1. McGraw-Hill/Irwin 2-1Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives L01: How do environmental forces influenceorganizations influence their environments? L02: Can you distinguish between the macroenvironment and the competitive environment? L03: Why should managers and organizations attendto economic and social developments?2-2 3. Learning Objectives L04: Can you identify elements of the competitiveenvironment? L05: Summarize how organization respond toenvironmental uncertainty. L06: Define elements of an organizations culture. L07: Discuss how an organizations culture affects itsresponse to its external environment 2-3 4. 2-4 5. How organizations interact with theirenvironment2-5 6. The Macroenvironment General elements in the external environment that potentially can influence strategic decisions. Laws and regulations Economy Technology Demographics Social Values2-6 7. The External Environment 2-7 8. Managing the Macroenvironment The economy affects a companys value Technology is changing every business function Demographics describe employees and customers Social issues shape attitudes toward your company and its products2-8 9. The Competitive Environment2-9 10. Who is the Competition? Worldwide Competition New Entrants Barriers to entry low Substitutes and Complements Resources from Suppliers 2-10 11. Barriers to Entry Barriers to entry conditions that prevent newcompanies from entering an industry Government policy (e.g., patent laws) Capital requirements (start-up costs) Brand identification (consumer brand loyalty) Cost disadvantages (Established economies of scale) Distribution channels (e.g., supermarket shelf space)2-11 12. Resources from Suppliers People from schools, colleges and universities Raw materials from producers, wholesalers, anddistributors Information from researchers and consulting firms Financial capital from banks and other sources2-12 13. Suppliers are important because They can: Raise their prices Provide poor quality goods and services Fail to provide human resources 2-13 14. Supply Chain Management 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.The right product in the right quantityavailable at the right place at the right time 2-14 15. Without customers, a company wontsurvive Final consumers those who purchase products in their finished form. Intermediate consumers those who purchase raw materials or wholesale products before selling them to final customers.2-15 16. Environmental Analysis Managers must identify organizational opportunitiesand threats. Managers must use environmental analysis to makedecisions2-16 17. Environmental Scanning Searching for and sorting through information about the environment that is unavailable to most people to determine what is important. 2-17 18. Questions managers can ask about theenvironment Who are our current competitors? Are there few or many entry barriers to our industry? What substitutes exist for our product or service? Is the company too dependent on powerful suppliers? Is the company too dependent on powerful customers?2-18 19. Competitive Intelligence The information necessary to decide how best to manage in the competitive environment they have identified.2-19 20. Identifying Your Environment 2-20 21. Scenario DevelopmentScenarios alternative combinations of different factorsinto a total picture of the environment and the firm.Best-case scenario: occurrence of events that arefavorable to the firmWorst-case scenario: occurrence of events that areunfavorable to the firm2-21 22. Forecasting Predicts exactly how some variable or variables will change the future. 2-22 23. Successful forecasting involves Using multiple forecasts, and perhaps average their predictions Remembering that accuracy decreases as you go further into the future Collecting data carefully Using simple forecasts where possible Remembering that important events are often surprises that depart from predictions 2-23 24. Benchmarking Identifying the best-in-class performance by a company in a given area and then comparing your processes with theirs. 2-24 25. Adapting at the boundaries Buffering creating supplies of excess resources in case of unpredictable needs Internal (Contingent workers) External (ending inventories) Smoothing leveling normal fluctuations at the boundaries of the environment 2-25 26. Adapting at the core Flexible processes methods for adapting the technical core to changes in the environment. Mass customization use of a network of independentoperating in which each performs a specific process ortask 2-26 27. Influence your environmentTwo proactive responses to changing the environment Independent action when a company acts on its ownto change some aspect of its current environment. Cooperative action two or more organizations worktogether to change some aspect of the currentenvironment.2-27 28. Cooperative strategies make sense when1. Taking joint action will reduce the organizations costs and risks2. Cooperation will increase their power (their ability to successfully accomplish the changes they desire).2-28 29. Ways to change the boundaries of yourenvironment Strategic maneuvering organizations canredefine or change which environment they are in Domain selection the entrance by a companyinto another suitable market or industry. Diversification when a firm invests in differenttypes of business or products or when it expandsgeographically to reduce its dependence on asingle market or technology 2-29 30. Ways to change the boundaries of yourenvironment (contd) Merger when one or more companies combinewith another. Acquisition when one firm buys another. Divestiture when a firm sells or morebusinesses. Prospectors companies that continuously change theboundaries for their task environments by seeking newproducts and markets, diversifying and merging, oracquiring new enterprises. Defenders companies that stay within a stable productdomain as a strategic maneuver.2-30 31. Culture and the Internal Environment Culture the set of important assumptions about theorganization and its goals and practices that membersof the company share. System of shared values about what is important andbeliefs about how the world works. Provides a framework that organizes and directspeoples behavior on the job.2-31 32. Culture clues Corporate mission statements and official goals Business practices (how a company responds toproblems, makes strategic decisions, and treatsemployees and customers) Symbols, rites, and ceremonies Stories (myths, legends, and true stories)2-32 33. The Ritz Carlton Service ValuesI Am Proud To Be Ritz-Carlton I build strong relationships and create Ritz-Carlton guests for life. I am always responsive to the expressed and unexpressed wishes and needs of our guests. I am empowered to create unique, memorable and personal experiences for our guests. I understand my role in achieving the Key Success Factors and creating The Ritz-CarltonMystique. I continuously seek opportunities to innovate and improve The Ritz-Carlton experience. I own and immediately resolve guest problems. I create a work environment of teamwork and lateral service so that the needs of our guestsand each other are met. I have the opportunity to continuously learn and grow. I am involved in the planning of the work that affects me. I am proud of my professional appearance, language and behavior. I protect the privacy and security of our guests, my fellow employees and the companysconfidential information and assets. I am responsible for uncompromising levels of cleanliness and creating a safe and accident-free environment.Excerpt from www.corporate.ritzcarlton.com2-33 34. Types of Organizational CultureGroup culture Hierarchical culture -internally oriented and- Internally oriented flexible- Focused on control and -based on value and stability norms associated with - Values and norms affiliation associated with a -compliance stems frombureaucracy trust, tradition, and long- - Values stability term commitment - Assumes compliance will -emphasizes memberoccur through formalized development roles2-34 35. Types of Organizational Culture Rational culture Adhocracy- Externally oriented- Externally oriented- Focused on control - Flexible- Productivity, planning - Emphasizes changeand efficiency are (growth, resourceprimary objectives acquisition, and innovation)- Members motivated by the belief that performance - Members motivated by the leads to rewardsimportance or idealogical appeal - Leaders are entrepreneurial and risk takers 2-35 36. Managing cultures Make sure that underlying values align with thedesired culuture Managers should espouse lofty ideals and visionsfor the company that will inspire organizationmembers Managers must give constant attention to themundane details of daily affairs and set examples Routinely celebrate and reward those whoexemplify the values Hire, socialize newcomers, and promoteemployees based on the values2-36 37. What kind of culture do you want to workin?To determine the type of culture best fits you visit:http://career-advice.monster.com/at-the-interview/Assess-Company-Culture-to-Find-the-/home.aspx2-37 38. 2-38 39. You should be able to L01: Describe how do environmental forces influenceorganizations influence their environments L02: Distinguish between the macroenvironment andthe competitive environment. L03: Explain why managers and organizations shouldattend to economic and social developments.2-39 40. You should be able to L04: Identify elements of the competitiveenvironment. L05: Summarize how organization respond toenvironmental uncertainty. L06: Define elements of an organizations culture. L07: Discuss how an organizations culture affects itsresponse to its external environment. 2-40 41. Test Your KnowledgeAn open system organization: Inputs___________, goods and services organizationstake in and useOutputsand ______________, products and servicesorganizations create.2-41 42. Test Your Knowledge Identify elements of the competitive environment 2-42 43. Test Your KnowledgeDescribe the three ways that organizations can respond to their environments.1. Adapt to the environment2. Influence the environment3. Select a new environment 2-43 44. Test Your KnowledgeThe Ritz Carlton service values are an example of which aspect of culture? 1. corporate mission statement 2. business practices 3. ceremony 4. myth2-44