The Environment and Corporate Culture
All outside elements that could affect the organization. Two levels:
Task environment: factors that affect organizations directly. For example,
customers, competitors, and suppliers.
• Customers: people and organizations in the environment that acquire
goods or services from the organization.
• Competitors: organizations in the same industry or type of business that
provide goods or services to the same set of customers.
• Suppliers: people and organizations that provide the raw materials that
the organization uses to produce its output.
• Supply chain: network of multiple businesses and individuals that are
connected through the flow of products or services.
• Labor market: people in the environment who can be hired to work for
the organization.
General environment: factors that affect organizations indirectly. For example,
international, technological, and sociocultural.
International: Managers must consider the international dimension
• Events originating in foreign countries.
• New opportunities for U.S. companies in other countries
• New competitors, suppliers, and customers
• New technological, social, and economic trends
Technological:
scientific and technological advancements in a specific industry as well as
in society at large.
Advances drive competition and help innovative companies gain market
share.
Industries that fail to adapt face decline.
Sociocultural: demographic characteristics, norms, customs, and values
Important sociocultural characteristics are geographical distribution,
population density, age, and education levels.
Current trends: Technologically savvy customers, widespread social
equality, growing diversity.
Economic: economic health of the country/region in which the organization
operates. It includes the consumer purchasing power, unemployment rate and
interest rates.
Legal–political dimension: government regulations at local, state, and federal
levels, as well as political activities
• Managers work with lawmakers.
Educate lawmakers about their products and legislation’s impact on
their business strategies.
• Specific tools:
Occupational Safety and Health Administration (OSHA)
Environmental Protection Agency (EPA)
Fair trade practices
Consumer protection and privacy legislation
Product safety requirements
Import and export limitations.
Information and labeling requirements
Natural: all elements that occur naturally on earth, including plants, animals,
rocks, and natural resources such as air water and climate.
1. An organisation must be sensitive to the environment.
2. Environmental groups advocate action/policy:
• Reduction and cleanup of pollution
• Development of renewable energy resources
• Reduction of greenhouse gases
• Ethical treatment of animals
• Sustainable use of scarce resources
Environmental Uncertainty: managers do not have sufficient information
about environmental factors to understand and predict environmental needs
and changes.
Environmental characteristics that influence uncertainty
• The number of factors that affect the organization.
• Extent to which those factors change.
• High uncertainty
• Many external factors.
• Eternal factors change rapidly.
• Low uncertainty
• Few external factors.
• External factors are stable.
Adapting to the Environment
Strategic issues: events or forces either inside or outside an organization that
are likely to alter its ability to achieve its objectives.
Boundary spanning: actions that link to and coordinate the organization with
key elements in the external environment. For example, Business intelligence,
big data analytics, Competitive intelligence (CI).
• Business intelligence: result of using sophisticated software to search
internal and external data to spot patterns, trends, and relationships.
• Big data analytics: searching and examining massive, complex sets of
data to uncover hidden patterns and correlations and make better
decisions.
• Competitive intelligence: activities to get as much information as
possible about rivals.
Merger: two or more organizations combine to become one.
Joint venture: strategic alliance or program by two or more organizations
• Occurs when a project is too complex, expensive, or uncertain for
one firm to handle alone.
The Internal Environment
Corporate culture: set of key values, beliefs, understandings, and norms shared
by members of an organization. For example, symbols, stories, heroes, slogans,
and ceremonies.
• Symbol: object, act, or event that conveys meaning to others.
• Story: narrative based on true events that are repeated and shared
among organizational employees.
• Hero: figure who exemplifies the deeds, character, and attributes of a
strong corporate culture.
• Slogan: phrase or sentence that succinctly expresses a key corporate
value.
• Ceremony: planned activity at a special event that is conducted for the
benefit of an audience.
Types of Culture
1. Adaptability culture: characterized by values that support the company’s
ability to rapidly detect, interpret, and translate signals from the
environment into new behavior responses.
2. Achievement culture: results-oriented culture that values
competitiveness, aggressiveness, personal initiative, cost cutting, and
willingness to work long and hard to achieve results.
3. Involvement culture: places high value on meeting the needs of
employees and values cooperation and equality.
4. Consistency culture: values following the rules and thriftiness and
rewards a methodical, rational, orderly way of doing things.
