented levels– Products will feature easy maintenance, low

recall, and easy installation– Keynotes: quality, speed, flexibility, and

response to customer requirements– Close connections with customers and suppliers


• Manufacturing innovations (cont.)– Agile manufacturing: build to customer

specifications. Example: Dell Computer– Just-in-time inventory management. Low

inventory on-hand, high interdependence with suppliers, high interdependence within the manufacturing process

– More decentralization in the manufacturing process


• Manufacturing innovations (cont.)– Concurrent engineering. Cross-functional

teams of manufacturing engineers, design engineers, marketing specialists, and customer representatives

– Requires good understanding of the group and conflict management concepts described in earlier chapters of the book


• Mergers and acquisitions– In 1998, $1 trillion in mergers– DaimlerChrysler formed in 1998– Phillips Petroleum Co. is a likely target of

French giant Elf Aquitaine


• Mergers and acquisitions (cont.)– Bertelsman AG wants to acquire Random

House– 1999 mergers: BPAmoco; Exxon-Mobil

“There are no German and American companies. There areonly successful and unsuccessful companies,” ThomasMiddelhoff, chairman of Germany’s Bertelsmann AG.


• The future consumer– More demanding, both domestically and

internationally– Helped by some technological changes

described later. More knowledgeable– The “zero tolerance of defects” customer has

arrived

International Changes

• Future managers should view their external environment as extending beyond their country’s boundaries– Competitors often come from other countries– View entire world as potential markets, supply

sources, places of production– Applies to organizations of any size– Emerging transnational organization sees no

boundaries. Example: Asea Brown Boveri operates in 140 countries

International Changes (Cont.)

• Climbing education levels. Able to work with modern technology

• Expanding computing, communications, and video technology

• Fastest growing but turbulent economies in Latin America, Eastern Europe, and Asia

• The United States and Europe will play major economic roles in the next century

• Immigration will be an important and divisive domestic issue

North America

• Continued strong position in world trade, although Europe is a major competitor

• Trade among North American Free Trade Agreement (NAFTA) partners has soared and will continue to do so

• Mexico is developing into a major manufacturer and exporter of sophisticated products

Latin America

• New governments moving away from economically crippling policies of the 1980s

• Reducing tariffs, encouraging outside investment, and selling state owned companies

• Market potential is colossal• Extensive free trade areas• Free Trade Area of the Americas by 2005?

Latin America (Cont.)

• 1999: Argentina and Brazil discuss a common currency

• January 2000: Ecuador considers moving to the U.S. dollar as its currency

Europe, Scandinavia, and the Former Soviet Union

• The Euro, a single currency that unites the eleven countries of the European Monetary Union (EMU), arrived in Western Europe on January 1, 1999

• EMU: Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Luxembourg, Portugal, and Spain

Europe, Scandinavia, and the Former Soviet Union (Cont.)

• Denmark, Sweden, and The United Kingdom chose not to join the union

• Greece did not meet the economic and financial criteria for membership

• Immediately replaced national currencies in cashless transactions

• Euro replaces national currencies, January 1, 2002

• DaimlerChrysler: adopted the Euro for all company transactions, January 1, 1999


• The EMU is the world's second largest economy, almost as large as the U.S. economy

• If the four countries who are not part of the EMU join, and the EMU accepts those desiring to join, the total EMU economy becomes the largest in the world

• The Euro could become a major world currency, competing strongly with the U.S. dollar for many country's reserves


• A single currency lets consumers see the pricing of the same items in different countries

• The Euro will not let companies charge high prices in one country to offset low prices in another country

• Transnational companies such as Coca-Cola Co. face the challenge of converging prices in different countries, even with labor cost and tax differences


• Eastern and Central European countries that are moving to market-oriented economies: Poland, the Czech Republic, Estonia, Slovenia, and Hungary

• Western European countries are trying to build economic relations with them

• Want to join the EMU, but likely not economically ready until 2010


• Building an extensive transportation network

• High-speed railroads, tunnels, and bridges• The Eurotunnel linking Great Britain and

the Continent will increase commerce in both directions

• Hungary is leading Eastern Europe in improving its rail, road, and telecommunications infrastructure


• Russian Federation– Dismantling their centralized economies and

building market-oriented ones– Moving to a decentralized market system will

not be easy because state-owned monopolies produce huge amounts of investment and consumer goods

– Economic and political instability will continue


• Russian Federation (cont.)– President Boris Yeltsin resigned on December

31, 1999– Premier Vladmir Putin became acting President– Despite the turmoil, some analysts see

continued forward movement to open market economy

– Tense relationships with some other countries of the former Soviet Union: Kazakhstan and Chechnya


• Russian Federation (cont.)– Opportunities abound for quick-moving

organizations– Rich oil and gas reserves, timber, gold, and

unsatisfied consumer desires– Major opportunities: communication, roads,

petrochemical, medical equipment, and pipelines

Asia

• Prominent economies: China, Japan, Singapore, Hong Kong, Taiwan, South Korea, Thailand, Malaysia, Indonesia, and the Philippines

• Highly diverse markets with more differences that similarities among them

• Devaluation of the Thai bhat triggered recessions in several countries: Thailand, Indonesia, Japan, China, and South Korea

Asia (Cont.)

• Singapore and the Philippines felt fewer effects

• Analysts predict a rebound and continued economic growth into the next century

Asia (Cont.)

• Hong Kong– A Special Administrative Region of China– Many feared Beijing interference would

dampen its entrepreneurial spirit– Still have few government controls, low taxes,

and no tariffs

Asia (Cont.)

• Hong Kong (cont.)– Recovering economically and continuing to

forge strong ties to businesses on the Chinese mainland

– Strategy: import goods for cheap assembly in China; reexport finished goods from Hong Kong

Asia (Cont.)

• China– Population: 1.2 billion, a potentially massive

market– Increased desire to expand outside investment due

to economic reforms in the 1980s– Uncertainty surrounds China's economic future– Unemployment is at levels that might bring social

protests– Although an uncertain economic future,

companies from all over the world see China as a burgeoning market

Asia (Cont.)

• Japan– Struggling to pull itself out of a strangling

recession– Slowly moving forward with economic reforms– Wants to remain a major global player– Could emerge from its crisis as a strong global

competitor

Asia (Cont.)

• Taiwan– A serious international competitor– No longer sees itself as a cheap assembler of

other people's products– Will play an increasing role worldwide in

electronics, semiconductors, and personal computers

Asia (Cont.)

• Taiwan (cont.)– Dropped import barriers and planning to reduce

foreign exchange controls– Its consumers vie for luxury goods ranging

from Jaguar cars to satellite dishes– A growing high-technology industry is

contributing to Taiwan's economic growth

Asia (Cont.)

• South Korea– Faced its largest economic crisis in the late

1990s. Following thirty years of spectacular economic development

– Debt-ridden chaebols moved the economy near recession

– Widespread layoffs happened in many industries, creating social unrest in a country where not having a job is shameful

Asia (Cont.)

• South Korea (cont.)– President Lee Hun Jai has strongly pursued

economic reform– His goal: shake out the old ways of doing

business and move to a 21st century competitive economy

– Foreign investment has increased as desired– By early 1999, there were signs that a new South

Korea will enter the next century

Asia (Cont.)

• Association of South East Asian Nations (ASEAN)– Formidable economic block: 500 million

people who want Western goods– ASEAN: Brunei, Indonesia, Laos, Malaysia,

Myanmar (formerly Burma), the Philippines, Singapore, Thailand, and Vietnam

Asia (Cont.)

• Association of South East Asian Nations (ASEAN) (cont.)– Reducing trade barriers; forming economic

alliances– Repledged their unity at a December 1998

summit– Planning the ASEAN Free Trade Area

Technological Changes

• Communication

• Internet

• Biotechnology

• Materials

• Manufacturing

• Transportation

Communication

• Wireless, digital communication will become common in the next century, using digital satellite systems

• Desktop Personal Computer (PC) videoconferencing– Virtual teams– Includes nonverbal communication

• Combine the two in a portable system. Possibilities are almost endless

Communication (Cont.)

• Speech technology; translation technology– Direct voice communication with immediate

translation into another language– Videoconferencing in one language. Closed

caption translation in another– Speech activated personal information manager

Internet

• Internet usage predictions– 1 billion e-mail accounts by 2002– European usage grew by 300 percent in the late

1990s– By 2000, more non-English speakers on the

Internet than English speakers. Language translation software will grow in usage

– Faceless quality of Internet communication can cause misunderstandings. “High tech requires high touch,” says one executive

Internet (Cont.)

• Internet commerce– From potato chips to blue jeans to Yves Saint

Laurent fashions to Volvo cars– Growth in commerce

• 1995: almost no transactions

• 1998: $8 billion in transactions

• 2003: $100 billion in transactions

• Not necessarily in addition to in-store sales

Internet (Cont.)

• Internet commerce (cont.)– No country boundaries– Emerging new business model--the

e-corporation– New English words and phrases

• E-commerce, i-commerce• “Bricks and mortar”: physical buildings• Ebiz. Business week has a new quarterly

supplement called e.Biz. First published in March 1999

• Virtual organization, virtual group

Internet (Cont.)

• Issues– Transaction security. More accepted by U.S.

consumers than European– Data privacy– Computer security

Internet (Cont.)

• Strategies– Bricks and mortar alone– E-commerce alone– Combine bricks and mortar with e-commerce.– Example: Staples.com

Internet (Cont.)

• Some cautious predictions from the Gartner group. Source: Infoworld, November 15, 1999, page 10– 1990-1996: Technology trigger– 1997-2001: Peak of inflated expectations– 2002-2004: Trough of disillusionment– 2005-2006: Slope of enlightenment– 2006-2008: E-business ends– 2008-2010: Plateau of profitability

Internet (Cont.)

• Some Web sites to visit– www.Gap.Com– www.Commtouch.Com– www.Reflect.Com– www.Firstjewelry.Com– www.Dressmart.Com– www.esocrates.Com

Biotechnology

• Calling the next century the “century of biology”

• Medical research will operate at the gene level, unraveling human DNA. A single “smart card” will carry a person’s DNA profile

• Agriculture: genetically engineered plants. Controversial in the European Union

Biotechnology (Cont.)

• Other biotechnology effects– Papermaking: use new enzymes. Reduce

chlorine usage– Computers: DNA-based designs and self-

repairing software– “Stone wash” blue jeans: use enzymes not

stones. Reduces pumice dust

Materials

Silently and efficiently, the new team member toils away in a chemistry lab at the university of California at Santa Barbara. With perfect precision, she lays down an ultrathin layer of an organic substrate. Onto this, she deposits interlocking calcite crystals, atom by atom. The two layers bond in a delicate crystal lattice. Under a microscope, it calls to mind the flawless thin-film layers on a silicon chip.

An abalone at work!

Materials (Cont.)

• The world of nanotechnology: studying how nature builds things atom by atom

• Wave division multiplexing technology: separate communication channels from different light colors in same optical fiber

• Microelectromechanical systems (MEMS): combine sensors, motors, and processors on a single sliver of silicon

Manufacturing

• Interconnected processes with real-time links to suppliers

• Close ties to customers to make what they want

• Increased competitiveness to those companies that recognize worldwide differences in customers

• Example: Solectron Corp, Milpitas, California, a 21st century manufacturer

Transportation

• Aircraft design– Lighter, faster aircraft that can go farther with

more people– Possible supersonic aircraft that flies the Los

Angeles-Tokyo route in 4 hours, not the 10 hours it now takes

– CargoLifter, a German cargo company, will launch a fleet of helium airships (super-blimps) that can haul 160 tons

Transportation (Cont.)

• Aircraft design (cont.)– Wing-in-Ground (WIG) effect vehicles

• Plane-boat devices that takeoff and land on water

• Fly just above the surface to use ground effects for lift

• Carry cargo or people

• Originally Russian research; used on the Caspian Sea

• Now pursued by Australia and Germany

Transportation (Cont.)

• Ocean transport– Larger cargo ships– Carry 6,000 containers, 100 percent more than at

present– Plans for a superhub for such ships on the East

Coast of Canada or the United States– New catamarans called “wavepiercers” transport

people and cargo at 45 knots (52 MPH)

Organization andManagement Changes

• Strategy– Long-term view– Extraordinary patience– Tailor products to local tastes. Domino’s pizza:

squid and sweet mayonnaise for the Japanese market

Organization andManagement Changes (Cont.)

• Strategy (cont.)– Gold Kist exports chicken feet to China. Called

paws, the Chinese view them as a delicacy– Discover new ideas for domestic markets in

foreign markets. Häagen-Dazs and its dulce de leche ice cream


• Continued global mergers and acquisitions– Ford Motor Co. and Mazda Motor Corp.– Deutsche Bank has proposed a merger with

Bankers Trust– Always looking for synergy in the merger or

acquisition


• Organizational design– Decentralized designs for strategies emphasizing

flexibility and customer needs– Quick responses needed for changing customer

needs and shifting markets– Cross functional teams: broad decision-making

and problem-solving authority– Existing and future communication technology

will let globally dispersed organizations reach decentralization on a scale previously not possible


• Management behavior– Decentralized decision making– Self-managing work teams– Reward systems

• Skill-based pay systems• Profit sharing• Gain sharing• Stock ownership• Increases people’s skills and lets them share in an

organization’s success


• Management behavior (cont.)– Information technologies help with

• Decentralization• Self-managing teams

– Leadership requirements• Facilitators• Resources• Guides• Helpers

Ethical Issues in the Future

• Increased domestic sensitivity about ethical issues in the future– Business Week featured ethical concerns about

the accuracy of corporate earnings reports in late 1998. The cover screamed, "Corporate Earnings: Who Can you Trust?”

– The cover story noted, "[Companies] appear to be exploiting opportunities to jazz up their earnings like never before--all without stepping outside the loose confines of generally accepted accounting principles (GAAP)"

Ethical Issues in the Future (Cont.)

• Increasing international sensitivity to ethical standards– More countries have begun to see that corruption

in international commerce decreases trust and increases uncertainty

– The Organization for Economic Cooperation and Development: Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

– Heavy criminal penalties for illegal bribes

Chapter 19 Future Directions of Organizations and Management Items in red are new observations since the publication of the book.

Documents

future slide

types of technological

uncertainty slide

right slide

economic changes foreign

international future

percent of workforce

management behavior