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Management Chpt03

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  • 1. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-1TheOrganizationalEnvironment3

2. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-2Organizational EnvironmentOrganizational Environment: those forcesoutside its boundaries that can impact it. Forces can change over time and are made up ofOpportunities and Threats.Opportunities: openings for managers toenhance revenues or open markets. New technologies, new markets and ideas.Threats: issues that can harm anorganization. economic recessions, oil shortages.Managers must seek opportunities and avoidthreats. 3. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-3Forces in the Organizational EnvironmentFigure 3.1DistributorsFirmFirmTaskEnvironmentSuppliersCompetitorsCustomersGeneralEnvironmentEconomicForcesGlobalForcesSocioculturalForcesDemographicForcesTechnologicalForcesPolitical &Legal Forces 4. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-4Task EnvironmentTask Environment: forces from suppliers,distributors, customers, and competitors.Suppliers: provide organization with inputs Managers need to secure reliable input sources. Suppliers provide raw materials, components, and evenlabor.Working with suppliers can be hard due to shortages,unions, and lack of substitutes.Suppliers with scarce items can raise the price and arein a good bargaining position. Managers often prefer to have many, similar suppliersof each item. 5. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-5Task EnvironmentDistributors: organizations that help others tosell goods. Compaq Computer first used special computer stores tosell their computers but later sold through discount storesto reduce costs. Some distributors like Wal-Mart have strong bargainingpower.They can threaten not to carry your product.Customers: people who buy the goods. Usually, there are several groups of customers.For Compaq, there are business, home, & governmentbuyers. 6. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-6Task EnvironmentCompetitors: other organizations that producesimilar goods. Rivalry between competitors is usually the most seriousforce facing managers. High levels of rivalry often means lower prices.Profits become hard to find. Barriers to entry keep new competitors out and resultfrom:Economies of scale: cost advantages due to large scaleproduction.Brand loyalty: customers prefer a given product. 7. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-7Industry Life CycleReflects the changes that take place in anindustry over time.Birth stage: firms seek to develop a winningtechnology. VHS vs. Betamax in video, or 8-track vs. cassette inaudio.Growth stage: Product gains customeracceptance and grows rapidly. New firms enter industry, production improves,distributors emerge. 8. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-8Shakeout stage: at end of growth, there is aslowing customer demand. Competitor rivalry increases, prices fall. Least efficient firms fail and leave industry.Maturity stage: most customers have boughtthe product, growth is slow. Relationships between suppliers, distributors morestable. Usually, industry dominated by a few, large firms.Decline stage: falling demand for theproduct. Prices fall, weaker firms leave the industry. 9. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-9The General EnvironmentConsists of the wide economic,technological, demographic and similarissues. Managers usually cannot impact or control these. Forces have profound impact on the firm.Economic forces: affect the nationaleconomy and the organization. Includes interest rate changes, unemployment rates,economic growth. When there is a strong economy, people have moremoney to spend on goods and services. 10. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-10Technological forces: skills & equipment usedin design, production and distribution. Result in new opportunities or threats to managers. Often make products obsolete very quickly. Can change how we manage.Socialcultural forces: result from changes inthe social or national culture of society. Social structure refers to the relationships between peopleand groups.Different societies have vastly different social structures. National culture includes the values that characterize asociety.Values and norms differ widely throughout the world. These forces differ between cultures and over time. 11. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-11The Industry Life CycleFigure 3.3Birth Growth Shakeout Maturity Decline 12. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-12Demographic forces: result from changes inthe nature, composition and diversity of apopulation. These include gender, age, ethnic origin, etc.For example, during the past 20 years, women haveentered the workforce in increasing numbers. Currently, most industrial countries are aging.This will change the opportunities for firms competingin these areas.New demand for health care, assisting living can beforecast. 13. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-13Political-legal forces: result from changes inthe political arena. These are often seen in the laws of a society. Today, there is increasing deregulation of many state-run firms.Global forces: result from changes ininternational relationships betweencountries. Perhaps the most important is the increase in economicintegration of countries. Free-trade agreements (GATT, NAFTA, EU) decreasesformer barriers to trade. Provide new opportunities and threats to managers. 14. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-14Managing the Organization EnvironmentManagers must measure the complexity ofthe environment and rate of environmentalchange.Environmental complexity: deals with thenumber and possible impact of differentforces in the environment. Managers must pay more attention to forces with largerimpact. Usually, the larger the organization, the greater thenumber of forces managers must oversee.The more forces, the more complex themangers job becomes. 15. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-15Environmental change: refers to thedegree to which forms in the task andgeneral environments change over time. Change rates are hard to predict. The outcomes of changes are even harder to identify.Managers thus cannot be sure that actionstaken today will be appropriate in thefuture given new changes. 16. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-16Reducing Environmental ImpactManagers can counter environmentalthreats by reducing the number of forces. Many firms have sought to reduce the number ofsuppliers it deals with which reduces uncertainty.All levels of managers should work tominimize the potential impact ofenvironmental forces. Examples include reduction of waste by first linemanagers, determining competitors moves bymiddle managers, or the creation of a new strategy bytop managers. 17. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-17Organizational StructureManagers can create new organizationalstructures to deal with change. Many firms use specific departments to respond toeach force.Managers also create mechanistic ororganic structures. Mechanistic structures have centralized authority.Roles are clearly specified.Good for slowly changing environments. Organic structures authority is decentralized.Roles overlap, providing quick response to change. 18. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-18Boundary SpanningManagers must gain access to informationneeded to forecast future issues. Rod Canions forecast of Compaqs future was wrong dueto his incorrect view of the environment.Boundary spanning is the practice of relating to peopleoutside the organization. Seek ways to respond and influence stakeholder perception. By gaining information outside, managers can make betterdecisions about change.More management levels involved in spanning, yieldsbetter overall decision making. 19. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-19Boundary Spanning RolesFigure 3.5Managers in boundaryspanning roles feedbackinformation to other managers 20. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-20Scanning and MonitoringEnvironmental scanning is an importantboundary spanning activity. Includes reading trade journals, attending tradeshows, and the like.Gatekeeping: the boundary spanner decideswhat information to allow into organizationand what to keep out. Must be careful not to let bias decide what comes in.Interorganizational Relations: firms needalliances globally to best utilize resources. Managers can become agents of change and impactthe environment. 21. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 20003-21Change as a 2-way ProcessEnvironmentEnvironment OrganizationOrganizationChange in Environment affectsManagerial actions impactFigure 3.6

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