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Chapter 3Organizational

Environments and Culture

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3-1 discuss how changing environments affect organizations

3-2 describe the four components of the general environment

3-3 explain the five components of the specific environment

3-4 describe the process that companies use to make sense of their changing environments

3-5 explain how organizational cultures are created and how they can help companies be successful

Characteristics of External Environments

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• Environmental change• Environmental complexity• Resource scarcity• Uncertainty

3-1

Environmental Change

The rate at which a company’s general and specific environments

change.

•Stable– slow rate of change

•Dynamic – fast rate of change

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Punctuated Equilibrium Theory

Stability

Dynamic Change

Stability

Dynamic Change Dynamic

Change

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Environmental Complexity

• Simple – few environmental factors that

affect organizations

• Complex– many environmental factors that

affect organizations

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Resource Scarcity

The abundance or shortage of critical resources in an organization’s external

environment.

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Uncertainty

The extent to which managers can understand or predict the external changes and trends affecting their

business.

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Environmental Change, Environmental Complexity, and Resource Scarcity

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General and Specific Environments

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Economy

• A growing economy provides a favorable environment for business growth.

• Business confidence indices show how confident managers are about future business growth.

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Technological Component

• Technology– an umbrella term for the knowledge,

tools, and techniques used to transform inputs into outputs

Changes in technology can help companies provide better products or

produce their products more efficiently.

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Sociocultural Component• Demographic characteristics, general

behavior, attitudes, and beliefs of people in a particular society

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Political/Legal Component

• The legislation, regulations, and court decisions that govern and regulate business behavior

• Many managers are unaware of the potential legal risks associated with traditional managerial decisions like recruiting, hiring, and firing employees.

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Specific Environment• Customers• Competitors• Suppliers• Industry regulations• Advocacy groups

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Customer Component

• Reactive customer monitoring– Identifying and addressing customer

trends and problems after they occur

• Proactive customer monitoring– Identifying and addressing customer

needs, trends, and issues before they occur

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Competitor Component• Competitors

– companies in the same industry that sell similar products or services

• Competitive analysis– a process of monitoring the competition

that involves identifying competition, anticipating their moves, and determining their strengths and weaknesses

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Supplier Component• Suppliers

– companies that provide material, human, financial, and informational resources to other companies

Supplier dependencevs.

Buyer dependence

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Behaviors

• Opportunistic behavior– when one party benefits at the expense

of another

• Relationship behavior– focuses on establishing a mutually

beneficial, long-term relationship between buyers and sellers

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Industry Regulation Component

Regulations and rules that govern the practices and procedures of specific

industries, businesses, and professions

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Federal Regulatory Agencies and Commissions

• Consumer Product Safety Commission• Department of Labor• Environmental Protection Agency• Equal Employment Opportunity Commission• Federal Communications Commission• Federal Reserve System• Federal Trade Commission• Food and Drug Administration• National Labor Relations Board• Occupational Safety and Health Administration• Securities and Exchange Commission

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Advocacy Groups

Concerned citizens who band together to try to influence the business practices of specific

industries, businesses, and professions

•Public communication

•Media advocacy

•Product boycott

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Making Sense of Changing Environments

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• Environmental scanning• Interpreting environmental factors• Acting on threats and opportunities

3-4

Environmental ScanningSearching the environment for important

events or issues that might affect an organization.

•Managers scan the environment to reduce uncertainty.•Organizational strategies affect environmental scanning.•Environmental scanning contributes to organizational performance.

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Interpreting Environmental Factors

• Threat or opportunity?

• Threat– managers typically take steps to protect the

company from further harm

• Opportunity– managers consider strategic alternatives for

taking advantage of those events to improve performance

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Cognitive Maps

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Creation and Maintenance of Organizational Cultures

• Primary source of organizational culture is the company founder.

• Organizational culture is sustained by…– organizational stories– organizational heroes

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Keys to an Organizational Culture

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Three Levels of Organizational Culture

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Changing Organizational Cultures

• Behavioral addition

• Behavioral substitution

• Change visible artifacts

• Hiring people with values and beliefs consistent with desired culture

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<click screenshot for video>

Camp Bow Wow1. What aspects of Camp Bow

Wow’s corporate culture reflect the surface level of the organizational culture? What aspects reflect the values and beliefs? What aspects reflect the unconsciously held assumptions and beliefs.

2. Why did Camp Bow Wow have to change its culture when it became a national franchise?

3. What impact does Heidi Ganahl’s personal story have on employees at Camp Bow Wow?

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