Ch 3 - Organizational and Natural Enviornments

7/31/2019 Ch 3 - Organizational and Natural Enviornments

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Organizational and Natural Environments

What can affect the business environment?

Fuel prices

Policies New Technologies

Natural calamities

Competition

Social trends Economic factors

War


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Organizational and Natural Environment

System theoryExternal environment: all elements outside an organization that arerelevant to its operations

Inputs: raw materials, money, labour and energy from the external

environment, transform them into products or services and sendthem back as outputs to the external environment.

External environment has direct-action and indirect-action elements

Direct action elements: also called stakeholdersinclude

shareholders, unions, suppliers etc.

Indirect action: technology, economy and politics of a society


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Origins of the Stakeholder Concept

What is a stake?

An interest or a share in an undertaking and can be

categorized as:Interest Right Ownership

Legal

Moral


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Stakeholder Definition

Person, group, or organization that has direct or indirectstake in an organization because it can affect or be affectedby the organization's actions, objectives, and policies.

Key stakeholders in a business organization includecreditors, customers, directors, employees, government(and its agencies), owners (shareholders), suppliers,unions, and the community from which the business drawsits resources.

Although stake-holding is usually self-legitimizing (thosewho judge themselves to be stakeholders are de facto so),all stakeholders are not equal and different stakeholders areentitled to different considerations.


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Who Are Business Stakeholders?

Production and Managerial Views


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Elements of the direct-action environment

Direct action environment is made up of stakeholdersindividuals orgroups that are directly or indirectly affected by an organization'spursuit of its goals

External stakeholders:

Customers:

Exchange resources in the form of money for an organizations

products and services Customer may be an institutionschool, hospital or government

agency, contractor, distributor, manufacturer or an individual etc.

Suppliers:

Every organization buy inputsraw materials, services, energyequipment and labour from the environment and uses them to produceoutput.

Zero inventory

Just in time


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Elements of the direct-action environment

Government:

It acts as facilitator, regulator

Governments and courts decisions play amajor role in shaping the strategies and

policies of the modern business

organization

Ban on smoking/non-iodized salt.


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External stakeholders Special-interest groups:

Consumer advocates and environmentalists

Concept of Exit, Voice and Loyalty Baba Ramdev opposing use of cold drinks

Jain community

Media: Organizations realize that they operate in fish bowl

Executives who deal with media need to be strong incommunication and clearly deliver their opinions

Financial institutions Organizations depend on financial institutions like

commercial banks, investment banks and insurancecompanies for supply of funds


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External stakeholders

Competitors

To increase its share organization must:

Gain additional customers, either by garnering a greatermarkets share or by finding ways to increase the size of themarket itself

Eg. Special telecom schemes to teenagers, rural areas etc.

Or beat its competitors in entering and winning in anexpanding market (Projects with huge investments)

In either case organization must analyze the competition

the competition and establish a clearly defined marketingstrategy in order to provide superior customer satisfaction

Other stake holder groups

Eg. Medical association of India


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Internal stakeholders

Employees

Changing nature of workforce

For implementing concepts like Team

building, self managed teams organizationsneed better educated and flexible employees

Shareholders and board of directors

Increasing interests of shareholders in the dayto day operations

Investment from some social groups


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ORGANIZATIONAL STAKEHOLDERS


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STAKEHOLDERS FOR SSNL

Sardar SarovarNigam Ltd

(Narmada Dam)

Employees

SSNL officers unions

Investors, Govt of

Guj, Govt of India

Villagers, Advasis

Vendors, Suppliers

News papers, TV

channels

Boards,

Regulators, Local

Panchayats

Association of

cement

manufacturers

Tube well

owners

Narmada Bacho

Andollan

Farmers, Villagers


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Stakeholder typology - Coco cola pesticide issue

DormantEducational institutions, big

purchasers, Local people where the plant is

located, general public DominantGovernment, Testing laboratories

Dangerous - Testing laboratories

DiscretionaryMedia,

DependentSuppliers, dealers, other businesses

dependent on the company

Demanding -


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Managing multiple stakeholder relationships

Network and coalitions

A particular issue may affect multiple groups

- Stoppage of coco cola -- Government,

Educational institutes, Media, Scientific

laboratories.

Network and coalitions

A single individual or group may have multiple

relationships with an organization

eg. A person may be working in a company, buy itsproducts, may be a member of environmentalist group

Stakeholders need to balance their conflicting roles


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Principles of Stakeholder Management

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S


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Social Variables

Demographicschanging composition of population (teenagers, oldaged)

Eg. Cloth business targeting teenagers

Lifestylesthey reflects attitudes

Eg. nuclear families, more spending on luxury products

Social values

Eg. Equality for women, increased social and economic expectationsof customers

Economic variables Rise in income levels

Rise in savings, investments, productivity

Political variables

Rigorous or a lenient view Eg. Coco Cola

Technological variables

Some variables all managers should keep

in mind!!!


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How do managers manage the indirect

action environment?

Managers monitor the indirect-actionenvironment for early-warning signs of

changes which will later affect the

organization.

Information sources: grapevine, managers

in other organizations, journal publications

online computer services, government

statistics. etc.


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Natural Environments

Current environmental concerns

Pollution

Air and solid

Climate changes

Global warming/Green house effect

Ozone depletionOther issuesadequate water supplies,

population and food security


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Frameworks for thinking about the natural

environment

The cost benefit framework If benefits of a proposed environmental regulation

outweigh its costs, then it should be implemented

Eg. Construction of a dam

Eg. Effect of vehicle pollution on general public

Difficulty in quantification.

The sustainable development framework

Engage in those organizational activities that can be sustained for along period of time or that renew themselves automatically

Advocates to coordinate our action across companies, geographiesand political entities.

Eg. Ban on using products by all countries which harm theenvironment while producing. DDT.


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Postures adopted by organizations for

greening of environment

The legal posture

Obey rules and invent environment friendly technology

The market posture

Go as per the market/customers requirements, ISO,

Eg. Some countries have been forced to use of recycled paper

The stakeholder posture Responding to multiple stakeholder groups

Educating employees, helping community efforts, appealinginvestors etc for environment conservation

The Dark green posture

Adopting environmental values and using natural resourcescarefully.

Eg. Not using cosmetics tested on animals, not using materialswhich cannot be recycled.

Documents

Ch 3 - Organizational and Natural Enviornments