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Chapter 3Organizational
Environments and Culture
© 2015 Cengage Learning MGMT7
© 2015 Cengage Learning
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
© 2015 Cengage Learning
• 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
© 2015 Cengage Learning 3-1
Punctuated Equilibrium Theory
Stability
Dynamic Change
Stability
Dynamic Change Dynamic
Change
3-1© 2015 Cengage Learning
Environmental Complexity
• Simple – few environmental factors that
affect organizations
• Complex– many environmental factors that
affect organizations
© 2015 Cengage Learning3-1
Resource Scarcity
The abundance or shortage of critical resources in an organization’s external
environment.
© 2015 Cengage Learning 3-1
Uncertainty
The extent to which managers can understand or predict the external changes and trends affecting their
business.
© 2015 Cengage Learning 3-1
Environmental Change, Environmental Complexity, and Resource Scarcity
3-1© 2015 Cengage Learning
General and Specific Environments
3-2© 2015 Cengage Learning
Economy
• A growing economy provides a favorable environment for business growth.
• Business confidence indices show how confident managers are about future business growth.
© 2015 Cengage Learning3-2
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.
© 2015 Cengage Learning 3-2
Sociocultural Component• Demographic characteristics, general
behavior, attitudes, and beliefs of people in a particular society
© 2015 Cengage Learning3-2
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.
© 2015 Cengage Learning3-2
Specific Environment• Customers• Competitors• Suppliers• Industry regulations• Advocacy groups
© 2015 Cengage Learning 3-3
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
© 2015 Cengage Learning 3-3
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
© 2015 Cengage Learning3-3
Supplier Component• Suppliers
– companies that provide material, human, financial, and informational resources to other companies
Supplier dependencevs.
Buyer dependence
© 2015 Cengage Learning3-3
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
© 2015 Cengage Learning 3-3
Industry Regulation Component
Regulations and rules that govern the practices and procedures of specific
industries, businesses, and professions
© 2015 Cengage Learning3-3
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
3-3© 2015 Cengage Learning
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
© 2015 Cengage Learning 3-3
Making Sense of Changing Environments
© 2015 Cengage Learning
• 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.
© 2015 Cengage Learning3-4
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
© 2015 Cengage Learning 3-4
© 2015 Cengage Learning
Cognitive Maps
3-4© 2014 Cengage Learning
Creation and Maintenance of Organizational Cultures
• Primary source of organizational culture is the company founder.
• Organizational culture is sustained by…– organizational stories– organizational heroes
© 2015 Cengage Learning3-5
Keys to an Organizational Culture
3-5© 2015 Cengage Learning
Three Levels of Organizational Culture
3-5© 2015 Cengage Learning
Changing Organizational Cultures
• Behavioral addition
• Behavioral substitution
• Change visible artifacts
• Hiring people with values and beliefs consistent with desired culture
© 2015 Cengage Learning 3-5
<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?
© 2015 Cengage Learning