Chapter 2 The Environment and Culture of Organizations Copyright © Houghton Mifflin Company. All rights reserved. 3–1 General Task Internal
Dec 21, 2015
Chapter 2The Environment and Culture
of Organizations
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General
Task
Internal
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The Organization’s Environment
3 Environments of an organization:Internal, Task, General
• Environmental Factors play a major role in determining an organization’s success or failure
• Managers should strive to maintain the proper alignment between their organization and its environments.
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The External EnvironmentThe General EnvironmentThe set of broad dimensions and forces in an organization’s surroundings that create
its overall context.
• Economic dimension
– General economic growth, inflation, interest rates, unemployment
• Technological dimension
– Methods available for converting resources into products
• Sociocultural dimension
– Customs, values, demographic characteristics of society
• Political-legal dimension
– Government regulation of business
• International dimension
– Extent an organization is involved/affected by business in other countries
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The External EnvironmentThe Task Environment
• Competitors
– Organizations that compete with it for resources
• Customers
– Whoever pays money to acquire an organization’s products/services
• Suppliers
– Organizations that provide resources for other organizations
• Strategic Partners
– Companies that work together in joint ventures/partnerships
• Regulators
– Have potential to control, legislate, or otherwise influence and organization’s policies/practices
» Regulatory agencies – EPA, SEC, FDA, EEOC
» Interest Groups – PETA, MADD, NRA
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Task Environment
McDonald’s
Competitors• Burger King• Wendy’s• Subway• Dairy Queen
Customers• Individual
consumers• Institutional
customers
Suppliers• Coca-Cola• Wholesale food
processors• Packaging
manufacturers
Strategic Partners• Wal-Mart• Disney• Foreign partners
Regulators• Food and Drug
Administration• Securities and
ExchangeCommission
• EnvironmentalProtectionAgency
Internal environment
Task environment
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The Internal Environment
• Conditions and stakeholder forces within an organization– Owners– Board of directors (elected by stockholders,
act in best interests of stockholders) – Employees – Physical work environment– Culture
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How Environments Affect Organizations
Change and Complexity– Environment can be described as being:
• Relatively stable or relatively dynamic and• Relatively simple or relatively complex
– Uncertainty• Unpredictability created by environmental change
and complexity
Stable/Simple – Least Uncertainty
Dynamic/Complex – Most Uncertainty
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Environmental Change, Complexity, and Uncertainty
Source: From J.D. Thompson, Organizations in Action, 1967. Copyright © 1967 The McGraw-Hill Companies, Inc. Reprinted with permission.
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Porter’s Five Competitive Forces• Threat of new entrants
Extent to and ease with which competitors can enter market.
• Competitive rivalryCompetitive rivalry between firms in an industry.
• Threat of substitute productsExtent to which alternative products/services may replace
the need for existing products/services.
• Power of buyersExtent to which buyers influence market rivals.
• Power of suppliersExtent to which suppliers influence market rivals.
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How Organizations Adapt to Their Environments
• Information Management in Organizations– Boundary spanners– Environmental scanning – Information systems
• Strategic Response– Maintaining the status quo, altering the current
strategy, or adopting a new strategy.
• Mergers, Acquisitions, Alliances– Firms combine (merge), purchase (acquisition), or
form new venture partnerships or alliances with another firm.
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How Organizations Respond to Their Environments (cont’d)
• Organizational Design and Flexibility– Adapting to environmental conditions by
incorporating flexibility in its structural design.• Mechanistic firms operate best in stable environments.• Organic firms are best suited for dynamic environments.
• Direct Influence of the Environment– Attempting to change the nature of the competitive
conditions in its environment to suit its needs.– Pursuing new or changed relationships with
suppliers, customers, and regulators.