Class2 POM

Management

Chapter 3

Understanding External and Internal Environments

Objectives

To understand the external and internal environment of a

firm

To get an overview of models that managers use in

analyzing environmental conditions and how they manage

environmental elements

Environments

External environment

Mega forces outside the organization influence the

success of failure of the organization & its products /

services

Internal environment

General conditions within a firm also influence the

success of failure of the organization & its products /

services

Forces in the External Environment

Distributors

Firm

Task/Internal Environment

Suppliers

Competitors

Customer

s

General/external

Environment

Economic

Forces Global

Forces

Sociocultural

Forces

Demographic

Forces

Technological

Forces

Political &

Legal Forces

Analyzing environmental conditions-1

We will look at 3 models for analyzing environmental

conditions:

1. The Population ecology model

2. Resource Dependence model

3. The Perceived Environmental Uncertainty model

Analyzing environmental conditions-2

Senior Managers, strategic and Top managers use similar

models when planning.

These kinds of modeling are of special interest when

assessing the risk involved in doing business in an area, a

country or a region

Large corporation and leading multinationals use intricate

models on uncertainty and resource dependency for

assessing the risk they are likely to face

Population Ecology Model

This is based partly on Darwins natural selection

model applied to the environment, suggests that firms

with appropriate characteristics are more likely to survive

than others without them

Darwins natural selection argues that the environment is

based on the survival of the fittest, whereby only species

with appropriate characteristics will survive

Resource Dependency model

Pfieffers Resource Dependency model argues that

organizations dependence on the environment for

resources will lead it to try to manipulate the

environment in order to survive.

Perceived Environmental Uncertainty

The concept was original pioneered by Duncan (1972) &

Dess & Beard (1984) modified it

The model looks at the complexity and dynamism levels

of the environment

As environmental uncertainty increases, managers must

monitor, act, assess the complexity & dynamism levels as

required

Duncans Perceived Environmental

Uncertainty framework (exhibit 3.4 p75)

Managing Environmental elements-1

We look at 3 ways to do this =

Approach 1: Adaptation

This uses buffering, smoothing, forecasting, rationing

Approach 2: Domain shift

In this the firm diversifies or/and changes the domain (e.g.: product mix)

Managing Environmental elements-2

Approach 3: Favourability Influence

The firm undertakes all those activities that may

favourably influence its position in the environment (p.78-

79)

The Internal Environment

Corporate environment =

Organizational environment

The symbols Organizational culture are:

Symbols, stories, rites/ceremonies

The Internal Environment

Exercise: Class work for discussion

Do Exercise 1 & Exercise 2 and let us discuss it for 5

minutes before the break

Management

Chapter 4

Corporate Social Responsibility

& Ethics

Objectives

To learn what is Corporate Social Responsibility

To learn about the approaches, issues and perspectives of


To learn about the Equator Principles & SRI approaches in


What do we mean by Corporate Social

Responsibility (CSR)?

CSR refers to a companys obligation to act to protect and improve societys welfare as well as its own interests

There are 3 major perspectives to CSR:

1. The invisible hand

2. The hand of government

3. The hand of management

CSR Perspectives-1

1. Milton Friedmans views that a firms only responsibility is to make as much money for shareholders are possible. Thus free market forces guide CSR. This is the Invisible Hand

2. Kenneth Galbraith argued that a regulatory hand of government was needed to guide business to manage its possible negative effects by enforcing various labour and product safety protections and pollution controls

CSR Perspectives -1

The hand of management argues that companies must

act to protect and improve societys welfare. It is based

on 3 arguments:

1. Anti-Freeloader

2. Capacity

3. Enlightened self interest

CSR Approaches

Approach Relevance

Activist Sustainability

Stakeholder Multiple shareholder concerns

Market Response to customers

Legal Environmental conservation

Issues in CSR

Is CSR is a theory or set of theories;

which stakeholder relationships are more important?

whether business commit CSR for moral, ethical, societal

or economic reasons?

Does business get any benefit out of it?

And is getting a benefit necessary?

Other approaches to CSR

Francesc Relao, (2011) of ESCEM Business School

(France) takes a social welfare approach.

He believes that it is possible for banks to be both

socially responsible and profit maximizing but divides

banks into social banks and Green washing banks

The Equator Principles & SRI

Developed by private sector banks: led by Citi, ABN

AMRO, Barclays and West Lb launched June 2003,

modelled on environmental standards of World Bank &

IFC. By Oct 2009, 67 FIs had adopted these

SRI are Socially responsible Investments that firms must

make in their environment

Class exercise

Take 15 minutes to think for discussion now:

1. Does Social Responsibility pay? If so how and if not, is

that a good thing?

2. How do organizations monitor social demands/

expectations?

3. What sort of Internal Social response

mechanisms do companies have?

All this is on pp102-107 but it would be better if you expressed

you own opinions & thoughts

Management

Chapter 4 continues

Business Ethics

What is Ethics?

Ethics: It is a set of beliefs about right and wrong

Managerial Ethics: We may consider 3 types:

1. Immoral Management

2. Amoral Management

3. Moral Management

Ethical Models

Social Ethics:

Legal rules, customs

Professional Ethics:

Values in workplace Individual Ethics:

Family influence

Organizations

Code of Ethics

Mechanisms for Ethical management

Organizations sometimes employ these tools for ethics:

1. Top management commitment

2. Codes of Ethics

3. Ethics Committees

4. Ethics audits

5. Ethics training

6. Ethics hotlines

7. Awareness of diversity

Reporting unethical Behaviour

Whistleblowers: a person reporting illegal or unethical acts.

Whistleblowers now protected by law in most cases.

Social audit: managers specifically take ethics and business into account when making decisions. This is similar to the Equator Principles in CSR

Exercise:

1. Let us read Exercise 2, p. 122 What do you think should

be done?

2. Let us discuss which organizations you consider as

having any one of the three types of managerial ethics

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Class2 POM